Andrej Petrus, Chief Investment Officer at ZAKA VC, a Czech family office focused on pre-seed and seed investments all across Europe, shared his ideas about how important it is for a startup to do reporting to its investors and explained how to do it properly. AIN.Capital published the blog post.
In the past 4 years of communicating with hundreds or thousands of founders, one empirical observation stood out. Founders who are not dedicated to reporting or internal KPI tracking, who are not transparently informing and leveraging their investors, are underperforming.
And don’t get me wrong. Reporting is not for investors who want to see how the business is performing month on month. Reporting is fully and mostly for you as founders.
Building and leading a startup is an operational nightmare. Everyday, you are dealing with new problems, which mostly cannot be outsourced to somebody else. This keeps you in a constant loop of dealing with problems 24/7.
But you still need to allocate some heads-down thinking time for at least 1-2 whole days a month. Thinking about the performance from a helicopter view, thinking about the strategic milestones to be achieved. Looking on the runway and cost efficiency. Thinking about if what you are doing actually leads somewhere.
And for this you need discussion and data – financial one, analytical one, other KPI metrics and feedback from customers, but mostly focus and time.
Early stage start-ups in pre-seed or seed round sometimes don’t have a board consisting of also non-founders (investors, advisors…), therefore are not legally pushed to create frequent board presentations and meetings. But still, reporting to all investors even in the early stage is essential and can provide a lot of value to founders.
Here is a high level view how a proper Reporting structure should look like, on monthly or quarterly basis (depending from your runway).
- Financial snapshot: Revenues, MRR, Costs, Burn, Cash position, Accounts Payables, Accounts Receivables, Runway + controlling Actuals vs. Plan.
- Analytical KPIs: users, customers, cohort retention, churn, Net dollar retention. Other applicable based on business.
- Highlights of the month.
- Lowlights of the month.
- Commercial qualitative update.
- Strategic milestones (what needs to be achieved to successfully raise next round and what is our progress?). This is probably the most important consideration to do, and can be updated as the business moves.
- Update on product.
- Update on fundraising.
- Update on hiring.
- Current needs – leverage your investors.
Send this as a pre-read 2 days before the call with investor or group of investors. They are your partners and shareholders, can be only heplful if they understand the whole picture and also assumptions you are using. Build trust through transparency, have an open mind to listen, learn and reiterate your strategic goals or assumptions.
And one more thing! Expect that every future investor will ask you for these previous monthly or quarterly reports sent to previous investors. It is a standard part of the Due Diligence process, so have it ready.
