06/08/2021

Communicating with Investors at the Right Frequency

For more from Jen Baird, see her blog: Startup CEO Reflections

Founder: Jen Baird, Founder & CEO
Company: Fifth Eye
Stage: Series A
Date Founded: 2014
Headcount: 9
Industry: Healthcare

The more frequently you communicate, the deeper into the details you need to delve. To manage the level of detail and involvement, control the communication frequency.

Communicating effectively with people who care about your company relies on determining what information to share. The frequency of communication helps determine how much detail to get into and what to share.   

This principle is based on the truth that there is an inherent pace of progress. How you demonstrate progress to different people depends on the frequency of communication. You decide what is the appropriate level of detail to share based on how recently you are communicating.  

To illustrate this concept, here are examples at opposite ends of a spectrum:

  1. At one end of the spectrum, there are people in my life who I touch once per year, with my annual New Year’s letter. I collect some representative pictures, craft some summary paragraphs, and capture the previous year’s highlights in a two-page PDF. I have a collection of these letters spanning two decades that all are at about the same level of detail. I enjoy both sending and receiving such letters – however, if those I am trading annual letters with sent a 50-page novella, it would feel wrong and intrusive.
  2. At the other end of the spectrum, some people collaborate daily. These are colleagues who spend time every day connecting, collaborating, and communicating to get the job done. There are dyads on my team for whom it would be odd for a workday to pass without talking. While we might separate for a while to work in parallel, when we reconnect, there is a shorthand in play that comes from being so in sync with one another that it is a bit like a never-ending, practically continuous conversation. We spend very little time catching each other up and, instead, just keep advancing the conversation at a very detailed level.

So, what is the difference between summarizing a year into two pages and unpacking the last few hours? It is a matter of the level of detail. When communicating is an annual thing, you reflect on what has changed over a year, what are the big highlights, decisions, happenings. When communicating is a daily thing, you reflect on what has happened overnight. The amount of information shared is much greater over time when you are communicating daily versus annually. This applies in a business context – and gives you a tool to establish the right level of detail to share.

Building a startup means recruiting and engaging many stakeholders to help support your team. For me, stakeholders include Board members, investors, advisors, commercial partners, and others who are one layer broader than your core team. These people are important. They are invested in your success. They want to help, to be engaged, and to contribute. To do these things, they need to know enough about what is going on to be effective, yet they don’t have the time or the need to be deep in the daily nuances of making progress happen.

This is where things can get tricky and delicate.  What is the appropriate level of detail to share with stakeholders who are not part of the core team? How do you share appropriately without involving them in too much detail? Walking this line is a common problem for startup leaders. For example, sometimes when I am talking to other startup CEOs, we discuss what to do about Board members or investors who are getting over-involved in the details to the point that they are becoming disruptive rather than helpful.

I intentionally use communication frequency in managing my communication with investors and similar stakeholders.  Here are three examples:

  1. Board meetings: Sometimes, early-stage Board members will suggest having monthly Board meetings. In my experience, this is too frequent because the substantive progress that is appropriate for Board members to monitor is hard to detect over such a short timeframe. The technical steps necessary to build the next prototype are nuanced, or sales cycles are often not instantaneous. At the earliest stage, where we will constantly be digging into details, and there will be lots of agile evolution, I think every other month can be a good cadence.  Once you get to the commercial stage, quarterly becomes much more effective as it keeps preparation time at a practical level, and monitoring metrics are often far easier to track.
  2. Quarterly Investor Communications:  I find that routine communications on a quarterly cadence to angel investors works quite well to keep them interested and excited. There is enough progress that happens in a quarter to have significant accomplishments or learnings to talk about without needing to delve into excessive detail that is hard to explain or follow. Quarterly investor reports capture the story of the startup’s progress well and keep investors feeling connected without requiring too much detail.
  3. Ad Hoc Investor Meetings:  Sometimes, potential investors want to talk with your team members as part of due diligence. For example, a classic investor question is, “What are you most worried about?”  They are trying to uncover the “scary” thing.  An unprepared team member’s immediate response to this question tends to be something like “I’m worried about solving the XYZ nuance of a particular line of code” that has been a thorn in the team’s side for the last few hours (and will be solved in the next few hours). To avoid this, I prepare my team members by telling them what timeframe to use when answering the potential investor’s questions.  Remind your team to answer what they are most worried about over a more extended period, such as a six-month time horizon. By framing the investor’s question this way, you help your technical team answer their question at a higher level by saying something like “getting through our live testing program to refine the product.”

When planning your communications with stakeholders, consider the timeframe over which you are communicating. Identify the 3-5 major things that have occurred since you last shared. Note that the level of detail you have to go to to find the 3-5 “major” things will vary depending on whether the last communication was last quarter, last month, last week, or yesterday? That is the level of detail that you need to communicate at.

The depth of communication required is directly related to the frequency of communication. If you find that a stakeholder/investor is getting too far into the details, try slowing down the frequency of contact to help draw them out to the appropriate level of monitoring.