Communication With Your Investors – the Good, the Bad, and the Ugly

Being a novice but somewhat active angel investor for the past two years (I currently have 10 startups in my portfolio), one thing that has struck me is the wide variation in communication levels between myself, as an investor, and the management of the companies I have invested in.

A while back, I saw a great blog post by Ben Yoskovitz entitled ‘Weekly Investor Updates (How To Communicate with Investors & Mentors).  In it he describes a great system for companies to keep in contact on a weekly basis with investors and makes the point that investor communication is absolutely essential to the success of a startup.  Unfortunately I would say that only one out of my ten invested companies comes close to following this excellent guideline.  The other nine fall into the following general categories: 

1)      Fair – somewhat regular communication and occasional requests for assistance/advice from investors – (3 companies) 
2)      Poor – little or very sporadic communication, primarily public product announcements – (3 companies) 
3)      Horrendous – practically no communication with the unfortunate exception of urgent requests for additional ‘bridge’ funding (1 company) 
4)      Incomplete – recent investments that nonetheless look like they will fall into the ‘Fair’ category at best – (2 companies)

Look, I am not a major investor in any of these companies – I don’t ask for much, and proactively contact them only when I have heard nothing for months at a time.  However I consider regular communication with ALL stakeholders critical to a company’s success and an indication of both discipline and willingness to ask for help.  

Finally, I would note that in my case there does seem to be a direct correlation between the level of communication and performance.  I don’t yet know in this case which is the cause and which is the effect; do strong companies communicate more (and poorly performing companies less likely to give out ‘bad news’) or does communicating more contribute to a company’s success?  I would hope for the latter, and I intend in the future to make it clear to companies before I invest that regular communication be a priority. 

UPDATE - August 29, 2013

After reading Glen Hellman's blog post on what makes a happy angel investor I thought I would revisit the communication issue with respect to my portfolio.  Since I wrote this I have added to my holdings and had some 'acqui-hire' type exits.

I would say my scorecard now reads:

1)      Good - regular communication and regular sincere requests for assistance/advice from investors (1 company)
2)      Fair – somewhat regular communication and occasional requests for assistance/advice from investors – (4 companies) 
3)      Poor – little or very sporadic communication, primarily public product announcements – (7 companies) 
4)      Horrendous – practically no communication with the unfortunate exception of urgent requests for additional ‘bridge’ funding (0 company) 
5)      Incomplete – recent investments that nonetheless look like they will fall into the ‘Fair’ category at best – (1 companies)