Why [street name] Likes It When CEOs Talk About Their Strategies

Certainty, certainty, certainty! That’s not too much to ask, is it?

Following through my blog about  How to Win More Investors – Raise Your Trustworthiness Score it does not matter whether you are the CEO of Wall Street, Howe Street, Bay Street, Main Street (for public companies) or in the back alley of Yaletown (for private companies) all investors want certainty, predictability. They want to know where you are going to take them in order to increase shareholder value. They want to know your why you are taking them there; why your team is the right team that can get you there at the current life stage of the business; how you are going to take them there, with what resources or assets to get there. Equally as important, when are you going to reach your destination (milestones, end goals)? After all, time is gold. Manage it well and your business becomes a gold mine where you can spin out other value creating assets.

Let me share with you a Harvard article: Wall Street Rewards CEOs Who Talk About Their Strategies  written by  Richard Whittington, Basak Yakis-Douglas, and Kwangwon Ah.   Watch this 2-minute video   to get the main thrust of it.

 

Antonio is a financial executive, an entrepreneur, an investor, interested in co-financing and co-developing health-wellness, health tech, and technology enabled businesses, from funding to exit. Serving as a strategic advisor to execute an evidence based plan, he offers interim executive services to businesses designed primarily to enhance their business expansion and financing success.  www.alamidascapital.com 

How to Win More Investors – Raise Your Trustworthiness Score

By Antonio A Arias

TRUST KEYIt’s August and summer R&R is almost over. Capital raising season revs up again in September. For those who have planted seeds since the spring developing relationships with investors, it could mean harvesting new capital soon. If not, it is never too late. So how do you raise your trustworthiness score with investors? With 20+ years involvement in raising capital I have learned these top 3 strategies in building trust with shareholders and prospective investors.

 

  1. Sharing your vision and plans

Transparent companies articulate a clear vision and strategy on how it aims to achieve its plans. Publishing its future goals demonstrate confidence, commitment, and accountability to all stakeholders – customers, partners, employees, shareholders. Doing so is like entering into a contract because it is making a public commitment.

To apply this strategy effectively, is to manage stakeholder expectations and contingency plans. Have you factored in sufficient contingencies in case things do not go as planned? For example in recent weeks, certain macro-economic factors can derail plans beyond management’s control. In the technology sector, certain pockets are exhibiting “bubbles” signs. Economic slowdown in China, underscored by recent currency devaluation, and credit uncertainties in Greece have de-stabilized markets. A major market correction could follow causing lower valuations and reduced liquidity.

If a company is operating with a sound system of financial controls and market flexible capital investment plans, investors will feel secure that their investments will be used for expansion instead of being a financial crisis solution.

  1. Reporting your progress

Being transparent can have a double edge effect. Not everything will go as planned. However, there is nothing worse than a complete information blackout as it can be construed as no news is bad news. When management consistently updates its stakeholders about positive and negative developments, they tend to understand. More importantly, they are interested in how the management has responded to adversities. This is why every proactive management strategy includes a well thought out contingency plan.

Surprises are prevented when driving while watching the operating dashboard. It’s important to establish the key performance indicators (“KPI”) or measure performance against certain benchmarks as soon as possible. What gets measured is managed. Does your company have a customer satisfaction index? How has management responded to customer feedback and competition? How is the sales pipeline growing?

  1. Let actions speak louder than words

Building trust is not the sole job of the management but it is their job to set up a good example for everyone in the organization to emulate.

What the leaders say in public should be consistent with what they do in private. With today’s social media technology, information travels fast and should be proactively managed.  A sound strategy in customer relations, investor relations, is complemented by a strong public relations strategy.

Treat employees like partners. Happy employees deliver happy customer results, impacting the top line revenues. Growing revenues flow through growing earnings and ultimately, growing valuations.

Call to Action

Work with seasoned  professional executives who understand your market, with relevant funding connections, and with the passion to sell your value proposition.

 

Antonio is a financial executive, an entrepreneur, and an investor, interested in co-financing and co-developing health-wellness, health tech, and technology enabled businesses, from funding to exit. Serving as a strategic advisor to execute an evidence based plan, he offers interim executive services to businesses designed primarily to enhance their business expansion and financing success.

 

Accessing Venture Capital, the Canadian Way

By Antonio A Arias

PUBLIC VCWhile advising a US private company raise growth capital, being in Vancouver, Canada instead of Silicon Valley or New York is a handicap. It is time to revisit our Canadian alternative. Some may argue about the compliance costs, but the Canadian financial marketplace is catching up with the US JOBS Act, indirectly. The incumbent venture exchanges and securities regulators will have to compete in cost and efficiency or self-expire.

Canada has its unique junior stock exchanges available to foreign issuers, in the form of the TSX Venture Exchange and the Canadian Securities Exchange, and the nascent TSX Private Markets. These exchanges fill the gap the JOBS Act and other global crowdfunding rules are supposed to fix. With the delayed implementation of an economically feasible US JOBS Act Title III rules, equity crowdfunding is limited to accredited investors under Title II Reg D Rule 506(c) or (b) without general solicitation. Adoption to Rule 506(c) which allows for general solicitation to accredited investors is working primarily in real estate and hedge funds. Other new platforms applicable to technology or healthcare have yet to populate and engage their platform with more relevant qualified investors.

Holding our breath for Title III and its spill over benefits into the US and Canadian capital markets could be fatal. For decades, Canada has been the mining venture capital of the world with a mature ecosystem copied by other countries. With the depressed state of mining, retail and institutional investors are starting to sector invest into technology and healthcare. Several mining ventures were financed in Canada but operating elsewhere. It equally applies to technology, healthcare and other sectors which are primarily operating in the US market.

Going public is not for everyone. Accessing capital through public listing has its challenges. It is more appropriate for the right growth stage business combined with the right management aptitude and attitude. Critical factors to consider before going public, among others include:

Matchmaking made in heaven – matching the target private company and the public venture company shell is akin to finding long term marriage partners. The founders of both companies have to be aligned in terms of mission, values, and culture as they have to work together until the real major exit by M&A. For extra precaution, management services or “pre-nup” should be agreed in advance to allow for orderly changes.

Milestones – hitting major milestones on time as promised is mandatory or otherwise face an angry market that will be reflected in the stock price.  Management has to set reasonable and deliverable expectations.  There is no room for reckless planning or value destructive decision making. Everyone has to identify with the enterprise value drivers while under-promising to shareholders.

Time velocity – time seems to travel at warp speed while managing public companies, as core business actions have to be executed synchronously with the periodic reporting to shareholders. Contingency planning and risk management are critical skills to please shareholders. Even at best efforts, something else will go wrong at the wrong time.

Continuous disclosure and financial reporting – growth companies unaccustomed to transparency will have to conduct themselves like public companies and hire public company professional managers –  investor relations, accountants  and finance people with knowledge of securities rules, in particular.

Corporate governance – recruitment of independent directors, reporting of related party transactions, insider reports, management compensation are examples of legally mandated best practices that management needs  to start adopting even as private entities.

All of these challenges are manageable when the management team is experienced or educated in running public companies. The added cost is warranted particularly when a company is about to scale or execute an expansion plan in a robust market. Timing is everything. When everything is running perfectly, a public company is creating its own currency for further expansion.

For further guidance, check out the BC Securities Commission Your Guide to Going Public and the TMX Capital Pool Company Program (CPC).

At ALA Midas Capital, we advise  early revenue to development stage businesses, the right time to go public using the TSX capital pool company program, as well as advise companies manage its securities regulations compliance, investor communications, and applying other best practices in running public companies. While preparing to go public, we can also advise you to become investment ready at the regulated equity funding platforms in Canada and in the United States. For a feasibility assessment or to gain insight from some case studies, contact us at info@alamidascapital.com.