Reporting

Raise capital, update investors and engage your team from Visible. Use the YC Investment Memo Template to get started. Memos are a clear and concise document to lay out strategic vision, rationale, and expectations (in case you missed it, we wrote about the importance of memos earlier this week). We found the Y Combinator Investment Memo to be particularly interesting. The YC Investment Memo Memos have been something that most of us likely associate with VC funds writing for a prospective investment. The YC memo flips this idea on its head. In the YC Series A Guide, they share an investment memo template aimed towards founders. YC suggests sending your memo to investors in advance of a meeting to set the tone for the conversation. The idea is that by articulating your own memo, you can: “Clarify your own company’s pitch and story” “Incept your vision of the memo into their (potential VCs) brains.” To give you an idea of what a memo may look like, we turned it into a Visible Update Template. Pitch Deck vs. Memo Using a memo to power a fundraise is an interesting idea. As YC suggests, founders that are strong writers may benefit from using a memo. The pitch deck has always been the go-to form for sharing data but Billy Gallagher of Rippling makes the case for using a memo in tandem. Billy Gallagher shares a few key advantages to a memo that we’ve summarized below: It is standalone — By sending a memo in advance you do not have to worry about the investors missing any context. Investors will be able to read and digest the memo on their own. Opposed to a pitch deck that may require a pitch and narrative around different components. Less time — A memo will allow investors to quickly pass or take the next meeting. This way you can spend time on the firms that are truly interested. Helps GP Pitch — At the end of a process a GP will have to pitch their other partners on why their fund should make an investment. By writing your own memo, it will make sure that the GP is properly presenting your company and idea to their peers. We are not suggesting that every company suddenly start sending memos to kickoff an investor meeting. However, there are clear advantages and an interesting tool that more founders should study. If a memo sounds like a good fit for you and your company, give it a shot! If you’re interested in learning more fundraising tips, be sure to subscribe to our weekly Founders Forward Newsletter.

This won’t be the first or last time we write this: being a startup founder is hard. On top of your day-to-day tasks you have to worry about your customers, employees, and investors. You can often feel like you’re buried when balancing the communication and relationships with all of your stakeholder groups. Concisely sharing strategy with your stakeholder groups is an effective way to set expectations and build relationships. One tool we’ve seen pop up more frequently in the last few weeks are strategic memos. Memos are a clear and concise document to lay out strategic vision, rationale, and expectations. We’ve shared 3 different “memos” below that can be used for your investors, team, and executives. Y Combinator Fundraising Memo In case you missed it, YC recently published a Series A Fundraising Guide. The guide is full of useful information covering every aspect of a fundraise. One of the areas we found to be most interesting was the idea of writing and sharing an investment memo. YC makes the case that founders should write an investment memo is two-fold. First, it can set up a meeting with a potential investor nicely when sent in advance. Secondly, it helps you as a founder clarify your pitch, thoughts, and rationale. As the team at YC writes, “A memo is particularly effective if you can write well. It stands better on its own as the deck (sent ahead of time) can miss context provided by your voiceover. Founders tell us that memos sent before meetings in place of a deck provided the necessary to set up an engaged conversation from the outset.” They go on to share a template of a memo that you can find here. We’ve turned it into an Update Template so you can share it out via email or link! Executive Team Strategic Memo Andy Johns is a seasoned startup professional and currently a partner at Unusual Ventures. Andy recently published a blog post, A Simple Tool for Managing an Executive Staff as a First-Time CEO, to help first time founders deal with their first executive hires. As Andy points out, managing an executive can be quite different than managing team individuals. “An executive’s job is to focus primarily on taking strategic risks. Each year, they should identify 2–3 major initiatives, large enough in impact to shape the direction of the company and enforce great execution against those initiatives. This is in contrast to non-executives, who you want to be focused primarily on tactical execution.” So how does a founder enforce execution against those initiatives? Andy suggests having your executives fill out a quick memo template for your executives to share with you. As Andy puts it, “Ideally, what they come back with is a strategy that has 2–3 major initiatives that they find are important, along with a list of success metrics and resources they need to get it done.” Once a founder gets a strategic memo from each executive it makes forming strategy and roadmap for the company as a whole easier. These memos can be used to fuel your strategic and financial plan for the year, create performance plans with executives and individuals, and the kickoff discussion points for annual planning. Check out the strategic memo template from the team at Unusual Ventures here. The EVERGOODS Product Brief The last memo is slightly different than the first two. EVERGOODS is a small equipment and apparel company based out of Bozeman, MT. EVERGOODS has a strong focus on building an incredible product and puts a great deal into R&D and perfecting every minor detail of their products (a couple of gear junkies on the Visible team can attest to this). As the founders, Jack and Kevin, put it, “Our experience lies in product design, development, R/D, and manufacturing for the likes of GORUCK and Patagonia. We believe in product and the processes of doing the work ourselves. Each project is an exploration, and ultimately a discovery, aided by our triumphs and our failures. This evolution inspires us and is at the heart of EVERGOODS.” Being gear junkies and product focused ourselves, we found their product brief to be interesting and useful to more than equipment and apparel companies. While it may not translate directly to every industry, their brief is a great tool to help product-focused founders understand why and how they are building certain products and features. Check out the product brief memo from EVERGOODS here. Each template above serves a different purpose. While each template may be entirely different they all have one thing in common: clear and concise communication. Setting up a system to properly share strategy and rationale in a concise way will not only strengthen relationships but keep all of your key stakeholders aligned. Do you have a memo or strategic doc that you share with your stakeholders? We’d love to check it out. Shoot us a message to marketing at visible dot com.

We recently hosted a webinar with Tyler Tringas, General Partner at Earnest Capital, covering alternative financing options available to startups. During the webinar Mike, our CEO, and Tyler covered the current state of venture and SaaS markets, all things Earnest Capital, and SEALs. In case you missed it, check out the recording and our favorite takeaways below. Financial –> Production Capital One of the driving forces behind the Earnest Capital Investment Memo is the notion that software is entering the deployment age (read more about the deployment age in the investment memo here). In short, Tyler explains the deployment age as a time when products, software in this instance, can and should be distributed to every corner of the economy. This creates a new software category where niche and sustainable business can succeed as opposed to the winner take all software companies we’ve seen in the past. Generally speaking, venture capital has been the default funding option for software companies but as we enter the deployment age there will be a need for a new form of funding. As a result, the type of capital companies need is shifting from financial capital to production capital (Enter: Earnest Capital). The Peace Dividend of SaaS Wars Another key driver to Earnest Capital Investment Memo is the idea of “The Peace Dividend of SaaS Wars.” The idea is that when countries are at war they will throw money to escalate and create new technologies. An example Tyler gives is the development of synthetic rubber during WWII. After the war, synthetic rubber could be applied to consumer goods. So how does this relate to SaaS? Investors and early leaders are throwing money to create new technologies in the winner take all SaaS markets. As a result, it is less capital intensive than ever before to start a new business. Tyler mentions that software companies can be started on a free Heroku plan where in the past you’d need to buy your own servers and space. In turn, this helps companies attack markets with a smaller total addressable market and may not be a fit for venture capital. The New American Dream Entrepreneurship is in decline in the US. Tyler believes that one major component of the decline is because, “the major area for new entrepreneurship, software and software-enabled businesses, has no default form of aligned funding.” In the past (think 1970s or 80s), an entrepreneur may have had experience or been highly qualified in a field, went to the bank for funding, and likely built physical locations. But with no physical collateral for a software company, who is supplying the funding to grow these companies? Another sign of a need for a new form of financing. Tyler argues that, “building, owning (and possibly someday selling) a profitable remote software business is the new American Dream.” Entrepreneurs can employ 15-20 people, distribute their profits amongst employees, and still create huge economic impacts for themselves and those involved with the business. Shared Earnings Agreement Tyler discovered that the traditional financing options for early stage investors (SAFEs, convertible notes) are not aligned with “Earnest” founders so they create a new financial product: Shared Earnings Agreement. Tyler discusses why they created the SEAL in the webinar and dives into a few of the key components. If interested in learning more about SEALs, we suggest checking out this post. Send Updates to Potential Investors Tyler briefly touches on the importance of sending investor updates. Tyler mentioned that he has seen investor updates as the best tactic they have seen in use to help companies fundraise. If Earnest speaks with a company they are interested in but are not quite ready to invest, they’ll ask to be sent updates about the business. From here, Earnest can be in the loop and ready to make an investment as soon as possible. Check out the Founder Summit Earnest Capital is hosting a summit for founders and startup leaders in Mexico City in March. The summit is intended to allow founders to meet and network as oppose to another conference full of presentations. If you’re a founder and interested in learning more about the summit, check it out here. Q&A Mike and Tyler tried their best to answer all of the questions at the end of the webinar. For the questions they did not get to, you can check out Tyler’s answers inline below: Q: I assume that at least some incumbents/market leaders will try to meet growth expectations by appealing and selling to niche audiences. How much weight does this threat carry in your investment decisions? If it’s not a threat, why not? A: Competition from large incumbents is definitely not something we outright ignore, it’s just that we try to dramatically lessen the risk by backing founders tackling markets that just wouldn’t move the needle for a $10B or 100B+ firm even they came in and took 100% of the market. That said it certainly can still happen. I don’t think we have a special sauce for that scenario other than to encourage founders to lean in to their startup competitive advantages. One thing we do is encourage founders to not try to make themselves seem bigger than they are (don’t use the “Royal We” if it’s actually just You). It’s surprising how much some customers really want to support an independent small brand. The Basecamp folks are putting on a masterclass on how to counterpunch on BigCos like Google with this Q: How does Earnest protect itself from a business defaulting on quarterly shared earnings payments? A: Pretty much the only “investor right” we ask for in our investment docs are the right to inspect the books. Many founders just go ahead and give us access to their Quickbooks. Which is how we would address some kind of fraud or misrepresentation of Founder Earnings. At another level it’s quite hard to accidentally “default” in the sense of being unable to make a payment, since the Shared Earnings are always a % of Founder Earnings, the business should have generated the cash to make the payment (in contrast to debt where a payment is due whether you have the profits to pay for it or not). Lastly if a company has the Founder Earnings but just refuses to pay, we are somewhat protected by the fact that a) the company is obviously doing well and therefore is valuable and b) not making Shared Earnings payments keeps our implied % of a sale higher, so the founder is kinda shooting themselves in the foot if they ever intend to sell the business, we’ll likely get more money from the higher % of the sale than they would have paid out in Shared Earnings along the way. All about aligning incentives! Q: The required “hit rate” for a SEAL portfolio to work is really high (given the capped return + long time horizon): How do you think about this question? Do you have a target % of startups that must “survive” to get a return? A: It is higher than you would see in a traditional seed VC portfolio, but our theory is that the failure rate is not a law of startup physics but rather the whole venture strategy ratchets up both a) the chance of being a unicorn and b) the chance of failure. We don’t know what the typical failure rate is for a basket of highly filtered and selected, post-revenue bootstrapped businesses, but our basic bet is it’s much much higher than is typical in venture. I go into this in some detail here. Q: For your portfolio companies, to what extent do they also have other investors beyond the founding bootstrappers? What is your range of size of investment and also the range of time horizon to large-scale recurring revenue? A: We have done a mix of being the first/only investor in a company, leading a round where several angel investors co-invest with us, and a few deals where we co-invested with other investors (least likely for us, but does happen). We’re open to anything but have a slight preference to be the first/only just because it’s so much easier to close (can be as fast as 2 weeks). As of this moment, we invest $50k-$250k which may increase over time. As a fund, ideally we would love to see business mature and get to real profitability in 7-10 years but we are early-stage, long-term investors and understand that timeline is out of our control. Q: Tyler mentioned a mix of outside capital and sweat equity, however Earnest and other micro-VCs only seem to want to invest in products that are built and have traction. How do I get help building an MVP? I’m a technical founder so I can write code, but trying to do everything myself is taking forever. A: Yea, I have to concede that one of the main advantages the venture model has over ours (similar funding for bootstrappers ideas) is that pre-seed VCs have a model where they can invest at the “idea stage”… because we are not unicorn hunting, we also can’t take the very high risk of investing pre-product pre-launch. One of the main effects of the Peace Dividend that I talk about is that it’s now pretty reasonable to bootstrap, as a side project, a real product to real revenue from real customers. So as an investor, I (and many others) now really have to wait until that stage because so many entrepreneurs are getting there without funding. Some good resources would be some of my Micro-SaaS blog posts (microsaas.co), Indiehackers.com, and Makerpad (makerpad.co) for tips on building an MVP for business ideas without writing a ton of code.

Our Community Templates are a collection of Update Templates created by our customers, partners, and friends. If you’d interested in showcasing your Update Template send a message to marketing@visible.vc Community Spotlight Company Name — Malomo Description —Malomo is a seed-stage, SaaS company based in Indianapolis, IN providing shipment tracking software for ecommerce brands Stage — Seed Capital Raised — $600k Market/Business Model — SaaS, E-Commerce The Investor Update Template If you’re a seed stage, SaaS founder this is a great template to get you started. Yaw, the CEO and Founder, of Malomo shares the Update below on a weekly basis followed by a longer form Update on a monthly basis. For a seed or earlier stage company a weekly investor Update can be a valuable resource for your company. A weekly Update gives you an added opportunity to leverage your investors and use their experience, network, and knowledge to help with early company decisions. Talk to your investors and see if they’d be interested in a more frequent Update. You may not need to send a weekly investor update to your entire investor list. If you have investors that are not as hands on or close to the business it may be best to only share a monthly or quarterly Update with them. You can view and use the Template below: Thanks to Yaw for taking the time to share his template. If you’re a founder, investor, or company operator and would like to share your Update Templates send us a message to marketing@visible.vc

Upside is a podcast about startup investing outside of silicon valley. Our founder, Mike Preuss, was able to sit down with the hosts at Upside and discuss all things founder and investor relationships. If you’re interesting in learning more about Visible, investor communication, and portfolio management give the episode a listen. From the Upside blog, you can find the recap of the episode below: AD: Finding experienced employees for your new business with Integrity Power Search (5:23) Mike’s background and entrepreneurship experience (7:56) Orr Fellowship (11:17) Managing a remote culture, different time zones, and off-sites (12:44) Initial problem and genesis of Visible (18:38) Changing the product from investors to founders (21:53) Finding clients (26:07) Tracking metrics and data (or lack thereof (30:05) Visible using Visible (32:38) Money model (36:13) Investors’ and founders’ access to information (43:13) Visible’s potential in a downturn or recession (46:31)

A board meeting can be an intimidating endeavor for first time founders. However, when a founder is well prepared a board meeting can be an integral part of a company’s success. In case you missed it, we hosted a webinar with Russell Benaroya covering the ins and outs of running a board meeting on demand. Russell spent the last twenty years investing in private equity and as a healthcare entrepreneur, building and exiting two start-ups. Currently, Russell is a Partner at Stride Services where they help high growth organizations with back-office support. Between his time as a founder and helping companies at Stride, Russell has become an expert in preparing and executing a board meeting. During the webinar, Russell shared how founders can always be prepared for a board meeting. You can find our favorite takeaways from the “Board Meeting on Demand” webinar below: Lead with Facts It is normal to feel anxiety and excitement before a board meeting. However, it is important to manage your emotions and stick with the facts. If you lead with data and facts then you can take the time to talk about strategy and the future of your company. Russell warns founders not to approach board meetings with a narrative or a story to tell as it can be exhausting and can understates the facts. A Board Member Will Never Know Your Business as Well as You Do If you’re looking for a board member to give you tactical operational advice remember that their view will be slanted. No matter how involved a board member is with your business they will not have the same information and understanding of your business as you do. In reality, a board member should be able to determine if you’re properly capitalized to execute on your strategy, how you are executing to the strategy, and do you have the right people in the right roles. Turn the Executive Session on Your Board Rather than using the executive session as a chance to air your frustrations and “seek counseling,” use it as a time to allow your board to bring up their own discussion items. Ask your board to come prepared to discuss their topics, their observations, and their agenda items they want to cover. What to Send Before the Meeting Russell suggests sending your metrics vs. plan, financial and operating metrics, actions since last meeting, key customer learnings, your pipeline, and your functional roles chart. You can take it a step further by saying founders should not send a simple org chart but rather a functional role chart that will showcase what positions you need to fill to deliver on your strategy. Russell recommends sending your materials 3 days in advance so your board has a chance to review the facts and form an opinion in advance of the meeting. No Surprises A board meeting should not be full of surprises for you as a founder or any of your board members. You should go into a board meeting with a deep understanding of where every board member stands. Russell recommends scheduling 1 on 1 meetings with each board member to pick their brain on different issues. There tends to be a herd mentality when sharing to a group (your board) so it is important to discuss on an individual basis to understand where they truly stand. Come with Your Best Thinking As a founder “you should be coming to your board meeting to share your best thinking.” This can be boiled down to a simple process. You come to the meeting and share how you are thinking about an issue, how you analyzed it, your recommendations, then ask the board for their thoughts on your recommendations. This way you stick to the data and use your knowledge to make the best decision for your business. From here, you can have a spirited discussion with your board. All in all, remember that running a board meeting comes down to the preparation you put in beforehand. With the right preparation and mentality heading into a board meeting, it can truly be a valuable asset for your business.

A great board of directors can be a “secret weapon” for a company. At the same time, a bad board can kill a company. Matt Blumberg, CEO of Bolster, joined us to break down how early-stage founders can build a great board — we covered everything from recruiting board members to running a successful board meeting. What we covered: How a great board can be a secret weapon The purpose of a board of directors Determining the makeup of your board Scaling your board as you grow How to best run a board meeting

A guest post for the Founders Forward blog by Florent Merian. Visible is on a mission to move founders forward. We’ve built an automation tool that lets you, founders and startup leaders, instantly create and send updates to your team and your investors. We often preach treating fundraising and investor communication as a process. It should be no different from any sales, marketing, or product process that you would implement at your business. In this blog post, we explore how you can apply your support process to your investor communication and why getting feedback from your investors is so important to build trust, engagement, and a successful long-lasting relationship. Know your investors, enhance your relationship To get feedback from your customers is vital to increase your business. So is feedback from your investors to build transparency and trust in your relationship. As Fred Wilson, partner at Union Square Ventures, reported, “founders and their teams spend a lot of time preparing for a meeting, and then they give the meeting their all, and often the Board leaves, and nothing is really said about it.” As he stated, “one of the most frustrating things about board meetings is that it is difficult for founders and CEOs to get feedback on them.” By engaging with your investors to know how they feel after a meeting and how you can improve, you better know them, their expectations and you get valuable insights to improve your performances as a startup leader. Related Resource: Navigating Investor Feedback: A Guide to Constructive Responses Build a personalized online survey to get insights There are several ways to ask for feedback. For instance, you can build an online review with a simple web tool, and share it with your investors when done. You can ask them the following questions: What are the three things we’re doing well? What are the three things we need to do better? What would you like to see followed-up on from this board meeting? Are there any topics you’d like to explore in-depth at the next board meeting? As your investors might be overwhelmed by emails and might not have the time to reply, personalize your survey with their first name to make more engaging and make sure it has a responsive design, so it’s accessible from any where and from any device. Then, you can collect data as part of your process to review your performances, to improve your management, and ultimately to foster your business development. This way, you can get valuable feedback from your investors and you can rely on it to improve your next meetings and updates. Get continuous investor feedback The same way you would do with your customers, regularly request feedback from your investors. Send them surveys after your Board meetings and keep them informed of your activity with regular updates to build and maintain a trustworthy relationship. Remember founders who regularly engage with their investors are 200% more likely to receive follow-on funding. To engage with your investors by getting feedback and sending updates regularly helps you maintain a trustworthy relationship, and it also enables you to build a better company. Thank you for your read! How about you, how do you engage with your investors?

Investor communication is a key skill that all startup founders should hone. Whether you're pitching new investors, updating existing ones, or trying to raise your next round, your ability to engage investors can mean the difference between failure and success. In this webinar you’ll learn: How to reach out to investors and get a meeting How to pitch effectively How to stay top-of-mind with prospective investors How sending consistent investor updates can make getting your next round easy How to leverage your investors’ experience and networks to get the help you need

Investor communication is a key skill that all startup founders should hone. Whether you’re pitching new investors, updating existing ones or trying to raise your next round, your ability to engage investors can mean the difference between failure and success.

Customer Development was introduced by entrepreneur Steve Blank in the early 90s. Since its inception, customer development has become core curriculum for startup founders and operators. Customer Development is one of the parts that make up a “lean startup,” an idea introduced by Steve Blank and Eric Ries. As the customer development framework has become a widely used approach in the startup world, we’ve decided how the process can be applied to a key facet of building a startup: investor development. In order to better understand investor development, it is important to understand customer development. As Steve Blank puts it in his book, The Four Steps to the Epiphany, “Broadly speaking, customer development focuses on understanding customer problems and needs, customer validation on developing a sales model that can be replicated, customer creation on creating end-user demand, and company building on transitioning the company from one designed for learning and discovery to a well-oiled machine engineered for execution.” The customer development framework can be broken down into the 4 steps below: Customer Discovery — “The goal of Customer Discovery is just what the name implies: finding out who the customers for your product are and whether the problem you believe you are solving is important to them.” Customer Validation — “Customer Validation is where the rubber meets the road. The goal of this step is to build a repeatable sales road map for the sales and marketing teams that will follow later.” Customer Creation — “Customer Creation builds on the success the company has had in its initial sales. Its goal is to create end-user demand and drive that demand into the company’s sales channel.” Company Building — “Company Building is where the company transitions from its informal, learning and discovery-oriented customer development team into formal departments with VPs of Sales, Marketing and Business Development.” Finding and marketing to new customers is hard. To help with this, it is important to note the four steps are recursive and iterative. As Steve Blank writes, “The nature of finding and discovering a marketing and customers guarantees that you will get it wrong several times. Therefore, unlike the product development model, the Customer Development model assumes that it will take several iterations of each of the four steps until you get it right.” What is Investor Development? As founders and investors often stress, raising venture capital is very much a structured process. And more times than not, a process full of nos and disappointments. Just as the Customer Development model assumes it will take several iterations until you get it right, the same can be said for pitching and closing investors. Elizabeth Yin, founder of the Hustle Fund, says, “an experienced fundraiser knows that the goal in going into your first fundraising meeting is to ask lots of questions and walk away understanding what next steps make sense. You should understand your potential investor’s pain points. Is there something you can solve for a potential investor by having him/her invest in your company? Do you have a solution for those pain points?” Following the core principles of the Customer Development model and Elizabeth’s idea mentioned above, a founder can easily systemize their fundraising process using the four investor development steps below: Investor Discovery — Investor discovery is the process of identifying targeted potential investors and whether your company/product/service can solve your investor’s needs and requirements. Investor Validation — Investor validation is where founders iterate on what they learned in the discovery stage and tailor their pitch and begin targeted outreach and conversation. Validation proves that investors are reacting positively to your company/product/service by investing capital. Capital Creation — Capital creation builds on the success from the first 2 stages and creates a scalable process for the current, and future, fundraises. Checks are being written and demand is being created for follow-on and future investors. Relationship Building — Relationship building is when your fundraising and investor relations process has matured. Formal expectations have been set between you, the founder, and your current and future investors. Note, that this is an iterative process (just like the Customer Development Model). If you believe your company cannot satisfy a potential investor’s requirements, ask questions to understand why and reiterate your solution to solve their investment pain points and requirements. Investor Discovery Investor discovery is the start of your fundraising journey. Before you begin the investor discovery stage it is important to identify who you believe your target investors to be by creating an ideal investor persona and list of targeted investors. The discovery process will happen during your first meeting with a new investor. A first-time founder may be tempted to begin their meeting with a company pitch and paint a picture of why their company is worthy of being venture-backed. However, this should be a time to understand the investor’s needs. Ask plenty of questions and pull together your learnings to tailor your solution and pitch to their needs. As Elizabeth Yin sums it up, “Your job in the first meeting with a potential investor is to ask a lot of questions—a la customer development style—to understand how you might be able to tie your story to their problems and interests. And so your pitch should not be stagnant, and although you may have created a deck before the meeting, it’s important to tie your talking points together as a solution to the problems you learn about in that meeting.” Investor Validation The next step in the process is to validate your solution and scale your process to other investors you’ve identified. As mentioned above, the first meeting with every investor should be about uncovering their pain points and requirements to tailor your pitch for each investor. The same holds true for the validation stage, but with an emphasis on rolling out your learnings and dialing in your pitch as you uncover different strengths of your business and your pitch from each new meeting. By completing both investor discovery and investor validation, you confirm that your company/product/solution is worthy of being venture-backed. These steps verify that your business model is feasible, the market is of interest to investors, establishes your price, and creates the perceived value to the market, and investors. Capital Creation To create capital you need to have proved your company is worth of being venture-backed. By completing investor discovery and investor validation you have likely confirmed your company is ready to be venture-backed. Capital creation is when checks from initial investors are being cashed. By validating the value of your company, a new sense of demand will be created for your company, new opportunities with co-investors and future investors will arise. It is important to note that new opportunities will arise for a future round. However, by taking your learnings from the first discovery and validation, you’ll be to engage these investors for a later fundraise. Relationship Building The final stage is relationship-building. The relationship-building stage is when your investor relations and fundraising processes have matured. You’ll have an established rhythm for communicating and engaging with your current investors as well as an approach for reaching out to prospective investors. Investors are invested in your success as a company and have validated that you are fulfilling a pain point. It is your duty to show that you’re taking their commitment seriously and sharing how you’re deploying their capital and ensuring they can help create value along the journey. All in all, it is vital to create a process that allows you to iterate and improve along the way. At the end of the day you are selling your company to a potential customer (read: investor) and communication is at the center of the relationship. Interested in learning more about investor development? Check out other ideas on our Founders Forward blog here.

One of the most powerful tools at investors’ disposal is equity research reports. Wall Street firms employ some of the sharpest minds in the industry who study companies with publicly traded stocks. These analysts delve into every aspect of the company, from its financial statements to its management team and competitors. Equity research reports provide solid analysis and the opinions of the analysts who follow the companies and their stocks extremely closely. What Is an Equity Research Report? An equity research report is a detailed report written by an analyst at a sell-side firm or independent investment research firm that analyzes the company’s business and finances and gives the analyst’s opinion of the company’s prospects and future stock price. Analysts are experts in the companies’ businesses, finance, and industries they follow. They research a company’s financials, performance, and competitive landscapes. They also create models to predict metrics like future earnings per share, sales, and a target price for the stock. Analysts keep a close eye on every move of the companies they follow and update their equity research reports at least once a quarter after the company issues its quarterly earnings report. If significant material changes occur mid-quarter, the analyst will write an update to their research report in a flash report. An example of an equity research report is a report on Apple written by a sell-side analyst from Argus. This report includes the analyst’s analysis and opinions about the company’s financials and future revenue and earnings predictions. The report also provides the analyst’s target price estimate and rating. Important Components of a Typical Equity Research Report The typical equity research report includes components that dig into the company’s financials, industry landscape, risks, and other vital aspects that can materially affect the company’s future business performance and stock price. Recent Results & Company Announcements Shortly after a company announces its quarterly results, an analyst will issue a new equity research report. This report will include an analysis of the recent quarterly results, including EPS, sales, and various financial metrics like EBITDA and profit margins. When releasing quarterly results, a company often makes announcements in a press release or through a conference call between management and the analyst community. The equity research report will include an analysis of these company announcements. Organizational Overview and Commentary An equity research report typically summarizes the company’s organizational structure. This summary outlines the management structure and the company’s major divisions. If the company makes any significant structural changes, such as appointing a new CEO or shutting down a division, the analyst will discuss the implications of these changes in the equity research report. Valuation Information Perhaps the most impactful part of an equity research report is the valuation analysis provided by the research analyst. The analyst provides an overview of the company’s performance through this analysis. The valuation information included within an equity research report includes margin analysis, EPS and sales estimates, the stock’s target price estimate, and other valuation and financial metrics calculated through a deep dive into the company’s financial statements. Estimates An analyst uses a company’s reported results and their own research into the company’s operations and the industry to calculate various estimates. The most prominent estimate is the EPS estimate, the analyst’s estimate for earnings per share for future quarters and fiscal years. Analysts also calculate forecasts for sales, margins, and other financial metrics. Many equity brokerage reports include a target price estimate, which is a short-term estimate for the stock’s price. An analyst may also issue a rating for the company’s stock, such as buy, sell, or hold. Financial Histories An equity research report typically contains financial data going back several years on both a quarterly and fiscal year basis. The analyst uses this financial data to perform an analysis of the company’s financial health and create projections. While research reports typically do not include complete financial statements, the reports often include important line items, valuation ratios, and financial metrics in tables which the analyst will reference in the commentary. Trends Evaluating trends is a big part of an analyst’s job; equity research reports discuss these trends. The report includes trends like year-over-year and quarter-over-quarter growth rates for metrics such as EPS, sales, and margins. The trend analysis gives an excellent overview of the growth of the company. For example, suppose sales significantly grew year-over-year, but EPS was stagnant. In this case, the company may be facing higher expenses, and the analyst will dive into the financial results and attempt to uncover the cause of the problem. Risks Many equity research reports include a section that describes the risks the company and investors may encounter. These risks may include economic headwinds, an increasingly competitive landscape, and company-specific risks like failed product launches or management changes. In-Depth Industry Research While analysts are experts on the companies they follow, they are also experts on the companies’ industries. Equity research reports include the analyst’s evaluation of the industry trends, the competitive landscape, and how the company’s prospects align with changes within the industry. Buy Side vs. Sell Side: What Role Do Both Sides Play? Buy-side and sell-side firms play different roles in financial markets, and it is vital to understand the role of each. Buy-side firms, such as hedge funds, pension funds and asset managers, have money to invest. They buy stocks and other investments and are fiduciaries of their client’s money. Sell-side firms, such as brokerage houses, sell investments to their clients, including buy-side firms. Sell-side firms employ analysts that write equity research reports. The sell-side firms provide these equity research reports to their buy-side clients. Buy-side firms use these equity research reports to help make investment decisions. Other Types of Research Reports Analysts produce several types of equity research reports. These include initiation of coverage reports, quarterly results reports, flash reports, and sector and industry reports. Initiating Coverage Reports When a sell-side firm begins covering a stock, the first analyst report is called an initiation of coverage report. This report gives the analyst’s first take on a company and its stock. Many investors pay attention to initiation of coverage reports because they provide a fresh perspective on a stock. Quarterly Results Reports After a company reports its earnings, an analyst will issue a new research report incorporating recent results. The analyst discusses the results and what went wrong and right in the last quarter. The analyst will also calculate new financial projections based on the results, company guidance, and management commentary. Related Resource: Portfolio Management: What it is and How Visible Can Help Related Resource: How To Write the Perfect Investor Update (Tips and Templates) Flash Reports Analysts issue flash reports when significant material changes involving the company, or the company’s industry, occur. An analyst may issue a flash report if the company’s CEO resigns, the company initiates a significant stock buyback program, or other major news breaks. In a flash report, the analyst will discuss the relevant news and how it may impact the company and its stock price. Sector Reports Sell-side firms also issue sector reports. The sector reports will dive into trends within the sector, a high-level analysis of the top companies in the sector, and past and future predicted performance of the stocks within the sector. Industry Reports Like sector reports, industry reports discuss the competitive landscape and major players within an industry. An industry is a subset of a sector. For example, the technology sector includes the semiconductor, personal computer, and cloud computing industries. Industry reports focus on a narrower industry rather than a broader sector. Equity Research Report Example Although each sell-side firm has a unique style for presenting analysts’ research in equity research reports, most contain similar types of information. Let’s conclude our discussion of equity research reports by looking at a recent Microsoft report written by Argus analyst Joseph Bonner after the company issued its fourth quarter 2022 results. The report starts with several tables of key statistics, such as financial and valuation ratios and the analyst’s investment thesis. The table also includes the analyst’s rating and target price for the stock. The report continues with the analyst’s investment thesis for Microsoft stock. This thesis briefly explains the analyst’s rationale for his Buy rating on MSFT stock. A section detailing recent developments within the company, which the analyst derives from the company’s earnings report and conference call, is followed by a look at select financial data. An analysis of growth rates for several key metrics like revenue and margins leads to an overview of risks that investors of Microsoft may face. Equity research reports offer investors a great way to harness the power of Wall Street analysts. These analysts live and breathe the companies they follow. Investors can use their expertise to advise them in the investing process.

You do a lot of work for your investors. Regular updates keep your board abreast of the latest company developments and current performance metrics. Monthly or quarterly meetings keep you accountable to their questions and concerns. You’re expected to answer their inquiries in a timely and satisfying manner. All of that accountability is wonderful, but it should also work both ways. One of the most valuable aspects of your investor updates is the opportunity it provides founders to make targeted asks of their VCs. After all, you chose these folks on the strength of their experience, capital and network. Accessing those resources with a focused request can be one of the best ways to improve your business. But inevitably, some investors will be better than others when it comes to tapping into their networks and assisting their founders. It’s not a bad idea to let them know where they stand and provide a nudge for improvement. Ranking investors can be an intimidating idea, but when done right can provide a useful way for founders to spur increased engagement from their investors and better illustrate their additional needs from the board. To handle it in the most tactful manner, focus less on creating a zero-sum, Game of Thrones-style battle between investors for the top spot and instead provide up-to-date developments on how investors have made a specific impact on the business. To succeed in doing so, you need to show contributions in several categories – a nice mix of hard metrics like # of intros alongside less qualitative items like offering good product advice. Here’s what I recommend: Ranking Your Investors by Hard metrics Nothing quite beats delivering clean data to convince your VCs of their value or their need to do more. A regular report on these three critical categories can encourage greater participation using nothing other than the facts. Referral revenue – Investors help drive deals. It isn’t a terrible idea to tie revenue directly to each investor or firm and be transparent with the entire board of this growth metric. Your board is likely comprised of a competitive group. Developing a referral revenue leaderboard won’t be the only way you’ll assess contributions, but just putting these numbers down on a one-sheeter could be a great way to fire up VCs to go out and hunt deals for your business. Capital – If you need follow-on funding from your board, you’re going to be asked to deliver data and provide a convincing argument for the initiatives that need cash to scale. Once you’ve completed their requests, it isn’t a terrible decision to start compiling a report that details the contributions of each investor as well and share these dollar figures. You’ll want the help of your current board to assist you in your raises. Detail who matters most. Investor referrals – In addition to follow-on funding from their own pockets, you want your investors to help facilitate venture deals with investor referrals. If members of your board make warm introductions that later lead to signed checks, track that money like a sales lead so an investor’s value isn’t solely tied to the size of their bank. Also, providing examples of referrals that have worked well can be an exciting talking point to inspire other investors to make additional introductions to close your rounds quickly. Human Resources Beyond the easy-to-quantify metrics, there are two core contributions investors can make to attract and retain talent. Here is how to leverage transparency in order to improve their commitment. Employee referrals – Money and deals will keep your startup afloat, but in the long-run, you need top talent to beat the competition. As you build out your leadership team, your investors should be your best recruiters. Their referrals can cut down on the time it takes for you to hire and ensure quality candidates will make the most of your time. The value of one’s networks can be easily shown by identifying for the group who is doing the best to fill the ranks. If a board referral leads to a hire, detail this in your investor’s contributions during your regular update. Employee training – Your investors’ responsibility for human resources doesn’t stop at employee referrals. “Traditionally, VCs and platform teams have helped their portfolio companies attract the best talent by providing recruiting and hiring support,” Maria Palma of RRE Ventures writes. “But recently, some VCs have also started to help their companies on the development and retention front. Many are now offering ongoing training, coaching, and proactive solutions to address the common leadership and management challenges that occur frequently as startups scale.” In order to encourage these contributions, you might both quantify the time they invest in these efforts and outline the specific areas where they’ve filled a need. This informs your entire board of what’s going on with investor-assisted retention efforts and builds a template for employee support in the future. A concise update to encourage contribution Compiling these data points and informal efforts into a single slide or one-sheeter underlines its importance to your work, shows that you value their endeavors, and doesn’t unnecessarily embarrass anyone. After all, you may have a few in the group that have fallen short recently but will be motivated to catch up and make moves soon. A concise overview can be both constructive and respectful. It’s a good jumping-off point to ask for more. It also doesn’t waste their time. As for your own records, you might take a more blunt approach. It will be helpful to regularly review these data points and actually assign a numerical rank to each investor. That way, as you begin to scale and the stakes increase on investor relations, you never lose focus on who has objectively mattered most to the business.

Running a Board of Directors Meeting For most businesses, a Board of Directors meeting must be held at least once a year — however, some businesses may choose to schedule them more frequently. A Board of Directors meeting is an excellent opportunity to make sure that key stakeholders are on the same page. During a Board of Directors meeting, stakeholders will be updated regarding the status and finances of the business, as well as offered presentations regarding the company’s future. Perhaps most importantly, stakeholders will be allowed to vote on future strategies and directions. For startups, a board meeting is an data and people. In a board meeting, the right people are exposed to the right data. Profit-and-loss reports, general ledger sheets, and other financial documents are presented to key stakeholders, and these key stakeholders are able to synthesize this information into important insights. Further, board meetings provide a pathway through which key stakeholders are able to discuss the company’s performance. There’s a reason why board meetings are required: because they are essential to a healthy business. Startups often experience more volatile changes than other companies, and may face unique challenges. Consequently, startups may want to have more frequent board meetings, and may find that their board meetings are even more useful than they are in traditional, established companies. Even in preparing for a board meeting, a startup will be able to explore its performance and its challenges, locating and assessing its risks. However, challenges can arise when the principles of a startup don’t have the time to prepare for a board meeting, or feel as though they aren’t certain what’s expected of them. As many startups are loose and informal, a board meeting may provide an unnatural level of formality. Startup founders may need to research board meetings further if they want to run a successful one. Board Meeting Rules How are board meetings run? What are the board meeting rules? Board meetings are 5% the meeting itself and 95% preparation. Before the board meeting occurs, you will need to prepare all of your documents and presentations in advance. You’ll need to determine exactly what you want to talk about during the meeting, as well as establishing what your goals are for that meeting. Ideally, your business has already been tracking its KPIs, metrics, and financial data. After the board meeting is scheduled, and before it starts, you should consider the current state of the business. What are its largest risks and challenges? What items are of the largest strategic importance? Before your board meeting begins, you should: Have completed and compiled the meeting minutes from the previous board meeting (hopefully well in advance). Most board meeting rules of order will have reading the prior meeting minutes first. Prepare financial reports, analysis, and other documents for the board members to review. Board meeting protocol generally suggests that these be reviewed early on, though they will also be sent to the board members in advance. Identify the company’s greatest risks, assets, and challenges, especially those that are most pressing. Create strategies that you would like the board to weigh in on, whether they approve or disapprove. Define clear goals that you want to achieve by the end of the board meeting. Once you have these things in place, it’s time to create an agenda. Your board meeting agenda is comprised of the topics that will be discussed, in order. It’s intended to keep everyone at the board meeting on the same page, as well as to ensure that nothing is missed. Many boards don’t have the best time management, and can potentially spend all of their time on a single issue, when multiple issues need to be discussed. Your agenda should be sent to all the board members directly, before the meeting occurs, so they themselves have time to prepare for the meeting. While it’s just a general outline of the meeting to come, it should still give them enough information that they’ll be able to form some thoughts, opinions, and ideas. A board meeting is a collaborative process, and your goal is to facilitate thought. To that end, your startup should be focused on presenting board members with the information that they need, as well as the challenges that are ahead. As mentioned, each board meeting and each company is different, and startup culture tends to vary significantly. Some startups may have looser and more frequent board meetings, while others may have infrequent, formal meetings. Some have strict board meeting rules of conduct, others don’t. Over time, you’ll discover what a normal “board meeting” for your startup looks like. Board Meeting Agenda What does the actual board meeting look like? How much time should be allotted for different things, and how do you go about voting for specific agenda items? Your board meeting agenda will provide a significant amount of guidance at this stage, but a traditional board meeting will look like this: Review the meeting minutes from the prior meeting. Discuss the company’s financial documents. Address any challenges and risks the company is facing. Host any presentations, regarding the status of the business. Discuss forward-facing strategies for the business. Vote on key decisions regarding the company’s direction. Raise and discuss any additional motions. The agenda should be paced properly, so that everything on the agenda can be covered within the time that has been allotted for the meeting. You will need to take control of the meeting, keeping an eye on the clock, and making sure that the board meeting doesn’t get bogged down. Understandably, the voting aspect of board meetings is often one of the most important. As key stakeholders do have a say in the future of the business, the vote will represent the actions that the business is allowed to take moving forward. Most of the board meeting will be leading up to these votes. The financial statements, challenge statements, presentations, and strategies should all be offering potential solutions to these board members. These board members will then vote on these solutions. Board meeting voting procedure is generally as follows: A motion is put to the table and discussed. Affirmative and negative votes are given. The affirmative and negative votes are tallied. This is for pre-scheduled votes. For non-pre-scheduled votes (new motions), a motion will generally be raised by a board member. From there, it must be seconded by another board member, at which time it will then be put to the table and discussed. Adhering to board meeting voting protocol is often necessary for two reasons: it ensures that votes occur expediently, while also making sure that the vote (and accompanying discussion) remains clear and civil. Often, board meetings may involve votes on topics that the board members consider quite passionately. Robert's Rules of Order Robert’s Rules are an excellent way to maintain order and decorum throughout a board meeting. A board meeting, by necessity, has to be orderly. Even in the most informal of startups, it must at least be clear what is being discussed and what the results were of that discussion. Robert’s Rules of Order can be applied to virtually any type of meeting, with a board meeting being one of the most likely to benefit. It is focused both on conducting meetings generally and also making decisions as a group. Here’s a simple Robert’s Rules one pager: Under Robert’s Rules of Order voting is done through motions, which must be seconded, and when these motions are seconded, they are then voted upon. A motion is defined as an intent to do something. In a board meeting, any planned strategy or decision would be considered to be a motion. Under Robert Rules of Order motions and voting are done with a single speaker at a time: there is no cross-talk, leading to an atmosphere more conducive to progress. Under Robert Rules of Order voting procedures, debates often precede votes, so that board members can discuss votes in full, and each board member can be allowed to share their opinion. In general, a “quorum” is required for most meetings. A quorum is a minimum number of members that the board meeting requires to be considered a full board meeting. Under Robert’s Rules of Order, meeting members have the following rights: to attend meetings, make motions, speak in debate, and to vote. These rights can be applied easily to board meetings. Depending on the way that Robert’s Rules of Order are applied, votes may be required to be unanimous, two-thirds, previous notice, or majority. Robert’s Rules of Order for small boards can be used as a method of structuring board meetings, giving insight into the decision-making process for groups, as well as the most important factors to emphasize. In general, Robert’s Rules place an emphasis on ensuring that an agenda is designed and kept, that everyone has space to talk and discuss, and that discussion is kept orderly and clear.

Last week, we hosted a webinar on how to raise a Series A. In it, Zylo CEO & Co-Founder Eric Christopher and I shared tactics and advice on how to make sure your Series A raise is a successful one. If you made it, thanks! We had a great turnout of engaged audience members. If you weren’t able to make it, you can check out the recording below: Today, I want to share three key takeaways from the webinar, in the hopes that they might help you raise your next funding round. How to know if you’re ready to raise? Series A readiness is a difficult thing to pin down. So much depends on your specific situation: the industry you’re in, the product you’ve built, your business model. A good breakdown of specific numbers you should be hitting can be found here, but even that list isn’t universal. As a general rule, though, you’ll know you’re probably ready to raise your Series A when you have these three things: an engine, healthy metrics, and a compelling story to tell. “An engine” refers to a predictable engine for acquisition. Acquisition of what, exactly, will depend on your company; it could be users, customers, revenue, etc. The important thing is, do you have a predictable way to acquire more? Healthy metrics refers to three general patterns: accelerated growth, low churn, and efficient acquisition. If your metrics demonstrate all three of these things, you’ll be very attractive to potential investors. The third item is this: can you tell a compelling story? This is potentially the most important item of the three. Every investor wants to invest in a good story. If you can effectively communicate what you’ve done so far, then paint a clear picture of what the future will look like if you keep succeeding, you’re likely to have success with your raise. If an investor likes the sound of that future and they believe you can make it happen, they’ll invest. Before you raise, commitment is key If you think your company is ready to raise a Series A, the first thing you have to do is prepare yourself. You have a lot of hard work ahead of you. A Series A raise takes, on average, about 5.5 months to complete. That’s a lot of time where your focus will be outside of the day-to-day of your business. You’re also going to face a lot of rejection—the most common answer after pitching an investor, after all, is “no.” A CEO/Founder who is undertaking a Series A round needs to be fully prepared to do so—committed to seeing it through, confident in their pitch, and always working with a specific goal in mind. Before diving into your Series A raise, you need to make sure you’re prepared for what it means. Don’t forget about your current investors Your current investors can be absolutely essential in closing your Series A round—whether they participate in the round or not. If your current investors choose not to follow on—for whatever reason—they can still be a huge help to you as you raise your round. They can provide everything from pitch feedback to warm introductions to other investors who might be a better fit. These are just three takeaways from our webinar on raising your Series A round, but there’s plenty more content where that came from. Check out the recording below: