Good Investor Relations Differentiates Firms in their Competition for Capital
Posted on Thursday, November 19th, 2015 | By Mr. Sanjay Mallik
For every successful investment, there are hundreds of stories of firms that did not get the much-needed capital. What differentiates successful firms from the not-so-successful firms? Why are some companies repeatedly successful in getting investments from investors while other companies, even those with better business models don’t make the cut? How can firms differentiate themselves as they compete for capital?
Among the many factors that differentiate companies from one another, one important factor that is oft-forgotten, is the ability to build investor confidence. A number of companies underestimate the need to clearly define and articulate their business models. We see this across companies of different sizes, from young start-ups asking for funding to blue-chip corporations embarking on new projects. Investors must clearly understand where and how their capital is going to be deployed and it is the responsibility of companies to explain that to investors and not the other way around where investors are expected to learn or deduce where their capital is being utilized.
This is where good relationship-building comes to the fore. Promoters, entrepreneurs and project managers all have to understand and anticipate the needs of the investors. Those who have the ability to elegantly communicate complicated business deals into conversations will have an advantage over those who rely on big excel sheets and complicated flow charts.
A striking example of this philosophy was Steve Jobs. Each year, Steve Jobs would invite the world to the unveiling of the latest Apple products. What followed was a breathtaking demonstration of Job’s ability to communicate the best of Apple to the world. None of those Apple products were revolutionary or firsts of its kind. Products similar to the iPods and iPhones existed before but it was the Apple touch that made them global bestsellers. It was Job’s communication skills with thousands of investors who would later go on to buy Apple products that cemented Apple’s corporate reputation as a cutting-edge mass consumer-friendly brand. In the same vein, companies must differentiate themselves by building investors’ confidence in their ability to acquire capital and create measurable value.
To sum up, here are the 3 most important things to remember when building good investor relations.
- Know everything about your company: Companies looking for capital need to be nuanced and be as familiar with marketing skills as they are with financial and economic skills. They should be able to answer queries raised by investors in a confident manner that demonstrates their knack for business
- Know everything about your investors: This is often useful when approaching venture capitalists who run funds focused on specific themes. Thus, companies must clearly match their funding requirements to investors who specialize in dealing with those kinds of funding opportunities
- Build Relations: In business, the relationships we build are the relationships that build us. Building long-term relationships with investors even with those who did not invest in your company when you required it. How you manage your relationships will determine how good your investor-relations are.
Ultimately, in business, people may not remember what you did for them, but they will remember how you made them feel. So, invest in building good-long term relations with investors.