When you are young and bold, building a startup may seem like the dream of a lifetime. But, becoming the next Elon Musk just doesn’t come with a push of a button. There are a lot of factors that I’ve seen mentioned on blogs as ingredients for success, but one that is not often among them is “optimal communication to users and investors”.
Making sure you take all people involved along on your journey doesn’t always seem the obvious “tool” to make your fresh company successful (focus is almost always on product, product, ship, ship). But to me it can be one of the means that determine a successful startup with longevity and maybe even a true corporation in the making.
Inspiration for this came from two sides. On the one hand I am following the startup efforts of my good friend Steven van Wel ever since he got me my (the) first iPhone from the States (exhibit A). And the second part is a piece I read that was linked to by another successful Dutch entrepreneur Vincent Hoogsteder (exhibit B).
What makes a difference in the communication that Steven orchestrates within Karma is the transparency and frequency in which the communication is done. Karma is a super startup that is doing well in the US market. A hotspot Wi-Fi on the go that provides access to your devices and that your friends, but also that the crowd surrounding your presence can benefit (think Dropbox exchange of return of favour).
Since the beginning of Karma, communicating with investors is done by a weekly email. Just one. But it is ALWAYS there and always on the same time of the week. Non-intrusive, transparent and regular. It doesn’t only focus on what they want to tell you about the day to day business of the past week, but also what is coming and what you can do today to make them more successful.
Yes, you as an investor feel you can contribute more than money, and so it should be with a good investor in my opinion. The difference: how many times have you asked your investor to really help you becoming successful? – and thus increasing the potential return on your investment.
Part of the same communication tactics of Karma is “dash boarding”. All data that can possible be gathered and shared are collected in a basic but great dashboard. Anytime you want, you can see the metrics of the company. This makes you part of the performance: you can see trends and changes before the official communication is done formally.
Financial dash boarding is very important for a startup. The way you report on your economic status tells your stakeholders how you are doing, how you are investing their money and how much TTL (nerdy abbreviation for “time to live”) there is left. You can do this in various ways but this piece on Mattermark gives a good idea and pointers.
“So Mattermark gets to spend $400K a month, right?” – WRONG.
If we collect $1M in cash this month, we can spend $1.4M this month and we’ll have a net burn rate of $400K. If we collect $200K in cash this month, we can spend $600K and have a net burn rate of $400K. While spending $1.4M a month might sound irresponsible if you’ve been reading the news about startup burn rates, in the $1.4M scenario the company is covering 71% of expenses with cash from operations. In the $600K expense scenario, the company is covering only 33%.
As long as revenues are growing, burning $400K a month becomes less and less risky over time.”
The message here is that you could report the burn rate differently but that would not give the right message to investors and would not optimise your spending towards a successful enterprise.
Knowing how to combine (big) data with the right communication skills increases transparency and (once again) makes sure your investors (and other parties involved) are on the same page as your mission is.
Ingredients for success:
- Pro-active engagement requests
- Big data dash-boarding
It sounds so simple but if you ask yourself this question: have you ticked all these boxes to their full function? Can you honestly say yes?
Innovating the world with your startup starts with doing a lot of things in the right way. Communication should rank high on that agenda.