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The Ultimate Guide to Startup Data Distribution How to tell your company’s unique growth story and keep all of your key stakeholders engaged.

Transcript of The Ultimate Guide to Startup Data Distribution | visible vc

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The Ultimate Guide to Startup Data Distribution

How to tell your company’s unique growth story and keep all of your key

stakeholders engaged.

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The Ultimate Guide to Startup Data Distribution

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Table of Contents

4 8 17 23 25 31 37

Building Your Data Distribution Philosophy Finding the Right Framework for Your Company Most Valuable Metrics “Stealing” the Right Metrics for Your Business Quite Possibly the Best Illustration Ever Communicating Data Across Your Organization Appendix - Further Reading on Data Distribution

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I. Building Your Data Distribution Philosophy

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The Ultimate Guide to Startup Data Distribution

Building Your Data Distribution Philosophy

What is “Data Distribution” and why do I need a philosophy?

In short, “data distribution” describes the systems and processes a company has for gathering key performance indicators and delivering them to the right people at the right time in order to support the continued growth of a company’s operations. How your company builds your specific data distribution philosophy centers around how you want to tell your company’s story and who you want to tell that story to.

When distributing a product, the goal is often to build awareness, turn that awareness into revenue, then provide enough value that the people paying you become advocates. In turn, bringing in more customers who follow the same path. A virtuous cycle if there’s even been one. 

A good data distribution philosophy feeds off the success of the aforementioned process, then feeds right back into it, accelerating the overall trajectory of the business. As a company grows, it acquires more stakeholders - employees, investors, advisors - who need to remain engaged in the business in order to play their role most effectively. When those different stakeholders are empowered with the right information, it leads to better communication between teams, more introductions from investors to potential customers or employees and an overall culture of transparency that endows a feeling of ownership that stretches beyond what shows up on a cap table.

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The Ultimate Guide to Startup Data Distribution

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In part, Data Distribution centers around how well your company turns this…

…into this.

Building Your Data Distribution Philosophy

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II. Finding the Right Framework for Your

Company

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The Ultimate Guide to Startup Data Distribution

Finding the Right Framework for Your Company

The way that a company tracks and analyzes the key performance indicators around its product development and distribution as well as its customers and employees is key in determining whether its data distribution system will be effective and yield long term positive results. It doesn’t matter how often a management team communicates with team members, investors and any other stakeholders if the communication isn’t actionable and relevant to what drives the success of the business.

Blake Koriath, CFO at SaaS-focused seed fund High Alpha, likes to start wide when working with companies, focusing first on business model and company stage, then digging into exactly who will be viewing specific metrics and when.

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The type of business you are in informs which set of metrics you should use (i.e. SaaS vs. Ecommerce)

The stage of your business informs which metrics within that set are the most important at that time

Your intended audience informs which subset of metrics you present in a particular time and place

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The Ultimate Guide to Startup Data Distribution

Finding the Right Framework for Your Company

Once you have evaluated all three criteria above, the next step is to hone in on the one key metric that matters most to the success or failure of your business; your company’s “true north” metric. In “Lean Analytics”, authors Alistair Croll and Benjamin Yoskovitz note that tracking and continually optimizing one key metric helps companies “avoid premature growth and build atop a solid foundation of true needs, well-defined solutions, and satisfied customers.”

“One of the greatest things about putting in place the right metrics is that showing them to people will

automatically change their behavior to try to improve the metrics. Furthermore, the metrics make it clear

what levers they can use to change performance.”

- David Skok, Matrix General Partner

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The Ultimate Guide to Startup Data Distribution

Finding the Right Framework for Your Company

The way that you finance your operation, build your product, serve your customers, and generate revenue will be the primary driver behind what metrics you track. As Alistair Croll, one of the authors of “Lean Analytics” wrote, online businesses tend to primarily fall under of the following business models:

Business Model Description

Transactional (Marketplace) Someone buys something in return for something.

SaaS (Software as a Service) Someone uses your software and their level of productivity means they don’t churn

Media Someone clicks on a banner, PPC advertisement or affiliate link.

Collaborative Someone votes, comments or creates content for you.

Gaming Players pay for additional content, time savings, extra lives, in-game currencies and so on.

App Users buy and install software on their device.

1 Understand Your Business Model

He goes on to say that “no company belongs in just one bucket” as, for example, Amazon cares about “Transactional” KPIs when making sales on their site but looks to “Collaborative” KPIs when collecting product reviews.

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The Ultimate Guide to Startup Data Distribution

In working with thousands of investors and operators over the last few years at Visible, we have come to understand the impact a company’s stage has on what metrics it should be tracking and how it should be tracking them.

Early stage teams may place more importance on things like cash in the bank and burn rate, hoping to extend the life of the business as they search for product/market fit and move from growth to scaling. Later stage companies, on the other hand, need to be much more qualitative in nature and understand how all of their different business units are contributing to their end goal as a business.

2 Evaluate the stage of your business

3 Determine who your intended audience is

When bringing a product to market, customer personas play a major role in things like pricing, messaging and feature set. When distributing key information about the performance of your business, stakeholder personas help inform which subset of metrics you present as well as when and how you present them.

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Finding the Right Framework for Your Company

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The Ultimate Guide to Startup Data Distribution

Investors, according to High Alpha CFO Blake Koriath, are often interested in the highest level metrics, enough information to quickly understand general trends in the business and also understand where they can have the most impact. Overall Gross Margin, MRR Added and LTV are examples of metrics SaaS investors may be interested in seeing.

Executive team members fall next in the hierarchy and need to understand how the success of their team is contributing to the overall direction of the business. Finally, team members are likely interested in the “atomic units” of those higher-level metrics. That is to say, how are their individual contributions bubbling up to impact the metrics that determine success for their teams?

Getting the right information to the right people at the right time is essential in telling the story around your company’s data. By focusing on targeted stakeholder personas, you can ensure that each group is empowered with the information they need to contribute most effectively to the growth of the organization.

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Finding the Right Framework for Your Company

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The Ultimate Guide to Startup Data Distribution

Team Level

How is the success or failure of my team contributing to

the overall business?

“Atomic” Level

How is my personal effort contributing to the success

of our team (sales, engineering, etc.)?

By developing targeted stakeholder personas, you can ensure that

each group is empowered with the

information they need to contribute to the

growth of your business.

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The Stakeholder Persona Matrix

Team MembersExecutives

High Level

What are the general trends in the business and where

can I be most helpful?

Investors

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The Ultimate Guide to Startup Data Distribution

4. Hone in on your “Most Valuable Metric” (MVM)

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To use another line from David Skok (the Godfather of SaaS metrics), “good metrics should be actionable, and drive successful behavior.” To accomplish this, you first need to determine the end definition of “success” for your company. Since the mix of factors leading up to this point (Business Model + Stage + Audience), as well as the overall goals of every company, are different, there is no one size fits all approach to selecting your MVM.

The primary reason to have a single, holistic metric is to cut out the noise that comes with trying to track (and take action on) everything so that you can hone in on the one thing that drives your success. Read any startup post-mortem and you’ll quickly realize the negative impact that lack of focus can have on a company.

As you will see in the profiles beginning on page 17, even growth stage and public companies often have a single MVM that they aspire to grow each period. In many cases, like with Airbnb or Meetup, the same MVM has been a guiding beacon since the early days.

At Visible, the metric most tied to our “success”, our MVM, is the number of companies we have actively using the platform on a monthly basis. The progress that we make on this metric helps us understand the performance of each one of our teams and can help us identify parts of the business bottlenecking our growth.

Finding the Right Framework for Your Company

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The Ultimate Guide to Startup Data Distribution

First of all, it gives us a good idea of how many people are coming in to the top of the funnel through different inbound and outbound channels then lets us know if our product is effective at “activating” those companies. Then, if a company is coming back to Visible each month to track and distribute their performance data, they are more likely to be inviting their investors, advisors and team members. As more companies in an investor’s portfolio begin sharing updates and metrics, the investor is more likely to become a paying customer. Similarly, team adoption within an organization grows as companies invite more employees.

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In addition, since so many of the companies on Visible are what would be considered early or growth stage businesses, their continued expansion will bring new stakeholders into the fray, adding to the number of people who rely on us for the organization of their most crucial business data.

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III. Early and Growth Stage Most Valuable Metrics

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The Ultimate Guide to Startup Data Distribution

Buffer

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Early Stage Most Valuable Metrics

Monthly Recurring Revenue

Understanding MRR helps Buffer accurately describe

the type of revenue they are receiving, factoring in annual

payments, monthly subscriptions and subtracting

refunds and fees.

Buffer

Number of Live Offers

Kickfurther focuses on how many “live offers” they have on the platform at a given

time. Their effectiveness at having offers live directly

affects every single other KPI they track - like revenue, user

acquisition, and user activation

• Raised $3.9MM from investors like Collaborative Fund and Vegas Tech Fund

• SaaS business model

• Remote team based around the world

• Member of Boomtown Accelerator in Boulder

• Marketplace business model

• Inventory financing crowdfunding for small businesses

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The Ultimate Guide to Startup Data Distribution

Buffer

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Early Stage Most Valuable Metrics

Weekly Active User Growth Rate

As a seed stage company, week over week growth is important for Charlie as it

helps them understand how effectively different

distribution channels - referrals, press, organic - are

performing.

Buffer

Product Page Visits

“Our core metric that we use to tell if we’re doing a good job is how many people are

actually clicking through and visiting product pages. That’s

how we know people are continuing to find value in

what we’re doing and everything follows after that — traffic, engagement, etc.”

• Investors include Hyde Park Ventures, Confluence Capital, and Lightbank

• SaaS business model

• Tool to compile dynamic one-pagers on whoever you are meeting

• Raised $7.5MM from firms like a16z, SV Angel and Google Ventures

• Collaborative, community-based business model

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The Ultimate Guide to Startup Data Distribution

Buffer

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Growth Stage Most Valuable Metrics

Growth in # of Companies to 2000 Messages Sent

For Slack, the magic number for user retention is 2,000 messages. Once a company hits that number, they are

extremely likely to stick around as a customer (93%

of teams that hit that number still use lack today).

Buffer

NPS - Net Promoter Score

NPS is a crucial metric for Ecommerce businesses who

rely heavily on return customers and word of mouth referrals. Warby

Parker sees NPS as the best leading indicator for the

health of their brand and by extension, their business.

• Valued at almost $3B after raising money from firms like The Social + Capita Partnership and Accel Partners

• Self-service SaaS business model

• Raised over $100MM from firms like First Round and BoxGroup and valued at $1.2B

• Ecommerce business model

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The Ultimate Guide to Startup Data Distribution

Buffer

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Growth Stage Most Valuable Metrics

Number of Nights Rented

Liquidity is key to the success of a marketplace. For Airbnb, the number or nights rented

and the growth of that number demonstrates how well they are attracting new

marketplace participants and then matching them with people on the other side.

Buffer

Sharing

• Went through YCombinator and now valued at over $25B on a reported $900MM in revenue

• Marketplace business model

• Raised over $300MM from firms like NEA and Lerer Hippeau Ventures

• Media business model

Buzzfeed believes that shared content is good content and

that editorial success in today’s media landscape is all

about word of mouth (sharing). Sharing as a metric

is a digital proxy for the previously mentioned Net

Promoter Score.

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The Ultimate Guide to Startup Data Distribution

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BufferNiftyChat is a (fake) company that recently raised a Series A round of funding that they have used to build up their sales team and grow their email-replacement chat software.

During the month of June, their MRR growth (NiftyChat’s MVM) fell short of forecast by about 10%, something that the team is worried will upset the recently added investors.

A company lacking a well thought out data distribution framework would likely choose to go silent on investors for a month in hopes that things turn around or (and possibly worse), simply report their 10% miss without any context or details.

Since they’ve been thoughtful in architecting their metrics, Niftychat’s executive team knows where to look to understand what caused their disappointing month. With no major product changes and their ad spend remaining consistent, their sales effectiveness numbers are the next place they turn. One of their most important sales metrics is Lead Velocity Rate and looking back to May, they realize that they failed to generate enough Leads to grow at the rate they wanted.

Since the NiftyChat sales cycle is ~ 30 days, they know that their May shortfall in generating sales ready leads played a major role them missing their MRR target and can now effectively communicate this, along with an action plan, to all of their relevant stakeholders.

MVM in Context: NiftyChat

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IV. “Stealing” the Right Metrics for Your Business

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The Ultimate Guide to Startup Data Distribution

While your MVM is intended to give you and your stakeholders a holistic look at your company it cannot exist in a vacuum. Each week, month and quarter, your MVM will trend differently and having a strong set of supporting metrics can tell you why, as well as how you can continue the trajectory or make the necessary adjustments to get back on track. Every supporting metric in your business should:

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‘Stealing’ the Right Metrics for Your Business

Have a meaningful impact on your MVM

Give you an honest assessment of how the underlying team, individual, or process is performing

Be actionable in and of itself

If these three criteria are met, you ensure that you aren’t spending time tracking and disseminating superfluous information about your company, saving your investors time in trying to cut through to what’s important and helping your team focus their efforts properly.

Once you have a good understanding of your MVM and are committed to the idea of building out a hierarchical data gathering system, your next step is to actually select the full set of metrics that make sense for your company. This is where things can get complicated, as there are hundreds of metrics to choose from as well as different time frames to consider and different ways of calculating certain metrics. Additionally, the amount of data produced in a growing technology company can be overwhelming for teams and founders.

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The Ultimate Guide to Startup Data Distribution

Luckily, many thorough frameworks - crafted through years of experience by top investors and founders - already exist and can give you a great baseline to work from, no matter your business model or stage.

Remember, as Pablo Picasso whose paintings even most VCs can’t afford is credited with saying, “great artists steal.”

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‘Stealing’ the Right Metrics for Your Business

Many thanks to Nick Podraza for the awesome image. Check out more of his stuff here.

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The Ultimate Guide to Startup Data Distribution

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Tomasz Tunguz - Your Startups 10 Most Important Metrics

‘Stealing’ the Right Metrics for Your Business

• VC at Redpoint Ventures

• Twitter: @ttunguz

• tomtunguz.com

• Investor in companies like Expensify, Nextdoor, and DraftKings

Analytics tools today make it possible to track thousands of metrics. The key to data

distribution success is in finding the signal in the noise. Tunguz recommends 10 core

metrics that he finds most effective in board meeting and centers the framework around how effectively you

are distributing your product, engaging your users, and

generating revenue.

3 Key Metrics to Start Tracking Today

• New Users Added Last Month by Channel / Trailing 6 Month Growth Rate

• % of Users Using Top 3 Key Features in a Given Month

• Burn Rate

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The Ultimate Guide to Startup Data Distribution

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Dave McClure’s AARRR Pirate Metrics for Startups

‘Stealing’ the Right Metrics for Your Business

• VC at 500Startups

• Twitter: @davemcclure

• 500.co

• Investor in companies like ToutApp, Sunrise, and Simple

500Startups focuses heavily on helping companies

“distribute” their product more effectively and the

AARRR framework is the basis for that model. The

framework looks at what metrics you should be

tracking at each customer lifecycle stage - Acquisition,

Activation, Retention, Referral, and Revenue.

3 Key Metrics to Start Tracking Today

• Acquisition channel with highest conversion to activation

• K-Factor, aka Virality Score - how many customers refer other customers?

• Monthly Active User Growth

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The Ultimate Guide to Startup Data Distribution

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Angela Tran Kingyens’ Marketplace KPIs

‘Stealing’ the Right Metrics for Your Business

• VC at Version One Ventures

• Twitter: @ATKingyens

• versionone.vc

• Investor in companies like Frank & Oak, Handup, and Unbounce

Every marketplace company is different but most tend to share similar characteristics -

namely that they bring together a seller on the

supply side and a buyer on the demand side. Because of that, marketplaces looking to raise money should be well

equipped to answer questions about certain

metrics that will be brought up during due diligence.

3 Key Metrics to Start Tracking Today

• Gross Merchandise Volume

• Gross Merchandise Volume Retention

• Net Promoter Score - How likely are customers to refer you?

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The Ultimate Guide to Startup Data Distribution

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Mark Hayes’ 32 KPIs for Ecommerce

‘Stealing’ the Right Metrics for Your Business

• Director of Communications at Shopify

• Twitter: @allsop8184

• markhayes.ca

• Author of The Ultimate Guide to Dropshipping

No matter how many or how few metrics you track it is

crucial that your performance should inform business decisions and the KPIs you measure should

drive actions. For an Ecommerce business, the

right metrics center around setting and reaching sales, marketing, and customer

success goals.

3 Key Metrics to Start Tracking Today

• Average Order Size

• Unique Visitors vs. Returning Visitors

• Average Customer Service Resolution Time

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The Ultimate Guide to Startup Data Distribution

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David Skok - SaaS Metrics 2.0

‘Stealing’ the Right Metrics for Your Business

• VC at Matrix Partners

• Twitter: @BostonVC

• forentrepreneurs.com

• Investor in companies like TribeHR, Hubspot, and GrabCAD

As we mentioned previously, David Skok is one of the

foremost experts on optimizing the various

funnels of a SaaS business. In SaaS Metrics 2.0, he dives

deep on the best metrics to track to ensure that you

know what is working, what needs to be improved, and how you can pull various levers in your business to become financially viable.

3 Key Metrics to Start Tracking Today

• Lifetime Value : Customer Acquisition Cost

• Net New MRR

• Net MRR Churn

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V. Communicating Data Across Your Organization

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The Ultimate Guide to Startup Data Distribution

Communicating Data Across Your Organization

The way that you track the key metrics around your business and the way you get them into the hands of the right people in the right format work in lock step to form your data distribution system. As touched on previously, simply tracking the right metrics is not enough. In order to effectively tell your company’s story, the data needs to be in one place, in a digestible format and accessible to the right people.

Regular updates, or better yet a real-time dashboard, where stakeholders can quickly understand how things are going, are key in establishing trust, building accountability and keeping everyone rowing in the same direction.

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The Ultimate Guide to Startup Data Distribution

In an interview with Fortune reporter Dan Primack, Andreessen Horowitz’s Marc Andreessen talked about the discipline that comes with taking the relationship with your stakeholders seriously. 

“It is a discipline that applies not only to the partnership with your investors but also applies to the quality of company you are building. It is that you actually take seriously the fact that you are deploying other people’s capital.”

- Marc Andreessen, General Partner a16z

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This mentality lies at the core of any successful data distribution strategy and is echoed by many other top investors and operators. Because of the trajectory of so many early stage businesses in today’s market - faster product, news and funding cycles for example - it is more important than ever to keep lines of stakeholder communication open. Remaining disciplined around data distribution and stakeholder engagement means keeping things simple, consistent and in the same format from period to period.

Communicating Data Across Your Organization

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The Ultimate Guide to Startup Data Distribution

Simplicity

The bar for early stage technology products is constantly increasing, making simplicity and elegance table stakes in the product development process. The same should be true for data distribution processes in early stage companies. Competition for customers, employees and follow on funding makes it more important than ever to build a simple stakeholder interface into your business. Management teams at young companies often fail to realize the negative impact that stems from not having a stakeholder engagement strategy. Investors and advisors have built strong networks and can be a great source of inexpensive customer leads, key partners, and talented team members if you make it as frictionless as possible for them to do so. 

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“The CEO is the investor’s user interface into the business.”

- Dharmesh Shah, Hubspot Founder

Communicating Data Across Your Organization

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The Ultimate Guide to Startup Data Distribution

Consistency

Investors like to focus on the companies where they can have the biggest positive impact and the ability to make an impact starts with being armed with actionable data. Investors that know what data they can expect and when they an expect it a far more likely to stay engaged and deliver on the network connections that can help accelerate your company.

In “Hooked”, author Nir Eyal talks extensively about using triggers in product design and working to align internal triggers with external triggers to form effective association. The best way to align these two types of triggers for the purpose of investor reporting is through consistency. When a new month or quarter starts, investors begin to expect the results from the previous period for their companies (internal trigger). Working to match your monthly or quarterly update with this expectation helps keep your company top of mind for your investors each period.

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Communicating Data Across Your Organization

Step 1. Trigger Month ends and investors

(users) expect updates.

Step 2. Action Update arrives in inbox in an easily

digestible (minimal friction) format.

Step 3. Variable Reward Each update has unique, interesting news about the company’s growth and how the

the investor can add value.

Step 4. Investment Every introduction or piece of advice

an investor offers elicits stronger emotional investment in your company.

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The Ultimate Guide to Startup Data Distribution

Format

Format is an extension of the previous two points and again drives home the importance of setting expectations among your stakeholders and meeting those expectations on a period by period basis. Sending an Excel spreadsheet one month, a Powerpoint deck the next, then an email with a PDF attachment leads to disjointed communication and too much mental overhead for investors to effectively manage, especially when you take into account that another dozen companies that they work with may be doing something similar.

Keeping information in a central repository and in a structured, well-understood format (Hey! That sounds like Visible) helps you stand out and removes barriers that may prevent an investor or advisor from going the extra mile for your company. 

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Communicating Data Across Your Organization

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Appendix - Further Reading

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The Ultimate Guide to Startup Data Distribution

If you’ve read to this point, you have a good understanding of the importance of stakeholder engagement. Early stage companies fail for a lot of reasons, one of the chief ones being a misalignment and a breakdown in expectations among key stakeholders. Founders fail to be transparent with one another, communication breaks down between a sales team and a product team, a CEO neglects to keep investors informed of negative developments in the business and those investors are left without a way to help. These are just a few examples of situations that can cripple a company’s ability to find success over the long term.

Fortunately, there has been lot of great content written about professionalizing your data distribution process and about why having a well-thought out process is important.

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Appendix - Further Reading

From the Visible Blog

• Is Radical Transparency the Way Forward for Startups? • Should You Update Your Investors? • The Sentiment Index - Solving Early Stage Information Asymmetry • Objective and Key Results (OKRs) for Startups • What is Your Investor Net Promoter Score • 9 Rules for Your Unborn (or Growing) Startup • Managing Investor Relationships and Updates • Tit for TaaT - Leveraging Transparency to Build Better Businesses

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The Ultimate Guide to Startup Data Distribution

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Appendix - Further Reading

On Building a Culture of Transparency

• Transparency at Buffer by Leo Widrich • How We Spend Money at Mattermark by Danielle Morrill • The Case for Making Radical Transparency the Top Priority by FirstRound • How Open Should Startup CEOs be with Staff? by Mark Suster

On Keeping Stakeholders Engaged

• You Aren’t Getting the Most Out of Your Investors by Paul Arnold • Updating Your Investors by David Lee • Why Investor Updates are Really, Really Important by Jason Calacanis • Why Investor Updates are Important by Alex Trumbull • Anxious Investors by Fred Wilson

On Tracking the Right Things

• 3 Phases of Financial Indicators for Startups by Danielle Morrill • What Investors Look for When Assessing Startups by Hyde Park Angels • Measuring What Matters - How to Pick a Good Metric by Ben Yoskovitz • The Right Metrics for Your Startup by Nadia Eghbal

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Visible is Modern Investor Relationship Management