What do investors want to know when a startup retires a product?

(This post was my response to a question on Quora: “Dear Investor, …” How should the rest of the email go? Required elements? Bonus points for…? Tone? How different is it from the communications to the press and to customers?)

Hopefully, you will not break the news via e-mail. If that’s the case, the relationship is most likely broken and therefore the e-mail would have in it all that you need to communicate, to keep your side of the story simple and straight.

bad_news

However, when investors invest in a company, they know that some things will work and somethings won’t. That’s just how the game is played. If everything was predictable and if success was the only outcome expected, the valuation would have been 10 – 20x more than what you got invested at.

That said, it is important to communicate as often as required with the investors. Share the good news and the bad one too. Share it early. Seek their advice. Seek a point of view. If it is different from what your view is, defend yours passionately but with all the reasons why you think your strategy should work (and the reason could well be emotional.. i.e. I just feel this would work. My gut tells me that this is what I want to do.).

If you have a healthy relationship with your investors, and if they believe that you are doing all you can to make this a success. If they see you committed and with conviction, the failures are just blips on the way. You share your view of what went wrong, what you learnt from that outcome, what decisions you would do differently, what you are doing to take corrective action … and what your going-forward plan is. And then go out for a beer. Have a good evening. Wake up the next morning feeling recharged and go take another shot at glory.

No investor gets upset at getting bad news. (At least the mature and experienced ones don’t and should not). But every investor hates to get the bad news last.

Advertisements

Author: Prajakt Raut

Prajakt Raut is the founder of Applyifi.com, and author of the book for startups - ‘Starting Up & Fund Raising’ Prajakt personal goal in life is to encourage and assist a 100,000 people to become entrepreneurs. _____________ Prajakt is the founder of Applyifi - an online platform that provides startups a 36-point scorecard and assessment report on the venture's investment readiness [www.applyifi.com], and helps them improve their odds of getting funded. Prajakt is also the founding partner of The Growth Labs, a platform where growth-stage companies get sharp, incisive advice from senior professionals and experienced entrepreneurs. [www.thegrowthlabs.in] Before starting Applyifi, Prajakt was the head of operations at IAN, founding member of a leading incubator, and the Asia-Director for TiE (2004 - 2007). Previously Prajakt had co-founded Orange Cross, a healthcare services company, and was part of the founding team member of Idealake Technologies. While in college Prajakt had founded a printing business and has spent over 10 years working in leading advertising agencies. Prajakt’s book, ‘Starting Up & Fund Raising’, helps startups understand an investor’s perspective, and helps them improve their odds of getting funded. The book also helps entrepreneurs understand the building blocks of a business.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s