Dear SaaStr: How Do I Deal With Investors That are Unhappy With The Company?
Be transparent. And show them an honest, data-driven path to a better future.
First, investors get most upset when founders hide things. And founders tend to hide things more when times are tougher. So … share more:
- Make sure you send a monthly investor update out ASAP after the month ends. Ideally, the very next day. It instills confidence.
- Have investor meetings over Zoom every 60 days, even if you don’t have to. More here.
- Do honest, root cause analyses of why things aren’t working. And speak with data. Data inspires more confidence. Not “woe is me”. That doesn’t.
- Show a plan to improve at least a few key things, and how that will impact growth / burn / etc. Make sure it is grounded in reality and the current product roadmap.
- Always be sharing your Zero Cash Date, and own the implications of when you are currently running out of money. Yes, it’s your fault if you don’t have enough capital. And your job to make sure it lasts. Blaming others for running out of money undermines confidence 100%. Even if sometimes, there’s a shred of truth in it. Way, way too many founders just don’t own the Zero Cash Date …. and a plan to never actually hit it. More here.
If you have board meetings every 60 days, your investors will be actively involved
Every 3 months, they'll be up to speed, but you won't always be top of mind
Never, and your investors will focus on other things
Up to you which path is best, really
— Jason ✨2022 SaaStr Annual Sep 13-15 ✨ Lemkin (@jasonlk) December 17, 2021
Second, investors are OK with tougher times — if you share a clear, honest path to better times. VCs especially are wired for a rough month, quarter, or even year … so long as they have reason to believe things will get better. So make sure:
- Your VCs understand what’s not working, and what you are doing about it. Not just that it isn’t working.
- You share a product roadmap that ties to customer needs and how you’ll serve more of them. Most VCs know you can close more of the leads you do have, if you level up your product.
- You share a financial model that is honest and shows a path to faster growth. But not a fiction. Too many finance folks create fictional models that require massive acceleration at the end of the year to tie. Don’t do that.
- Make sure you never blame anyone else. Not only does that undermine you as CEO and founders, it again suggests a “woe is me” mentality. Those aren’t the founders you want to back.
- Go recruit at least 1 great executive. If you can do that — everyone will believe more. If you can get a great VP to join, that shows you can do it.
And at the end of the day … just don’t run out of money. The most stressful thing of all is when investors are forced to write a second or third check they don’t want to write. Never make VCs feel like you are going to run out of money, and things usually aren’t that bad in the end. A bit more on that here.
You may never make unhappy investors … happy. But you can address their root concerns, and make things better. They almost always will feel less stressed with more honesty and transparency, and with you clearly owning the burn rate and zero cash date. And … a clear path to better times.