How to streamline investor reporting processes

In today’s current business landscape, startups have to contend with the additional challenges of an uncertain global economy.

High inflation rates worldwide; new interest rate cycles from the Federal Reserve, Central European Bank, and Bank of England; continued global supply chain problems; and the looming risk of recession, all contribute to a vulnerable environment that makes it difficult for startups to scale. For this reason, excellent investor reporting is critical, as it is the vessel that drives strong investor relations.

For many startups, investor reporting can seem like a distraction - an undesirable obligation. However, the reality is that reporting to investors can be one of the most critical cornerstone processes for a startup’s success. With the market's current conditions in mind, it's now more critical than ever for startups to take advantage of the insider guidance experienced investors provide.

Crafting quality and consistent investor reports is easier said than done. It is a key skill that is crucial for scaling startups to master if they want to optimize their investor communication strategies, which in turn can set the foundation for success.

This article will cover:

Five reasons why investor reporting is crucial for all startups

Investor reporting serves several purposes. Whether highlighting the latest quarterly results or showcasing a new press release to shareholders, periodic reports help investors get an inside look into a company's overall health. Below, we will be diving into some of the top benefits of investor reports for startups.

Maintain healthy investor relationships

An investor report acts as a periodic update - a kind of “check-in” or record of the company’s progress. Done correctly and transparently, reporting can help a company develop open, strong investor relations that inspire confidence and trust among shareholders.

2. Avoid shocking or negative news

The nature of startups, especially those in their first three years of operations, tends to include a considerable degree of risk attached to their return on investment. For this reason, it is common for there to be unexpected roadblocks or dips in revenue.

Frequent reporting to investors allows startups to keep their VCs up to date on all the latest developments in their company. This can help avoid any investor dissatisfaction, especially if these events lead to poor key performance indicators, delays in product development, recruitment bottlenecks, and so forth.

3. Receive feedback and advice

Investors are meant to provide guidance. Many of them have been in your shoes and have been startup founders at some point in their careers. Whether they have founded a company or have invested in multiple startups, they often have the expertise needed to scale an early-stage company.

Investors can be a source of invaluable advice for startup founders. Keeping them updated on company performance through regular reports gives investors the key insights they need to be able to support business strategy and growth effectively.

4. Safeguard future funding opportunities

A startup’s series B or C funding often comes from the same investors that provided their series A funding round. By maintaining strong relationships with detailed, transparent reporting regularly, a company puts itself in a stronger position to raise capital during future funding rounds.

5. It’s required

Venture capital firms typically require regular business reports from their investors. This means investors must provide data, status updates, and insights into how their investments are going.

Five investor reporting best practices

To make each investor report as strong as possible, startups must follow these strategic guidelines.

Establish the right investor relations culture

As mentioned, the obligation to report to investors can sometimes feel like an inconvenient task among a list of other startup demands. When left to the last minute, it can become tedious and lack perspective or critical insight.

Instead, prioritize investor reporting as a way to support the overall growth of the organization.

Once you shift your mindset and look at these reports as a fundamental aspect to scale, you will then become laser-focused on the overall process and, in turn, create stronger and more strategic reports.

Prepare in advance

Reporting should be periodic, like clockwork. Whether it's once a month or once a quarter, make sure to create a timeline and schedule reports.

To ensure consistency in each and every report, there should be an assigned project manager, and each stakeholder, such as CFO, CTO, and CMO, should be given ample time to compile and deliver the requested data.

Moreover, the right technologies and processes should be identified and put in place to ensure optimal outcomes.

Identify the ideal reporting method

The best thing a startup can do is to find an efficient way to create investor reports. While many finance teams depend on investor reporting software, there are also more strategic solutions on the market that assist with other FP&A processes.

Today, many modern finance teams are shifting towards FP&A software to conduct essential business tasks and plan for the future. Not only does this help to streamline their data and financial information into a single solution, but it also allows them to speed up the entire process of financial planning, reporting, and forecasting, from start to finish.

Maintain a rigorous commitment to transparency

Honesty is the best policy. If an investor doesn’t have a full understanding of a company’s position, the organization can’t benefit from its advice.

It may be tempting to disguise or keep disappointing results from view, but doing so will likely damage the company more in the long run. Moreover, venture capitalists are smart, seasoned professionals. Chances are they can spot when something is amiss, which is a surefire way to torpedo trust and confidence.

Ensure your financial information is accurate and comprehensive

The quality and integrity of data, departmental performance, and forecasts should all be meticulously checked. This even goes for more minor details, such as spelling, fact-checking, and so forth. To prevent human-prone errors, consider using a strategic finance platform that can help automate the entire data collection process.

What are the different components involved in an investor report?

A high-quality report typically includes the following elements:

a. An executive summary of current company performance.

b. Metrics including takeaway KPIs, key data, and predictive analytics.

c. A high-level overview of the performance for the period you are assessing.

d. Product updates, including launches, upgrades, or changes to the product.

e. Company updates, including market changes, notable investments, events, new recruits, compliance developments, etc.

‍f. Conduct forecasts and scenario planning analysis.

g. A brief summary that contains key takeaways from the report.

How to improve the quality of your investor reports

Startups can implement a series of measures to improve the quality of their reporting. Below are a few of our top recommendations on how to create top-notch investor reports.

Consolidate data into a centralized solution

This avoids the prevalence of data silos and inefficient, inconsistent processes to do with data gathering, retrieval, and analysis. A single platform that houses all data needs also provides centralized control in addition to greater efficiency, data integrity, and transparency.

Modernize your tech stack

There are a whole host of new FP&A features and strategic finance trends that are emerging in the industry today. If you want to make sure your finance function stays ahead of the game, make sure you invest in a modernized tech stack.

Today’s technology landscape is vast and ever-growing, making it increasingly difficult to know which platforms are right for your finance team. That’s why it is essential to do your research, outline your desired features, and study the different options available.

Ensure all budget owners are accountable for their data

Each budget owner should have ownership over their data and be assigned key responsibilities. This ensures that the quality of monthly, quarterly, or annual reports is held to a higher standard and has the right oversight before it's shared with investors.

Adopt a “BizOps” mindset

BizOps - taken from business operations - is the belief that maximized success is only possible through strong collaboration and connection between the finance team and operations. By aligning different teams of an organization, all functions will be able to align on KPIs and business objectives when creating their path forward.

Why data automation is the future of investor reporting

Data is everywhere. The best thing an organization can do is to learn how to harness and use it to its advantage to grow. When a company is unable to manage its data to derive valuable insights, it won’t be able to learn from the past and create a clear roadmap for the future.

However, with the right strategic finance platform in place, startups can streamline their financial processes and better support strategic decision-making among senior management.

If your finance function wants to build robust investor relations, improve transparency, and build trust among your investors, consider incorporating an FP&A solution into your current processes.

How to streamline investor reporting processes: A comprehensive guide

Dani Thomason