For an entrepreneur, approaching venture capital investors can be a nerve-racking experience. But the experience is not without its challenges for the investors either.
Although many founders are diligent in their efforts to keep investors up to speed, getting the latest scoop on how a company is actually doing isn't easy. And when a startup whose operating costs are covered by your investment goes dark, it can be impossible to tell whether the team is putting off sharing bad news with you, or whether they’re just too swamped with new customers to scrape their data together.
According to Preuss, Visible’s internal research shows that frequent investor updates — even if the news isn't great — make VCs two times more likely to give a company follow-on funding. For instance, if you know that traffic is down because your company’s site took a hit from Google’s page rank algorithm and you’re working on it, it’s better to be upfront and tell your investors than to wait until they come to you to ask about your numbers.
“I think where founders struggle sometimes is, startups are hard, and they may not have the best news to share, so they go dark for six months,” said Preuss. “And what happens then is you go ‘Oh shit, we’re out of money. Can you guys pour more money into the company so we can figure this out?’ And the answer to that question is usually going to be no.”
Beyond fostering trust through honesty, giving frequent updates can also help companies get the help they need to get out of a tricky spot. In many cases, VCs have worked with companies in similar situations before, and may see patterns where founders are too close to their own data points. And even if investors may not personally be able to help, they may be able to tap into their networks and find someone who can.
Inspired by companies like Slack and Mailchimp, Preuss said his company strives for a really simple user interface, despite a lot of customization options and advanced integrations.
“Design is really table stakes now for building software — I think if you have a poorly designed user interface and user experience, you’re going to get your butt kicked by somebody else. I think that’s just the way of the world now, and what people have come to expect,” said Preuss.
Founded while Preuss was living in San Francisco, Visible started as a dashboard solution for investors to monitor their portfolios and understand how companies were doing. But after hearing from investors that some companies in their portfolios were hard to get on board, Preuss and his team decided to pivot, instead becoming a tool for companies to initiate communication and own and tell their own stories to stakeholders. Around this time, Preuss — a Chicagoland native — also decided to move back to Chicago, and set up shop in the Loop.
In its current iteration, Visible is used by 2,500 companies, and the company is looking to hire additional engineers.
Images via Visible.