Investor Relations Officer, Embrace the Upcoming Data Revolution
Until last year, there was money in abundance in the capital market. Companies easily attracted investors; valuations reached record highs. There was talk of a free cash market, from which - due in part to the corona pandemic - the tech sector in particular benefitted. For some months now, the investment climate has been completely different. The flow of capital has not dried up, but raising money is much more expensive. Fewer and lower amounts of money are being invested. Capital providers are more cautious: they are primarily interested in short-term profits and less in growth. Whereas the investment period used to be between five and ten years, investors now want to see returns within five years.
This situation is expected to continue for the foreseeable future. That means a lot for the investor relations officer (IRO). He or she will have to step up his or her efforts to find and interest new investors in his or her business strategy. It will be "a war" for capital.
Learn from successful e-commerce players
How does the IRO deal with this? Many professionals struggle with the question of how to find new capital providers in a relatively straightforward way to reach a deal with them. Fortunately, there are plenty of opportunities for the profession. A true data revolution is expected to unfold within the profession. Several communications platforms, such as Q4, have already launched technologies that allow IROs to gain valuable insights from data about potential and existing investors. Professionals can thus strengthen their company's position and are able to attract the attention of the right investors.
Nowadays, more and more investors are looking for information online. As a result of the corona pandemic, companies increasingly offer opportunities to gather financial and non-financial data digitally. Not only can more be found on the company website, but interested investors can attend an online event or ask the CEO a question during an interview via Zoom or Teams. Increasing digitalization will lead to a true data revolution in the world of investor relations. All companies generate a considerable amount of data. So far, the IRO is hardly familiar with data, but he or she cannot escape going along with this development. This is exciting, but above all, the data revolution offers many opportunities. IROs can learn a lot from techniques that have long been used in e-commerce. The e-commerce industry and the investor relations industry have in common that buyers, sellers and intermediaries can come to a deal with each other online. Anyone who has ever shopped online knows how well online providers can entice consumers to make a purchase. Thanks to various technologies, e-commerce parties have a good picture of the customer and can make him or her a personalized offer. This is all about the ultimate customer experience.
Do not let potential investors walk away
Precisely because it will soon become more difficult to attract capital, it is important for IROs to use technology - following the example of e-commerce - to approach investors more personally and to better respond to their needs.
The IRO will be able to:
- Find visitors on the company website.
The IRO will know which investors have visited the company website. These can be new investors who have not previously shown interest in the company;
- Getting knowledge with mailings to relations.
Every company sends e-mail newsletters to its relations about its figures, management changes or business strategy. And they usually stop there. In the online world, however, there is more to be gained from such a mailing. Like parties in e-commerce, IROs can also use technology to find out which recipients actually open and read the mail. It is valuable to know which group has an above-average interest in the company;
- Give new and existing relations a warm welcome.
The average website for investors is now very static. If investors want more information, they can fill out a form. Successful e-commerce parties often have a virtual front door to welcome visitors. Loyal but also new, potentially interesting customers are recognized and greeted. There is a virtual assistant who can establish a direct line of communication with an employee. Thus, potentially interested investors do not wander away;
- Getting to know the visitor personally.
Data analysis allows the IRO to get a good picture of the investor and what he or she is looking for. Thanks to data-driven insights, communications can be tailored for different types of investors. This increases engagement with the company.
Data has been available, but until now the IRO had no tools to gain valuable insights from the data. That will change significantly and represents an enormous gain for professionals. Thanks to new technology, it does not matter if a company has a large team or if the company employs only one investor relations officer. An IRO can get and stay in touch with investors and respond to their information needs with relatively little effort. Thus, the IRO can build and maintain a valuable network of investors.
Sounding the alarm on activist shareholders
Also of particular interest to companies is: data analysis allows the IRO to find activist shareholders at an early stage. Because the system knows which visitors from which investment companies are showing interest in the company, an alarm bell goes off if it appears that a particular company has been labeled activist in the past. The IRO is notified and can alert relevant departments within the organization. Several companies have already been alerted thanks to these techniques, allowing them to be extra vigilant.
Data lead to a more initiative-taking role
It is often said that the IR-professional is not proactive per se. It is understandable that the IRO acts mostly reactively: the function of the IRO changed enormously in recent years. Many tasks were added to their role. The IR-professionals are not only responsible for financial communication, but also for more and more non-financial data, such as ESG topics. In addition, the IRO is a strategic partner both internally and externally. On top of that, the team in charge of investor relations is becoming smaller and smaller. Often this function is fulfilled by only one employee. Technology and data can alleviate the enormous pressure on the shoulders of the IRO and allow the IRO to play a more initiative-taking role.
In doing so, the IRO should take to heart three pieces of advice:
- Don't be afraid of data, be open to it, and discover what benefits data brings. The data revolution will lead to many wonderful things, such as new contacts and improved customer relationships;
- Beware of the "data silo" trap. Data only becomes valuable when different data streams are combined. It's nice if you know which investors searched the website for information: that produces a long spreadsheet of names. However, that list only becomes interesting when you can filter out five people who do not yet invest in the company, who previously attended an event and who regularly read the newsletter;
- Hire ability. Look internally or externally for people who know how to manage data. Often there is already a lot of knowledge in the marketing department; these colleagues have been working with big data for longer.
This article was published in Management Scope 02 2023.