Trying to raise capital? Even non-listed companies should think investor relationsby Ana Raman
We have all heard about the importance for companies - unlisted (or private) and listed (or public) - to have a public relations strategy. We rarely hear, however, about the need for an investor relations strategy for privately held companies, which is not usually included in PR plans.
Investor relations or IR facilitates effective dialogue between a company and its investors. It's as simple as that. And yet, it is so much more than that. It includes activities ranging from targeting and engaging investors to developing your company's investor value proposition, to making the pitch. See a previous blog post to learn more about investor relations activities.
Many believe that IR is a function reserved for publicly traded companies, and granted, most IR-related articles and research are written for that audience. Certainly the size, scale, and some components of an IR plan for a private business would be quite different than that of a public company given the complexities, requirements, and longer shareholder lists of companies trading on stock exchanges. But the benefits are similar for both types of companies.
The IR plan for a private company does not need to be lengthy or in great detail, however laying down a roadmap of how your company plans to target, engage, and manage investors can bear the following seven benefits for your business once it decides that it may be time to raise capital:
1. Secure capital
Securing capital is the ultimate goal in the capital raising process. Just like any other business goal needs a defined strategy and objectives, raising capital is no different. An IR strategy acts as a roadmap in the process to reach that intended goal, and throughout the company's relationships with its shareholders.
2. Attract the right type of investors
Laying out an IR strategy can help your company understand the different types of investors and their investment philosophies and objectives. By doing this groundwork early on, you can better focus your efforts when it comes time to start knocking on doors. This also helps the investor out as they can receive pitches from companies that have done their research and better align with what they are seeking in a potential investment.
3. Make an effective pitch
Considering and identifying what type of investor you would like to have as a shareholder in your company helps you frame how you tell your story. Like any good communication, it's important to know your audience and speak in a way that appeals to them, increasing the likelihood of sparking their interest and perhaps leading to that coveted round of funding.
4. Build credibility with investors
Being able to define your purpose and objectives helps you communicate more meaningfully and effectively with the investor community thereby leading to greater credibility with this group. Being credible with your shareholders is critical to long-term success and translates into a stronger corporate reputation.
5. Enhance shareholder relationships and value
Working through an IR strategy can make you think about your relationship with shareholders in different ways, leading to opportunities to enhance that relationship. Through regular communication, feedback, and improvements based on the feedback, your company and its shareholders can mutually help each other and increase your company's valuation.
6. Encourage consistency, discipline, and accountability
An IR strategy would include how you plan to report back to your shareholders - including the method and frequency. Consistency in communications establishes not only credibility with your investors, but also builds discipline and accountability. These are important qualities for long-term success, and if they are built early on, they can gradually become a part of the culture of your organization.
7. Prepare for a potential IPO
Having an IR strategy helps a private company prepare for its potential IPO. An IPO is an extremely involved process with a lot of complexity and moving parts. If a company has practiced IR in a structured and consistent way well in advance of an IPO, it will be better equipped to prepare for the type of work that is required to undergo a successful process.
Investors are critical to a business's growth and success whether they are shareholders of a private or publicly traded company. An IR strategy is an important and perhaps a missing piece in your company's search for capital.
Ana is a strategic business and communications professional who has worked in small to large cap companies across several industries, advising management and developing effective communications programs to help businesses transform and execute their strategy. Her roots are in finance, a skill set she especially applies in her area of expertise - investor relations and financial communications.
Over the years, Ana has developed her capabilities across the PR spectrum and continues to do so - no PR or business topic is off limits. She is a curious thinker who is always seeking to learn how to become better, faster and stronger. Ana is the founder and Principal of Vega Advisory. is based in Ottawa, Canada.
Contact Ana Raman
This article was first published on http://prsoundpost.wordpress.com/ (January 2015). Reproduced on www.reportwatch.net by kind permission of Ana Raman.
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