Startup CEOs providing regular updates to investors have a higher success rate
By Dirk Paessler, Founder/CEO of Carbon Drawdown Initiative
After 40 years around startups, there is one thing I still don’t understand: Why would anyone running an high-risk organization like a startup and who actually wants to reach goals not report regularly to their investors? But still, I see this happening again and again…
It is my observation that the inability of an early startup CEO to provide regular reporting to investors is an early indicator of future failure. It is debatable whether they fail because
They suffered from a lack of transparency and understanding of their progress (or, worse, lack of progress).
A CEO who doesn't respect investors enough to take time to compile such status reports is him/herself the problem.
The investors had no chance of bringing their business knowledge and guidance into the project and helping to avoid a disaster.
I have been working in the startup environment all my life and have been on the executive side and on the oversight/board/investor side multiple times.
What I observed is this: CEOs who provide regular status reports to all investors have a much higher success rate than the ones who take money from investors and didn’t bother much with telling them what happened. In the worst case you hear from them too late, when the business is already busted.
The actual cycle (every 1 / 2 / 3 months) and depth (1–5 pages, with or without latest P&L) isn’t much of a differentiator.
But two things are important:
The report should mostly be compiled by the CEO him/herself. It is the monthly chance to review his/her progress using KPIs and compare them to the plan. He or she needs to “own” this numbers, know them by hard.
The report should go to every shareholder / investor / CLA holder. Not just within the board. Ideally even to all employees.
Only if these rules are followed can you reap the benefits, that is at least my conviction.
Every first day of the month the CEO and management sit down, review the latest numbers and KPIs and get a sense of where they are on the journey and how much the plans are actually in sync with reality. Are we still on track for the plan or do we need to correct either approach or plan?
Every month investors also have a chance to look at the trajectory of the company and contribute their experience – often by making connections to companies that have faced similar challenges or by sharing their personal experience/view.
In the 20 years I ran Paessler as founder/CEO, I sat down every first of the month and collected the final data from the previous month — revenue, number of customers, trial downloads, ad-clicks, churn, maintenance prolongation and every other KPI that was involved in our success.
I looked at the data and wrote an internal blog post/email to all shareholders and, in our case, even to all employees so everybody knew where we stood. I lived full transparency, even when it was painful at times. But at least we sustained the pain together.
In our first years my reports came from a long Excel spreadsheet that I filled manually (!) with each monthly data point. Later I programmed my own “CEO reporting system”, and eventually, as we grew beyond 200 employess, a sophisticated data lake/data warehouse from our IT team took over. But at that point we had already found out who our business works, we were far beyond product/market fit.
One thing never changed – the report was always my first job of the month, first thing in the morning, regardless of the weekday.
Because if a CEO cannot sit down once a month and explain to their investors exactly where the company stands, they probably don’t understand the business well enough themselves. And that will eventually lead to failure.
