As an entrepreneur, I fostered an unusual communication practice with our investors and advisors. I treated them as I would have wanted to be treated if I were in their shoes. This is the Golden Rule in action.
You need to have empathy for those that you raise money from. They aren't the "man in the arena" (one of my favorite quotes from Theodore Roosevelt), but they can be very supportive - should you choose to treat them as part of your extended team. They are putting their money (if they are angel investors) - or their investors' money (as is the case for venture capitalists) - into your venture and you should treat that capital as if it were your own. And if it were your own capital ask yourself, "What kind of updates would I want?" My guess is you would want to always know how the business is doing and how you could help the business - and therefore help your investment. Part of the thrill of investing is to see the entrepreneur succeed - both changing their life and many other people's lives in the process. Investors enjoy telling their friends - other investors and family - about the success of your business. The journey is more important than any return they get (although to be clear they don't want to lose either their money or their investors' money). The more they help you, the more they live vicariously through you - and their fingerprints are all over your business. This is called a "helper's high" by my good friend and CEO coach, Kirk Dando (you can read more about Kirk and the value of CEO coaches in my Lucky7 post about the 7 lessons learned on the journey from founder to CEO).
So treat your investors the way you would want to treated yourself. Send them email updates often. I personally used to send email updates about Bazaarvoice as often as three times per week and almost always at least once per week.
Sadly, I had to stop this practice several months before we filed our S-1 to go public. That is one of the downsides of going public - the regulation involved and the potential of insider trading. My private-company updates included new client wins, major client launches, big client up-sells, new executive hires, new marketing campaigns, challenges that we needed help with (such as a client contract renewal or a blocker at a client that was preventing them from properly adopting our nascent solution), new product launches, etc. All of these would have been considered material public news for a would-be public company, and that is why the practice had to stop.
However, when we were private, these updates created a high leverage extended team. For example, I would send an update of a major client win, such as OpenTable, and get an email response from one of our investors that is friends with the CEO. Then instead of being a low-level sale, we now had high-level adoption to help drive adoption of our solutions. This was especially important because our solutions needed to be evangelized to educate the client on business practices they should change as a result of having access to online word of mouth from their most valuable stakeholders - their customers - for the first time in their history. This is where the Bazaarvoice mission statement of "changing the world, one authentic conversation at a time" came from.
You may be wondering how this relates to my earlier Lucky7 post on how to communicate to get things done quickly. Well, to reach a lot of investors simultaneously, the most efficient method was email. But then once they responded, the most efficient method was to call them, such as in the OpenTable example. When I called them, me and the investor would usually get into some tangential conversations and I would find other ways that they could help us. In other words, calling them fostered a better relationship. Because I emailed updates frequently, constantly fostering the relationship, it created a virtuous circle where I got more out of our relationship, and - importantly - they did too.
Speaking of relationships, one way to think about investors is that they are on the periphery of the arena and ready to help you. If you think of a coliseum, imagine that you and your team are the "men in the arena" (again, I use this term as a nod to Theodore Roosevelt and of course there are also women in your company). The spectators are made up of many people - the press, current and potential consultants, potential employees (to be clear, all current employees are in the arena with you), current and potential clients, current and potential partners, current and potential investors, etc. You current investors are already on the journey with you. Of course, your current clients are too - but I wouldn't necessarily say they are all in the arena with you (although some of the early adopters most certainly are) - and they deserve frequent communication as well. But let's stick to investors and advisors in this post - I'll talk about how to treat clients, especially the early adopters or pioneers, as an extended part of your team in a later post (and Marc Benioff covers this topic well in his book Behind the Cloud). Back to investors - your investors often have valuable tools for you to leverage in the coliseum, such as their contacts or lessons they've learned when they used to be the man in the arena themselves or from learning from one of their other investments (this is what venture capitalists call "pattern recognition"). So it is not only smart to be empathetic to your investors because you want to build a relationship with them, it is also smart because they can really help you. To assume otherwise is arrogant or ignorant. When I bring up this topic in speeches or when coaching an entrepreneur, I usually get a reaction of "what a good idea". This tells me that the primary problem is ignorance - entrepreneurs just haven't been educated on this topic, and that is why I wrote this post. As far as the arrogant, they are usually in for a hard fall.
All of the same lessons in this post apply to your Advisory Board members. You can just substitute investors with advisors above. Both are compensated to help you - investors through ownership of some of your equity and advisors through stock option grants that they can exercise at a later period of time. As far as Advisory Boards, I would only invite some Advisors to an occasional Advisory Board meeting (usually every six months). Those were the advisors that I thought were the most strategic, such as Mike Maples, Jr., Josh Kopelman, Steve Katz, Jamie Crouthamel, Julie Constantin, Ralph Mack, and Satya Patel. The rest of my advisors had a more specific purpose - such as marketing knowhow (given the marketing nature of our solutions) or experience in getting into a new industry (like financial services) or geography (like Europe). For all advisors, they would get the same emails I sent investors. To have invited all of my advisors to a regular Advisory Board meeting would have been unwieldly - there would have been something like 30 people in the room and little commonality in terms of the way they could help the company. Had I set up this practice, as I've seen some companies do, it would have also limited who I asked to be on the Advisory Board to keep it small - and that would have been a shame because some advisors you can add are for a very specific purpose.
As far as my Board of Directors, they always got the most sensitive information about the company. I couldn't risk sending some information - such as the firing of an executive - to all of my investors and advisors. But my Board of Directors got a deep look into that. And I didn't have to stop communicating with them once we went public. Limiting the updates to them only shrunk the circle of people in the arena that could actively help us. And that indeed is a downside of being a public company, but there are many upsides too (including the $281 million of stock we sold in our IPO and follow-on offering, which significantly strengthened our balance sheet from the around $12 million of cash we had in the bank right before we had the public fundraising event - you can read more about our capital efficiency as a private company in this Lucky7 post). Of course, all of our investors and advisors get regular updates today via our press releases, our Summits (which are broadcast online), and our Earnings Calls. But the frequency isn't the same as when we were a private company, which is natural.
I should mention that this Lucky7 post is related to the one I wrote earlier this week about how Steve Jobs asked for help and what that has to do with the DNA of 1776 and Israel.