The Non-Obvious Benefit of Investor Updates
If you think updates only benefit investors, you're wrong.
Greetings! We hope you had a fantastic week.
💭 Thought Bubble: Leveraging the Update
Have you had a day or a week that felt incredibly busy but when you stopped to think about it you weren’t quite sure what you accomplished? We have all been there. For most people, saying “yes” to events, new projects, etc. is an easy answer. We develop FOMO, conjuring images of what we’ll miss if we say no to the opportunity. We feel like we’re only losing time, right?
Wrong. Not to get too philosophical, but time is a finite and immensely valuable resource—we only have so much of it.
What is true for our own existence is even more true for startups. The speed of execution is one of the key advantages that a startup has. The problem, though, is that for a startup founder the path isn’t clear and there can feel like a hundred different tasks to prioritize. If you plan for too many or the wrong things, your speed of execution decreases in areas that materially matter to your business.
This is why focus is so important. In episode 116, Josh Sanchez, CEO & co-founder of FloatMe, a SpringTime Ventures portfolio company, discusses the “north star”, the key metric that a company tracks consistently over time to know if the business is making meaningful progress. What specifically this metric is will differ based on your company, and while it might feel nearly impossible to nail down exactly what you should be tracking, doing so helps you understand your business better and facilitates focus and prioritization of your time and resources.
As Josh mentions in episode 116, he recommends including the north star in investor updates. Not only does this give the investor a good sense of how the business is progressing but it holds the founder accountable to one overarching goal.
Investors, SpringTime included, like to harp on how critical the investor update is. We often talk about it in the context of relationship building and how useful it is in demonstrating follow through and consistent communication. One of SpringTime’s co-founders and operating partners, Rick Patch, advocates for investor updates for a very different reason: the process of writing an update is incredibly valuable for founders. The act of writing this update forces founders to reflect on the last month or quarter and identify what is and isn’t working. If progress against the north star metric isn’t being made, the act of reflecting on the previous time interval is beneficial in understanding if resources are being allocated to the wrong activity. Building a routine around this helps you spot problems early and course correct before they become too dire.
While it might feel like just another chore, when the investor update is done well it keeps founders focused on what truly matters to the business. It can prevent you from “waking up” in one, two, or six months wondering when and where things went wrong.
If the idea of doing investor updates at a regular cadence overwhelms you, it shouldn’t! An update doesn’t have to be complicated. Take Josh’s advice from episode 116 and focus on the three P’s—plans, progress, and problems.
🤷♀️ What the heck is a Seed round these days?
Peter Walker, Head of Insights, at Carta posted the above graph on LinkedIn (post here) and asked for feedback on what folks considered to be a Seed round. A key takeaway from the comments is that the definition of a Seed round is still quite fluid. A better way to think about round definition might be in relation to go-to-market milestones; e.g., revenue milestones, number of customers, etc.
💪 Ability to Raise
Antler had a really interesting post that outlined framework (above chart) on how founder pedigree influences the founder’s ability to raise their first round. While this is based on the Berlin ecosystem, if you change the amounts to USD, I think the above framework mostly holds true for what we see in the U.S.
The one change I’d make for the U.S. market is under “Some Pedigree”. I’d change those qualifiers to “Key track at a scaleup, Goldman, Ivy League, or meaningful industry experience gained from top companies; e.g., Visa for payments”.
It’s not all doom and gloom for those that fall outside of these categories, though. The post also discusses how to increase the odds of success if you don’t have the traditional signals.
📝 Due Diligence Checklist
Charles Hudson at Precursor Ventures published an article, “Due Diligence Checklist for Pre-seed Companies”, on what he assesses during diligence for Pre-seed companies. As you can imagine, founders and executives are what they spend the most time on, but in addition to that, they also look at who owns equity and how much, corporate structure, and finances/expenses. What I also thought was interesting was Charles’s commentary at the end about reference checks and how former managers and colleagues actually aren’t great at predicting someone’s founder readiness.
😴 Decompression Zone
Who doesn’t love a good dessert? This list of the 50 top desserts gave me wanderlust… and a craving for some Italian tiramisú.
Have a fantastic weekend! 👋