Communicating with your investors and how transparent to be

YCombinator takes a notoriously skeptical view of investors.  Few are as helpful as they promise, they need to be “managed,” they’re just capital they’re not helpful, blah blah blah.  YCombinator does some fantastic things, but I can’t disagree more with this perspective. Chances are your company will need its investors to provide crucial assistance at some point – I can’t name a single company who succeeded without either an insider bridge during times of trouble, a key connection to a partner or future funder, or some sort of other major value add from an investor.

So if you’re going to need your investors, you can’t try to manage them.  We’ve had portfolio companies that meter out information to us in careful spoonfuls and try to keep us at an arms length.  This doesn’t feel great when we’ve already trusted you with our capital and are on your side.

The biggest entrepreneurs make is that they assume they don’t need their investors, they manage their investors… then they need their investors.  To make this point succinctly: if we don’t hear from you for a year, our last communication was “we’re going to kill it this year thanks for investing,” then we hear “sorry we’ve been out of touch for the last year, but we need a bridge,” we’re unlikely to be there for you.  We haven’t seen the mistakes you’ve made, we haven’t seen your growth and we don’t feel like a partner.

Every company has turmoil and difficulties – good investors know this.  You should be fully open to your investors – writing to them at least quarterly (more often in the early days) with a transparent breakdown of your numbers, successes and failures.  You should be spending time on the phone with them picking their brain for solutions, connections and general opinions on the business.

Your business will hit rocky waters.  Having your investors feel like partners in the business will help you navigate those waters.  Emailing us whenever you need more money might sink the boat.