We have all heard about the importance for companies – private and 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.

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.