How to Deliver Bad News to Investors Without Losing Trust

Daniel Olmedo Nieto | Co-Founder @ EasyVC | Forbes 30 Under 30 Europe
Delivering bad news to investors is something every founder dreads, but it’s a reality that comes with building a business. According to a Harvard Business Review study, over 65% of startups experience at least one “critical moment” where difficult updates must be shared with stakeholders. How founders and CEOs handle these conversations can make all the difference. If done poorly, trust may unravel and relationships with investors may suffer—just when support is needed most. But sharing tough news doesn’t have to damage trust. In fact, being open in hard times often does the opposite: it shows integrity, builds stronger partnerships, and gives investors a chance to help. In this article, we’ll walk through practical steps to deliver bad news to investors thoughtfully, so you can be honest without losing their confidence.

Recognizing When to Share Difficult Updates

Early Warning Signs You Must Address

Most problems don’t emerge overnight—they simmer and send subtle hints before becoming visible hurdles. An unplanned dip in user engagement, a persistent shortfall in sales targets, or operational bottlenecks that refuse to budge are all red flags investors deserve to know about early. If forecasts slip more than once without swift recovery, or expenses spiral with no immediate fix, it’s time to sound the alarm.

Instead of waiting until you’re cornered by missed targets in a quarterly review, flagging downward trends as they appear shows you’re watching the company’s health closely. Transparency in the face of these early warning signs positions your team as proactive rather than reactive.

Impact of Delays on Investor Confidence

Time matters to investors. When product launches slip, regulatory approvals take longer than promised, or partnerships stall, trust can erode quickly if the news arrives late or feels glossed over. Delays—whether measured in weeks, months, or quarters—almost always affect more than schedules; they shake investor confidence and can spark tough questions about execution.

Communicating delays promptly—even before you have all the answers—gives investors time to process and adjust. It also reduces speculation and rumors, shifting the narrative from suspicion to shared problem-solving.

Identifying the moment to update investors is just the beginning. Once you’ve spotted these signals, how you frame and deliver your message can shape the outcome just as much as the facts themselves. Let’s look at how to communicate these hard truths while keeping your relationship strong and constructive.

Crafting a Message That Respects Investors

Choosing Direct But Empathetic Language

When difficult news needs to be shared, don’t skirt around it. Speak plainly and avoid filler. There’s a difference between respect and avoidance. For example, instead of saying “We regret to inform you,” begin with the core issue: “Our Q2 revenue fell short of our projections.” By being upfront, you honor your investors’ time and intelligence. Then, layer in understanding: acknowledge the disappointment and recognize what’s at stake for them. Let your concern for their stake come through in your words—“We know this directly affects your expectations.”

Balancing Honesty With Clarity

Transparency can unsettle, but vagueness is a greater threat to trust. If margins dropped, specify how much and why. If a critical product launch slipped, give the real cause without sounding evasive. However, never overload your message with technical details or industry jargon that buries the key points. Use numbers and specifics when they support clarity, not confusion: “Production was delayed by six weeks due to a parts shortage, impacting delivery for three key customers.” Own the message—investors value candor over a sugarcoated summary because it allows them to make informed decisions.

Delivering tough news is only half the challenge. The next step is ensuring it reaches the right people, in the right way, and at the right moment—laying the groundwork for a conversation, not a crisis.

The Right Way to Communicate the News

Selecting the Appropriate Channel (Email, Call, Meeting)

Not all bad news deserves the same delivery. A brief earnings miss may be suitable for a personalized email, but a major leadership shake-up needs a face-to-face conversation or, if distance is an issue, a video call. Consider your investors’ preferences and the gravity of your news. Sensitive updates, such as strategic pivots or unexpected losses, often warrant a scheduled meeting—never an impersonal mass email. Direct communication demonstrates respect; it allows room for questions, which can soften the impact and prevent misunderstandings.

Timing: When and How Fast to Reach Out

Delaying difficult updates only raises suspicion and erodes trust. Reach out as soon as you have verified the facts and clarified your next steps. While you might be tempted to “wait for better news,” transparency wins in the long run. If you anticipate public disclosure—such as media coverage or financial reporting—inform investors first. No one likes to hear bad news secondhand. Choose a time when your investors can focus, not during market turbulence or late on a Friday, to ensure your message lands with the attention it requires.

Of course, how you break the news is only half the battle. Next, you’ll need to offer insight into why events unfolded the way they did, and—more importantly—what steps you’re taking to set things right.

Providing Context and What Comes Next

Explaining the Root Cause Without Excuses

Investors notice when you gloss over uncomfortable facts. Instead of offering vague explanations, address what happened with candor. If supply chain hiccups delayed your rollout, detail which factors were outside your control and which might’ve been anticipated. Give a concise timeline of events, and reference specific data points or decisions that led to the setback. This specificity shows that you understand the situation fully—not just narrating events, but unpacking how and why things went wrong.

Outlining Concrete Actions and Adjustments

After laying out the facts, shift the conversation toward solutions. Spell out the changes being made, whether it’s revamping operational processes, reallocating resources, or seeking outside expertise. Instead of blanket promises, provide milestones: what will happen in the next 30, 60, and 90 days? Mention key metrics that you’ll use to measure progress. If you’re pursuing a fresh funding strategy or a new partnership, say so. Precision here signals competence and intent—qualities investors look for in difficult moments.

By clearly explaining what happened and exactly how you’ll move forward, you give investors something tangible to focus on—even amid disappointment. Now, once the facts and your next steps are on the table, the most important part begins: actively listening and responding to the concerns that are sure to follow.

Addressing Questions and Maintaining Relationships

Inviting Feedback and Dialogue

After delivering unwelcome news, investors are likely to have concerns or clarifying questions. Invite them into the conversation by pausing and asking what’s on their mind. Listen carefully without defending or deflecting, even if the questions are tough. Share specific ways they can reach you—whether it’s a dedicated call slot, a group video update, or one-on-one follow-ups. This signals that their perspectives are welcome and valued.

Offering Regular Follow-Ups and Progress Updates

Don’t disappear after the initial announcement. Map out a plan for ongoing updates and stick to it. For example, if you promised quarterly progress, send those updates on the exact day you committed—even if results lag behind hopes. Share actions taken since the last update along with honest outcomes, and be transparent about what’s still uncertain. Consistent, proactive communication builds reliability, showing investors you’re not hiding from hard realities or hoping their concerns will fade.

Creating a steady, open line of communication helps transform a difficult conversation into a foundation of trust. Next, it’s crucial to understand how regulations shape what and when you share—the right approach here prevents legal headaches and reinforces ethical integrity.

Disclosure Requirements You Can’t Ignore

Before sharing any bad news with investors, it’s essential to understand what information you are legally obligated to disclose. Securities laws in most countries require public companies—and sometimes private ones—to report material events that could influence an investor’s decision-making. “Material” doesn’t always mean disastrous, but if something would change an investor’s perspective about your company’s value or trajectory, transparency becomes non-negotiable.

Failing to disclose critical information can attract allegations of selective disclosure or even fraud, especially if some investors learn about the news before others. The laws exist to protect the principle of fair access. If you’re unsure whether an event is material, consult legal counsel rather than taking a chance. Announcements related to financial shortfalls, regulatory actions, or major operational setbacks almost always require formal, timely communication.

Compliance isn’t just about the letter of the law—ethics play a huge role in sustaining trust. Some situations may not force an immediate legal disclosure, but keeping investors in the dark until the last possible minute erodes goodwill. Treating your stakeholders with respect by being open (even when the news is hard to share) reflects the kind of company culture that attracts future support.

As you’ve seen, following rules and acting ethically sets the stage for meaningful investor relationships. Next, let’s consider how you can apply these principles when facing real-world scenarios and crafting your own communication strategy.

Sample Scenarios and Template Scripts

Delivering bad news never feels easy, but having the right words at your fingertips can make all the difference. Here are a few real-world scenarios, each paired with a direct, respectful script you can adapt for your next investor update.

Revenue Miss or Downturn

Subject: Update on Q2 Results and Next Steps

Dear [Investor Name],
Q2 did not meet our expectations. Revenue finished at $1.2M, 18% below the forecast. This shortfall was driven mainly by slower-than-expected onboarding in two large accounts.

We’ve paused new hires temporarily and shifted sales support to focus on accelerating these deals. I’m monitoring progress personally and will share weekly updates as we get back on track.

Thank you for your continued partnership. Please let me know if you’d like to discuss this in more detail—I’m available this week for a call or meeting.

Missed Timeline or Project Delay

Subject: Timeline Update on Platform Launch

Hi [Investor Name],
I want to update you about our product launch. The technical review surfaced a security flaw that requires attention before we go live. As a result, the launch is now scheduled for September instead of August.

The team is addressing the issue with support from an outside firm, and we’re building in extra testing to avoid further surprises. I’ll keep you posted after the next milestone check-in, with specifics on our progress.

Please reach out if you have questions—the team and I are happy to walk you through the plan.

Leadership Change or Team Challenges

Subject: Company Leadership Update

Dear [Investor Name],
I want you to hear directly from me—[CTO’s Name] is stepping down for personal reasons at the end of this month. While this was unexpected, I’m working with the team to ensure continuity. Our lead engineer is stepping in as interim CTO, and we have started the search for a permanent replacement.

I’ll introduce the interim CTO on our next call and outline our succession plan. If you’d like to speak sooner, let me know and I’ll set up a time.

Your support during transitions like this makes all the difference.

Having prepared scripts on hand can steady your nerves and help you focus on what your investors need most: candor, clarity, and concrete steps forward. But remember, how you respond—and the actions you take—are just as important as the initial message. Let’s explore how to keep that line open and relationships strong after the news is shared.

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