Meet the Expert
Director of Investor Relations, Abingworth
- Consultant in investor relations for venture capital and private equity, with experience at three venture firms – VantagePoint Capital Partners, Bay Partners and Kodiak Venture Partners.
- Has served as primary contact with hundreds of venture fund limited partners, domestic and international, developing detailed ongoing communications, portfolio financial updates and meeting presentations.
- Has managed communications and public relations for major fundraising efforts, meetings with prospective investors, and preparation of due diligence questionnaires and related documents.
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Investor Relations for Venture Capital
Director of Investor Relations, Abingworth
- VC firms fail to engage in ongoing fundraising.
- In the VC world, the effort to raise money from limited partners often ceases the moment a round of funding is complete. There's a quarterly report that goes out and there's the annual meeting, but there's no ongoing day-to-day effort to stay in touch with investors and build a stronger relationship. There's also often very little effort to court potential new investors who may be able to participate in a future funding initiative.
Individualized attention is ideal. When the VC firm has a special announcement about a company that has exited well, or a partner that has received an award, it's best to make these with a one-by-one, face-to-face connection. Phone calls are much more effective than emails. When it comes time to raise your next fund, investors who have a positive feeling about the firm, and a good grasp on the work the firm has done since they invested, will be much more likely to invest again.
- A VC firm has made no effort to differentiate itself from its competitors.
- A firm that has not figured out what makes it unique or has not managed to project that image out into the market is not doing anything to build its identity. This is a lost opportunity. Effective branding can help solidify existing relationships and attract new investors. Many firms don't spend enough time on their pitch. They understand what they're trying to sell, but have a tough time articulating it. They aren't sure how they compare to other firms or why what they do is unique.
The VC firms that are very successful or have older generations at the helm will claim that branding doesn't matter and that it's all about performance. But this is not entirely true. There are some very successful VC firms that have turned in only a mixed performance but spent a lot of time and money on branding. It's their brand that sells them.
- No effort is being made to keep track of investors and their activities.
- Many firms do very little if anything to track their limited partners. They make no effort to study their investors as individuals or to learn more about their interests and other investments. This leaves the firm with only a very shallow pool of knowledge about its investors.
A more in-depth awareness would help the firm build a better long term relationship with its limited partners, and could be used to identify added categories and industries in which the current invetors might also want to invest. To create a database, skip the Excel spreadsheet and invest in a CRM software program like Salesforce. It's a great tool for tracking what's worked in the past, and a variety of other key elements. The firm can sort its limited partners into interest groups and funding categories with one stroke of a button.
- There is too much emphasis on crisis management instead of controlling the message.
- At a VC firm, the general partners are often preoccupied with putting out fires and finding the best exit plans for their companies. They get so caught up in the day-to-day details, they fail to stay in touch with their investors on a consistent basis. It becomes difficult for them to see the big picture, and control the message. They tend to remain in a perpetual state of reaction, instead of being able to be proactive.
- The firm only communicates the good news to its investors.
- Reporting only the good news and leaving out the bad is probably the worse thing a firm can do. Every VC firm has skeletons in its closet. The sooner a firm communicates any bad news, the better the outcome. The investors will at least know the trajectory. It may be disappointing, but it's better to know than to be in the dark. In the financial industry, no one likes surprises. Sharing bad news is never easy, but hIding the truth is far worse. If things aren't going well, it's better to own up to that and try to fix it. Otherwise, the firm can end up looking like it was either not paying enough attention, or is incompetent.
- There is not enough face-to-face communication with limited partners.
- Many VC firms only communicate what they absolutely must. They're not in their investors' faces enough, or tooting their own horn enough. Being "in your face" may have a negative connotation, but when a limited partner has entrusted millions of dollars to a firm, the firm has got to go see that person. It can't expect the investor to come to them in San Francisco or Silicon Valley, or wherever it's based. If a limited partner is in Ohio, the general partners have to go to Ohio to say hello, at least once a year. Emails are okay, and phone calls are better, but there's nothing as effective as a face-to-face meeting.
- Don't judge a limited partner by its current size, or a junior contact by his or her current job.
- When an investor comes in with $1 million, the firm should pay as much attention to that investor as it does to the $25-million investor. That $1-million investor may well become a $5-million investor in the next fund, and then a $10-million investor in the one after that. It's not always possible to predict. It's important to treat all of the investors with respect.
General partners can sometimes be impatient when they have to engage with a limited partner contact who is not the decision-maker, but that same junior executive may one day be running a pension fund or endowment. If your firm didn't give him the time of day, he'll remember that. You never know where that junior executive may end up.
Investor Relations for Venture Capital: Common Problems