An Investor's Perspective on the Value of Regular Check-Ins
We have tons of posts about why founders should write updates, this is a post about the investor perspective on the value of real-time check-ins.
This post is not about why founders should write and send investor updates. We have enough of those posts already, and if you do a simple search, you’ll find tons of VCs opining on why founders should keep their investors updated regularly. I want to address a different but related topic. We have a very large portfolio, and many of my investors (Limited Partners, or LPs) ask me why I spend so much time meeting with existing portfolio companies and what I get out of those meetings. In a typical week, I talk to 30-40 of our existing portfolio companies; those meetings are a significant chunk of my time and are very important to me. I find these meetings extremely valuable, and I wanted to lay out why I find them so useful and what I, as an investor, get out of them. Before getting into specifics, here’s some essential info on where companies are when I meet them:
I don’t have a previous relationship with the majority of the companies that we invest in at Precursor. I get to know most of the founders we back through the investment we make in their companies. I value getting to know them as people.
My experience is that product velocity, or the ability to turn investor dollars into a product with strong product-market fit, is the most significant predictor of future success. We invest in pre-launch companies, so I am betting that the people we back will be able to build what they outlined when we met. Spending time 1:1 allows me to gauge how quickly founders are figuring out the core problems they’re facing and how they talk about and think about the challenges they face.
I generally don’t take Board seats, so I use my monthly check-ins with companies to understand their progress over time. I don’t believe that most pre-seed companies need boards, as there are relatively few governance issues to address at that stage.
As an investor, I don’t know, ex-ante, which of the 10-12 meetings per year with a given company will be impactful. My experience is that neither I nor the company can evaluate the value of any of those meetings in real time; the value is often only known after the fact with the benefit of hindsight. Usually, 2 or 3 meetings each year will address decisions material to the company's outcome. The other meetings allow us to get to know each other and (hopefully) build mutual trust and a shared understanding of the problem the founders are tackling.
The more frequent the touch points, the less pressure there is on any conversation or check-in. Regular check-ins allow me to get to know the founders better and for them to get to know me better. I want to be a good advisor to the founders we back, and I learn a lot from regular touchpoints with them. Most of what I hope to learn about them is how they solve problems, and I tend to focus on a few key areas:
I learn a lot about how the teams we back process new information that confirms or challenges their view on the problem they are tackling. Given that we invest in companies looking for product-market fit, this is precious insight to gain.
I learn a lot about where their energy naturally flows with respect to product, people, and market opportunity. Every founder we back has a natural focus based on his or her background and interest, and knowing where his or her energy naturally flows helps me understand a given founder’s strengths and weaknesses.
With trust, I hopefully earn the right to share candid feedback, positive or negative, on my view on where the business is headed. Sometimes an engaged observer or investor can see things the team can’t see due to their proximity to the problem.
Founders don’t owe me, or any investor, their time. Keeping investors up-to-date and informed comes at the expense of other activities that can create value for the business. The founder's job is to build a big business, with or without help from their investors. Hopefully, this post sheds some light on why I value regular check-ins with portfolio companies.