Overcommunicating?

I was on a panel this week with some really good VCs and several equally high quality entrepreneurs.

The topic was managing a Board and we covered a bunch of important topics.

One subject that came up was communicating with your board and investors. One of the entrepreneurs said that she had been advised to send a weekly status email to her board and investors and she cringed when she thought of that. Another entrepreneur said that there's a danger in "overcommunicating" and the problem with something like a weekly email, other than the time it takes to compose a decent one every week, is that you will set the expectation and you won't be able to stop without disappointing your investors.

Here's what I think about all of this:

1 - Communication (both ways) is the hallmark of a healthy entrepreneur/VC relationship. The more communication, the better the relationship.  It should not be all one way.  The VC should initiate the contact as much as the entrepreneur.

2 - Formal communication is overrated.  Weekly status reports that go out to the entire board are often not read, particularly if they are delivered in an attachment like a pdf or a spreadsheet.  I much prefer the ad hoc phone call or email.  The closer it gets to a conversation the better it is.

3 - It's hard to have a "conversational" relationship with a bunch of people at the same time.  I am on several boards where we have that.  Particularly via email.  When the CEO can send out an informal email and copy his entire board and possibly a couple senior managers and the group can have an email discussion, that's a really good thing.

4 - If you are going to do a weekly status report, I'd suggest making it short and sweet. And do it via email without attachments. Just the Good, The Bad, and The Ugly in five paragraphs or less.  Don't spend hours editing it.  Just put down your thoughts and hit send.

5 - You need to change your communication techniques with your board and investors as your company grows.  Maybe it does make sense to send a weekly email when you have ten or fifteen employees but doing that when you have 200 seems nutty to me, unless the company is in a significant crisis mode.

6 - The entrepreneur should determine the mode of communication and should not have something mandated to him or her.  Suggestions on how to improve it are fine, but requests for reams and reams of information and analytics are not.

There is no one good way to manage communication between an entrepreneur and the Board and investors.  Each entrepreneur needs to find a method that suits them best. Efficiency is key.  But it has to be effective.  And it should be frequent.

Because I'd rather be guilty of overcommunicating than undercommunicating every time.

Comments

[Alan from Chicago]

Totally agree, Fred. I was always a believer in frequent, short phone calls and emails. Literally 5-10 minute calls - if you are willing to work with a VC you need to treat them as your partner -- which means updating them/soliciting thoughts on both good and bad. No one is surprised at Board Meetings, and everyone appropriately feels like they are part of the team -- and that's the key....I think it's the CEO's job to make sure the investors do become part of his team -- they're not your "boss" but rather a bunch of real smart guys on your side, and my goal was always to figure out ways to get them to help me and my company as much as they could. You need to be transparent to these guys any way -- there should be no "positioning" to your investors - not if their truly partners in what you're doing. And they should be.

[Mike Orren]

FWIW, when you've got a group of angels, instead of, say one VC-- Nothing beats the weekly email. I agree with Fred that brevity is the way to go. You just can't talk with twelve people every week and run a business too.

We do a weekly email of just our core stats and a few sentences, with a longer analysis once a month. No one asked for it-- we just do it. And as long as you're communicative about the whys and wherefores, everyone understands if you miss a week here and there (assuming that the miss is because you're too busy creating good news and not because you're dodging bad).

[John]

Great call. Communication is (obviously) a wonderful thing when done well by both parties. Weekly status reports may seem like a great way to keep up with an investment especially when a investor has many to look after. But if the entrepreneur is putting time and effort into these updates without receiving regular responses it can sour the relationship and create tension, the last thing either party wants. Keep them constant, informal and open IMO.

[Laurent Kretz]

An interesting subject, and we are in the middle of a debate with my partners about communicate or not, how often, about what, how deep, ... with our investors. and i must say, this post helps me argue ! ;)
in our case, we are at the seed round so we have a close, sometimes personal or amilial, link with our investors. I want to let them now what we do with their money, and how the team they trusted is doing. The motivation might be different with a VC (hopefully I'll experience it .... soon !) but, as you state it, I do believe that you talking to your counterparts, businessly speaking: they have the experience, the feedbacks, the knowledge ... to comment, help, review, suggest.

Any input or advice on "communicating with your early investors" ??

Another article on the subject:
http://redeye.firstround.com/2006/04/no_surprises.html

[Chris Campbell]

Great post. What seems to work best for me is informal emails, phone calls, and a dinner now and then. This will probably be a little more formal if we go the VC route in the future, but sharing information is not a problem as long as everyone is flexible. We had one angel asking for a weekely progress report, and I believe that sets too formal of a tone and hinders the trust building process required for a great entrepreneur - investor relationship.

[Dylan Salisbury]

The point of a status report isn't to have a dialog. It's to get the status out, keep the writer accountable on progress towards established goals, and cut down on surprises.

I've done better work when I've been expected to publish informal but accurate status reports every week. Why wouldn't writing status reports have the same effect on a CEO?

[Zoli Erdos]

How about using a wiki for most written Board communication?

[Jeff Schrock]

As a CEO and board member/investor, I've been on both sides of the table, in both good times and bad.

I agree that communication is critical. Sometimes it doesn't feel like it's worth the effort as CEO (often there's no response or the feedback isn't actionable) But it helps create engagement with your board (which you'll need if/when things go bad) and it helps your info processing / thinking to summarize the ebb and flow of the week.