Reporting

With the number of places available to gather information on how VCs invest – Mattermark and CB Insights on the paid side, Crunchbase and Angelllist for the burn conscious – it is no longer difficult to understand who you should be trying to raise money from. Want to know who most prolific early stage FinTech investors are, for example? LMGTFY…the first result from CB Insights gives you a good starting point. Great! So it looks like 500Startups is very active in the space but they are a big firm, who should I be reaching out to there? Well…a second Google search might lead to something like this. That was easy. It took me longer to write that last paragraph than it did to find a firm that may be interested in what I am working on and a partner at that firm that may be into what I am building. So why can raising capital be such a difficult and time consuming process, even for companies on a strong growth trajectory? Put simply, it is because most founders haven’t given enough thought to what is behind each individual investor’s thesis. Go to any VC website and it is not hard to find out what their (publicly-facing) framework for making investment decisions looks like. Some of these theses are actually very interesting reads (Union Square Ventures, NeuVC, and OS Fund come to mind). But if you have had the opportunity to speak at length with any successful investor, you will quickly come to find that what they are really looking for — beyond the eloquent “What We Invest In” essays used to make journalists fawn and LPs open checkbooks – is a combination of a good product, a highly functioning team, and a large, growing market. Mark Suster has written about this before, and so have many others. Start with knowing where they start As a founder, you are competing daily for two things – capital and talent. Raising money means selling your company in a way that puts you at a competitive advantage against other startups a VC could back. One of the quickest ways to build this advantage is by understanding which of the three aforementioned decision factors play the largest role in your target investor’s process. You need to know this before the first call or meeting. Instead of “here is what we do, are you interested?” switch the context to “here is why we are a perfect fit for your thesis.” Make it easy for them to fit you into their existing mental framework of how they want to invest instead of forcing them to do all the work to organize their own thinking around your company. Remember, VCs need to sell too. They need to convince their partners that adding your company to the portfolio will have a positive impact. They also need to defend their investment decisions to LPs, often on a quarterly basis. Build an investor interest profile As capital has poured into the system, making money a commodity (side note, that post is from 2000…what’s the phrase, “history doesn’t repeat itself, but it rhymes”?) many VCs have gone on the offensive in order to gather attention and court the best companies. This means a larger social media presence, frequent blog posts, and more interviews. Use this to your advantage by studying what they say and trying to determine which factors loom largest in their decision making. Marc Andreessen, for example, sees market as the determining factor in a company’s success or failure. In a different post than the one noted above, Upfront’s Mark Suster trumpets team as the most important factor in a VC’s decision of whether to investor or to pass. If you are fortunate enough to get an audience with one of the Marc/ks, lead with market and team respectively. Search further (I’m done Googling for you!) and you’ll find plenty of investors who base decisions first and foremost on whether a company’s product stands out amongst its competition. Additionally, leverage the information your peers are putting out into the market. Funding announcements come fast and frequent these days (StrictlyVC and Term Sheet are good ways to keep up. So is Mattermark’s free iPhone app) and are often accompanied with quotes from CEOs and founders around the future of their businesses. The narrative put forth in these funding posts (ahem, press releases) are likely the same ones they used to court and close their investors. Go through enough announcements for companies your target investors have backed and you can build a very detailed profile of what they care about. Want to go a step further? Reach out the CEOs who just closed the round. They’ll probably be happy that your inquiry isn’t another terrible sales pitch and will be open to help since they know first hand the challenges you are up against. Raising capital isn’t a spray and pray endeavor. It also doesn’t operate on the self service model. Even at the seed stage closing a round of funding is a high-touch, big ticket sale where relationships need to be built and nurtured. Any company that closes a round from top investors must have some degree of competence in all three of the main decision-making factors (product, market, team). The ones who do it most efficiently know which areas they excel and which of those factors matter to each and every investor they take the time to meet with.

This post is excerpted from our first book, The Ultimate Guide to Startup Data Distribution. You can download the book for free and learn more about how other top companies are building and operating high-impact data distribution systems to keep everyone that matters engaged in the their business. Check out the other parts if you haven’t already: Part 1. The Ultimate Guide to Startup Data Distribution Part 2. Your Company’s Most Valuable Metric Part 3. How to Find You Company’s Storytelling Framework Part 4. ‘Steal’ the Right Metrics for Your Company (Coming Soon) You can also find more on the topic of Startup Data Distribution here: The 3 Key Pillars of Startup Data Distribution – OpenView Labs How to Tell Your Company’s Story – Medium The way that a company tracks and analyzes the key performance indicators around its product development and distribution as well as its customers and employees is key in determining whether its data distribution system will be effective and yield long term positive results. It doesn’t matter how often a management team communicates with team members, investors and any other stakeholders if the communication isn’t actionable and relevant to what drives the success of the business. Blake Koriath, CFO at SaaS-focused seed fund High Alpha, likes to start wide when working with companies, focusing first on business model and company stage, then digging into exactly who will be viewing specific metrics and when. 1. Understand your Business Model The way that you finance your operation, build your product, serve your customers, and generate revenue will be the primary driver behind what metrics you track. As Alistair Croll, one of the authors of “Lean Analytics” wrote, online businesses tend to primarily fall under one of the following business models: He goes on to say that “no company belongs in just one bucket” as, for example, Amazon cares about “Transactional” KPIs when making sales on their site but looks to “Collaborative” KPIs when collecting product reviews. 2. Evaluate the stage of your business In working with thousands of investors and operators over the last few years at Visible, we have come to understand the impact a company’s stage has on what metrics it should be tracking and how it should be tracking them. Early stage teams may place more importance on things like cash in the bank and burn rate, hoping to extend the life of the business as they search for product/market fit and move from growth to scaling. Later stage companies, on the other hand, need to be much more qualitative in nature and understand how all of their different business units are contributing to their end goal as a business. 3. Determine who your intended audience is When bringing a product to market, customer personas play a major role in things like pricing, messaging and feature set. When distributing key information about the performance of your business, stakeholder personas help inform which subset of metrics you present as well as when and how you present them. Investors, according to High Alpha CFO Blake Koriath, are often interested in the highest level metrics, enough information to quickly understand general trends in the business and also understand where they can have the most impact. Overall Gross Margin, MRR Added and LTV are examples of metrics SaaS investors may be interested in seeing. Executive team members fall next in the hierarchy and need to understand how the success of their team is contributing to the overall direction of the business (for example, Lead Velocity Rate for a a Sales Manager). Finally, team members are likely interested in the “atomic units” of those higher-level metrics. That is to say, how are their individual contributions bubbling up to impact the metrics that determine success for their teams? Getting the right information to the right people at the right time is essential in telling the story around your company’s data. By focusing on targeted stakeholder personas, you can ensure that each group is empowered with the information they need to contribute most effectively to the growth of the organization.

How to Determine if You Should Send Investor Updates So you just raised your first round of funding. Or closed your first big customer. Or launched your product. Congrats! Now what? Well, if you are like us and like thousands of other early and growth stage companies, it is probably time for you to start thinking about your process for getting the right information to the right people at the right time. With the amount of data you have coming in from your customers, your tools and your employees, it can be a bit overwhelming so having a clear understanding of the benefits of implementing a repeatable process can be a great place to start. Related Reading: How To Write the Perfect Investor Update (Tips and Templates) Luckily for you, we built a little guide to help you understand the importance of stakeholder engagement, namely investor updates. Consider it a choose-your-own-adventure guide for the modern founder. If you would like, you can download PDF right here. Want to read more about keeping the people that matter to your business engaged and informed? Here are a few great places to start: The Visible Reading List – Our curated collection of the best content from top investors and entrepreneurs about the how and why of stakeholder engagement Why Update Your Investors? – Some ideas on what you should track and how you should track it Is Radical Transparency the Way Forward for Startup Marketing? – Transparency plays a big role in keeping your stakeholders engaged.

This was originally guest posted on BoomTownBoulder All great relationships have one thing in common: communication. Open and honest communication is the key to any fruitful relationship. So why should your investor relationship be any different? Great entrepreneurs have an open dialogue with their investors and are able to get the most from them. However, at Visible we constantly hear about companies going silent after the money is wired. Why? Here is my hypothesis: startups are hard. This isn’t earth shattering news, but when you start to look into the head of an entrepreneur it will make sense why they have communication problems with their investors. When you are a CEO/founder/entrepreneur, your view of the world is just your company. Your “portfolio” is 1 of 1, so to speak. Updates to your business are typically not amazing. Instead of providing regular updates about the business, a founder will wait until they have amazing news to share. The amazing news never comes, the founder has been silent for 6 months and has 45 days of cash left. Who is more likely to get the bridge round of financing? The founder who has been providing regular updates and correcting course when needed or the one who has been silent for 6 months and has no cash left… It’s always scary to share bad or mediocre news but it is what the great founders do. Why? Because they realize that they can extract value from their investors outside of just capital. An investor’s view of the world is one of many. They have seen failure, success and mediocrity. They know when to step in and when to let go. Great. So how do I communicate with my investors? What do they care about? Consistency is the key. Typically, the earlier you are in your lifecycle as a company the more frequent the investor update. Companies going through an accelerator may be sharing weekly updates, whereas Seed/Series A are monthly, and Series B+ are quarterly. Most early-stage investors care about a couple of key things: 1. Cash in the bank. Cash is the oxygen of the business. Without it you die. This should be the metric that startups have their eye on. All. The. Time. 2. Months to 0. This is how many months until you are dead. Typically your cash in the bank / net burn. You can get fancier and include hiring plans, etc but we like to keep it simple. 3. Key Metric Growth. This is the growth of your “true north” metric. It could be MRR, it could be DAU, but this is the metric on which you define success. Afterall, PG said it best: Startup = Growth. 3. Team. How is the team performing & who are you hiring. You can get a little more advanced here and report on the team composition, e.g. R&D vs Business vs Admin. You could also split our full time employees, part time, and contractors. 4. Asks AKA how investors can help. Having explicity actions for you investors is the best way to leverage them. Saying “looking for intros to BD execs at CPG companies” will not get you anywhere. Saying, I need an intro to Mike Smith at Acme Corp will convert much better! What investors really care about is how you are executing against your plan. Seeing that you have 4,500 MAU is great but how does that compare against the forecast? Ultimately the format is up to you. We see companies put the “Asks” first alongside “Thanks” for those who helped from the prior update. Some include the new hires first. Related Resource: Investor Relationship Management 101: How to Manage Your Startups Interactions with Investors Obviously, we are biased, but Visible was built to solve the investor relations problem for startups. We easily allow you track, visualize and forecast your KPIs and provide a narrative to your stakeholders. Feel free to hit us up if you have any questions or sign up

Transparency: Who are Visible’s Competitors? I probably get asked who Visible’s competitors are on a daily basis. This questions bugs me and I feel like people ask it for one of two reasons: They ask the question just to ask the question. My guess is that they ask it to make it feel like they are asking a “hard hitting” question and seeing how I respond. They are considering buying a portfolio monitoring tool and want to know where else to look so they can compare. For person number one, there are so many other things I’d rather talk about as an entrepreneur and operator than my competitors. I’m fully aware of them and know who they are. You also do not need to be constantly forwarding me emails about my competitors because I’ve already seen them, signed up for their service, and know what they are about. I’m living and breathing this 24/7. For person number two, I’m about to make your job incredibly easy. Below are all of the direct Visible competitors including their pricing relative to other solutions and what their offering is. You’ll see I didn’t list pros or cons or compare against Visible, so feel free to check them out. I’m incredibly confident in the value our team offers and our product. We are laser focused on crushing this problem. I cant wait for everyone to see what is next… Again, the companies above are people I believe directly compete with Visible. There are other services out there that have similar functionality but it isn’t their core focus. Next week we are releasing a breakdown of their entire software industry for the venture investing market–stay tuned!