5 Reasons Why a Startup Needs to Report to Their Investors


The web is full of articles and tips on how to find the right investor and secure funding for a startup. Accelerators, incubators, workshops, events, blogs and other programs or initiatives all dedicate themselves to helping startups find various sources of funding.

But what happens after the Startup receives investment? How does the startup build a relationship with the investor? How is the startup expected to update investors?

This is where the startup community often lacks information. Here is an approach that will make your startup stand out from the mediocre or inexperienced startups who don’t know what to do post-funding.

All startups should be reporting clear and concise information to their investors after receiving funding from day 1. They should be frequently showing their investors the latest financial information as well as tracking the company’s progress. Startups are very unpredictable. Early stage companies should be reporting much more frequently than established companies; ideally monthly or quarterly.

With regards to financial documentation, the standard reports are normally: balance sheets, profit and loss accounts, cash flows and any other budget reports or plans. Startups should also be tracking their Key Performance Indicators (KPIs), a specific metric that can be used to measure how a particular aspect is performing. Investors can see how the company is executing by comparing their actual results, and their targets.

KPIs are specific to each company and can help give insight as to whether or not the strategy that is being used is effective or whether something should be adjusted.

So, why exactly is it so important to report to investors? How would this benefit a startup? Here are 5 of the most important reasons for why a startup needs to report to their investors:

  1. Having clear financial reports gives startups and investors a holistic understanding of the business which leads to more informed business decisions.

    For example, if a startup stays on top of their cash flow and has an understanding of their burn rate, they can revaluate their spending to help avoid the running out of capital even if their order book is looking healthy.

  2. Reporting to investors in a timely manner helps to build transparent relationships. By showing the investors all of the business (the good and the bad), investors will be able to trust what the startup reports. The relationship between the two will be much stronger.

    If the startup is transparent and reliable, they are already helping their investors to mitigate risks in their portfolio. If the startup is perceived to be a more stable investment, it will make the investors more inclined to reinvest in the startup again in future funding rounds.

  3. Tracking your KPIs will enable a startup to better understand their own strategy. By tracking and recording your metrics, the startup can evaluate how effective their strategy is; startups are able to see the impact of their business decisions.

    Monitoring progress through KPIs gives investors the opportunity to see a startup’s ability to execute; again making the startup more investable at a later date.

  4. Investors can only help startups if they are kept up to date. If they know what is happening in the business, they can offer advice, support, input, resources and feedback. For example, if investors know that the startup was looking to hire a new developer, the startup can benefit from the investor’s pool of resources and connections that could help find them a talented new recruit.

    An investor shouldn’t just be a source of capital but a mentor, someone to give constructive criticism. After all, the investor wants the business to succeed just as much as the startup.

  5. Being organised and reporting effectively from the beginning will benefit the startup hugely in the long run. For any potential exit strategy, whether it is reaching IPO or being acquired, collecting the data needed will reduce the due diligence efforts that will be required for the company. By reporting from day 1, a startup will be preparing for success.

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SeederBoard - Startup Reporting

Taking the time to report clear information to investors could be the difference between becoming a startup that succeeds or fails. If you are a startup and have not yet developed a reporting strategy for your startup, it should be your first priority.

There are tools to help startups with their investor relations. SeederBoard allows startups to upload all of their financial information, track KPIs and analytics, receive feedback from investors and know the current state of the business at all times from one central location.