Keeping investors updated

Send them a monthly letter, including:

• Your own summary, in plain English, of major things that the business has done. New products, features, hires, etc.
• One or two (at most two) problems that you're working on, that you need their advice and help with
• A P&L report for the previous month, comparing it to prior months
• A current balance sheet
• An estimate of how much money you have left, in months, based on the current burn rate (assuming you are not profitable)
• A chart showing the progress of what you consider the most important two or three metrics of your product or service: for example, a web site might measure global monthly uniques.

The very act of producing this letter every month, even if you didn't have investors to send it to, is remarkably valuable in keeping focused on the important things.

As an angel investor, I've seen both ends of the spectrum.

I have startups that send me relatively regular updates (though not quite to the level of detail that Joel suggested) and others that I don't hear from at all other than major updates (like a new financing) or when there's some signature required.

I personally lean towards solving for what is expedient/efficient for you (but meets any minimal contractual requirements).

One of the problems with a lot of small investors is that a lot of your time can be eaten up answering their questions about how the business is going. They have money invested and will want to be informed about how their investment is going.

If it was me, I would try to do a few things upfront:

1. Make sure they understand the nature of an investment in a startup: ie. risk involved, (in)security of capital, liability, debt vs equity, the nature of uncertainty in a startup.
2. Make sure they are very clear about the terms of the investment and what they mean, especially time expected for return of capital, time to pay interest/distributions, what happens if the company goes belly up, if and when they can liquidate their investment
3. Set expectations on how and how often you will communicate with investors. Make sure they know you want to spend your time working on the business
4. Limit the seats on the board (if appropriate) to 1 private investor (who may be nominated by the others.

Then update them regularly at the timeframes you have nominated. At these times be transparent with information but understand that they may not have the financial/business understanding you do.

Hope this helps

I usually keep my angel investors updated via a monthly progress report and cash flow statement using Google Docs. I will also let them see the upcoming tasks on Pivotal Tracker.