Frequency of Communication Between Entrepreneurs and Investors
The frequency of communication between entrepreneurs and investors varies widely depending on the investor and the entrepreneur's preference. In the past, quarterly updates were sufficient for non-board members, but now the expectation is different.
Modern Update Expectations
Accelerators like Y Combinator (YC) and other similar programs have set a higher standard for non-board members. These companies now send detailed monthly updates right after the end of the month. These updates include key business metrics tracked over time along with a brief narrative. In fact, failing to adhere to this standard can be seen as a red flag to potential investors.
Board Member Communication
For investors who sit on the board, the level of interaction is more relaxed. While it is ideal to have board meetings every six weeks, some entrepreneurs might meet with their directors as often as every four weeks. Meetings every eight weeks may be too infrequent, as much can change in that time.
Variation Based on Personal and Business Factors
Paul Howey highlighted that communication frequency varies significantly between different investors. Similarly, it also varies based on the entrepreneur's needs and preferences. Some entrepreneurs prefer frequent involvement and assistance from their investors, while others only need cash. Some want to communicate every detail of their business, while others prefer to keep the information to a minimum.
The amount of communication required is also influenced by the size of the investment and the entrepreneur's ownership stake. For example, an investor who owns 20% of the company and sits on the board will require a higher level of interaction. Conversely, an early-stage angel investor who owns 1% of a later-stage startup will have less to say on an ongoing basis.
Importance of Clearly Outlining Expectations
Many issues can be avoided by discussing these expectations upfront. Investors must understand the level of interaction the entrepreneur desires, and entrepreneurs need to know what level of information-sharing their investors expect. Failing to have this conversation is akin to marrying someone without discussing the possibility of having children.
To stay in touch with your investors, many successful entrepreneurs, like the author, send monthly email newsletters. These newsletters detail the good and bad news, discuss the biggest risks, and include interesting questions and answers from investors.