Investing in a startup is easy but getting positive returns (hopefully money-over-money) is damn near impossible. At the early pre-seed/seed stage we are betting that whatever the founders are planning will take 12–18 months to accomplish and 3–6 months to raise their next round during that time as well. But once we make the investment, what happens and what can we do?
Unless you are the lead investor and take a board seat or are strategic enough to be an observer, you actually know very little until you need to know. We generally expect a company update every month or quarter from the founders laying out the good, bad and ugly. This is where my analogy of the old Polaroid camera comes from; we get a snapshot of the company and try to help based on that.
We obviously want to help our startups the most that we can to help them be successful but it’s hard to do when you’re obviously not day-to-day. Imagine being a founder, sending out an update and every individual investor/angel wants to meet or chat to get a more in-depth overview of what’s going on. A lot of what’s in the updates are things that have taken months to plan, execute and refine, generally something that a somewhat casual conversation won’t help and something you might learn you can’t contribute to.
Until you have about 10 investments, there really isn’t much you need to manage unless a specific request comes your way. In the same fashion that I see first time founders get all excited then realize there isn’t much to do at the start, the same thing happens to first time investors as well. Unfortunately this can then lead to ‘angel exhaustion’ because they made a few investments then just wait as it takes years if you’re lucky to get an exit or most likely a write off.
Having now invested in over 10 startups and managing another dozen, here is what I’ve learned about updates:
While the updates are great for us, it’s also very beneficial to always benchmark and quantify where your business currently stands. We love to see the progress over time, connect the dots to see what works to learn and apply it to other investments we make.
NYVP is an early-stage VC that invests in the best founders! You can find our list of investment on Crunchbase or on our website www.NYVP.com to learn more.