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IR BLOG: Who Are The Right Investors?

Why roadshows remain a remarkable tool to attract investors
10 July 2018
It’s goodbye to Goldilocks – but not hello Bears just yet
19 July 2018

By Simona D’Agostino Reuter

 

Make sure that you (or your provider) has targeted the right investor – this is what you hear since day, long time before your company get listed. Fine, but who are your investors, or shall we say, who are your potential investors? Of course, those who are interested in your stock as they are familiar with the sector, with your peers and, ultimately, can invest in your region.

Easy to say!

So, starting from scratch, before thinking about where to find investors you need to think about the following: do you have in mind your ideal investor? Is it someone who doesn’t ask a lot of questions and gives you the money  Straight away or do you prefer having someone who could be a potential ambassador, who will help you grow, open their network, etc.?

“Choose an investor who doesn’t have your interests at heart or who is out of sync with what you’re trying to build, and you may be living with a bad relationship every day.”

 

Put yourself in the investor’s shoes

What do they look for when evaluating your company? Here are just few ideas.

  1. Financial performance. Maybe first of all, investors want to know your numbers. Prove them that your company has excellent (or at least good..) financial performance and be ready to answer questions about the financial stability. Expect investors to evaluate your revenue streams, acquisition cost and turnover rates.
  2. Medium-long term strategies and opportunities. Investors will ask if your company shows signs of growth and if you have plans such as issuing shares or borrowing money to stimulate growth.
  3. Management background and experience in the industry. Investors don’t want entrepreneurs to make mistakes on their dime. They look for experienced entrepreneurs and management teams with a track record of high performance and leadership in the company’s industry or in prior ventures.
  4. Effective business model. Present the business model that you are currently using and prove that it will help your company become more profitable.
  5. Company uniqueness. Your product or services need to be distinctive. Prove to your investors, with concrete evidence, that your market potential is big enough to make investing worthwhile.
  6. Liquidity. Market liquidity is relevant and sometimes is not only specifically related to your stock (i.e. on the AIM segment). You need to work on your stock price free float and encourage more institutional funds to enter.
  7. Large market size.  The larger and more stable customer base that your brand has, the stronger competitive advantage you will have when pitching to investors.
  8. Geographic exposure. Where is your business primarily based? Make sure you are not too much exposed to emerging and/or political risky markets.

 

Where are your investors?

It’s never easy to find them, but what we often see is that investors are usually tempted to move if they follow a specific sector, a region, or a specific size of companies – large caps, startups, S/M caps, .. very useful opportunities in this sense are network events, pitch competitions, private banking meetings, conferences, events, roadshows and reverse roadshows.

“Most investors will research your business experience. Passion and commitment should be evident to inspire confidence in investors and stakeholders.”

First of all we would say, an investor should be happy. It is important to make them gratified, it’s a long-term relationship and you’re going to need to support each other. Of course they will be very happy if you give them a great return on their money.

Until that happens, there is plenty you can and should do to make sure your existing investors are your primary fans.

 

Investors targeting

Investors targeting is one of most important among brokers and corporate access providers’ services: to seek your potential investors with accuracy becomes more and more a key success factor of the IR strategy.  Employing a strategic and targeted approach to identifying and meeting with compatible investors is a best practice and can have a significant impact on your company’s valuation in both the short- and longterm.

 

Startups sometimes think of investors as too tough and maybe grumpy people who want to invest in their story only to only get a good financial deal. But it is not like that, most of the times. Often investors like to invest in startups and genuinely want to help them be successful. If you can show your investors that you are willing to sacrifice a lot in order to make your startup a success, they will likely be eager to help you grow also (Rutger Kemper, Investment Consultant).

 

 Roadshows provide a remarkable opportunity

Another point, don’t forget Roadshows! Roadshows are always a remarkable marketing tool to attract investors. As such, they are one of the most important steps by a company planning to issue securities through an IPO and, afterwards, along its new life as a listed company.

Companies need to impress institutional investors so that at least a few of them are willing to invest. Some large investors (but also small investors including hedge funds) will not put money in a company without having the opportunity to meet with senior management. We are convinced roadshows provide that opportunity.

“It is during the meetings that an investor can get all of their questions answered, and while you can do that in email, people also look for non-verbal cues – do they trust this person? ”

Building trust

There are a lot of things investors need to look out for when investing. But at the end of the day it’s all about personal connection. If an investor feels connected there is a higher chance investment will follow. Also, providing clear and complete information about how your company is going provides a solid basis.

OUR ADVICE… being face to face. Do not only talk about successes. By talking about the problems you encounter and how to deal with it, investors will be able to get a sense of how you operate as an entrepreneur and they will get a sense of what kind of a person you are.

It may happen that investors just comment: ‘I didn’t invest in A or B because our visions weren’t aligned” or “simply the management did not convince me”. You can’t ascertain that without being face to face.

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