7 IPO roadshow mistakes to avoid

Illustration courtesy of  Frits Ahlefeldt-Laurvig on Flickr

Illustration courtesy of
Frits Ahlefeldt-Laurvig on Flickr

Rob Swystun, Pristine Advisers

The art of storytelling isn’t just something you have to master to write great fiction. It comes in handy for a lot of different things, including your initial public offering roadshow, where you try to convince people to invest in or partner with your company.

In an IPO roadshow presentation, you will typically have 30 minutes for the pitch and 30 minutes for being peppered with questions, writes Elizabeth MacBride for Forbes. To maximize the strength of your pitch, you should be framing it as a narrative because presentations are boring, but stories are fun. So, add a little story to your presentation and you’ve got something that will not only keep people awake, it may even convince them to throw some cash your way.

Now, the whole “have a narrative” thing is nothing new. In fact, you’ve probably heard it hundreds of times by now. But, just having a narrative isn’t enough. You also have to use it effectively. And that’s where learning from others’ mistakes comes into play.

To figure out the top mistakes companies make with their IPO roadshow pitches, MacBride spoke with Brad Kinnish, director of investment banking at Deutsche Bank, Kristian Andersen, founder of consultancy firm Studio Science, and Nathan Sinsabaugh, the design director at Indianapolis-based design firm Rally.

“It’s become theater,” MacBride quotes Sinsabaugh as saying. “Brand messaging, storytelling and design used to not be a consideration a decade ago.”

As MacBride points out, more services and products are being commoditized, which means brand, culture and story are some of the few differentiators left between companies.

To effectively get their message across, companies often have to (and should) decrease their amount of slides from north of 80 to south of 35. To do that, a company needs to stick to highlighting five key themes that effectively tell the firm’s story. This includes the difficult theme of what makes your company different.

Companies who are looking to go public can help their IPO pitches by avoiding these seven common mistakes:

  1. Comparing your company to a different one

Comparing your company to an already successful company in another industry (à la “We’re the Airbnb of [insert industry here]”) is only helpful to you in casual conversation, MacBride says. However, if you’re relying on those types of comparisons during a pitch, Sinsabaugh says, you’re going to have problems.

Plus, MacBride adds, you open yourself up to the ol’ “I know Airbnb and you’re no Airbnb.” Not what you want.

  1. Concentrating too much on the past

While listing some accomplishments is helpful, relying too heavily on past accomplishments isn’t good. When you’re pitching your company, you are, in part, pitching its ability to be strategic and forward thinking. Looking back is, of course, the exact opposite of this.

However, you also cannot give the impression that you’re willing to immediately drop your company identity if the market goes a bit sour.

Sometimes a shift may be needed and you may want to start your public company life as something a bit different, but you will still need to clearly convey the reasons for that shift.

  1. Underestimating how much your attendees know

Thinking that you’re talking to people who have absolutely no knowledge about your company is what MacBride calls an absolute killer.

Investors are out there doing their homework on your company.

“They are experts at discerning truth from fiction,” Kinnish says. “If they find a chink in the armor they will be persistent in exploring that.”

  1. Forgetting about the culture

Company culture is important and needs to be addressed in at least one slide. This lets you talk about your employees (the people who actually make up your company) and to let investors know that you’re building the company for the long term.

  1. Getting defensive

If investors bring up a touchy subject for the company, immediately going on the defensive can spell doom for a pitch. You don’t want to skip over it, either, though.

“Enable it for a period of time,” Kinnish suggests, “and then say, ‘we’re happy to chat about this more. If there’s time remaining we can come back to it.’”

If you allow the questioning about a touchy subject to go on for too long, it may spiral out of control rather quickly.

  1. Leaving out the personality

The CEO gets to be the star of the show for a presentation and investors want to see who the CEO really is. It helps if the CEO is charismatic and high-impact, but regardless of the type of person the CEO is, they’ll need to work that into the presentation for authenticity. That’s not to say the CEO should go out of their way to be someone they’re not. But, the more they can let their personality shine through, the more authentic the pitch will be.

  1. Making the presentation too complex

US Securities and Exchange rules do not allow for investors to get a copy of the presentation, so you can’t make your charts and graphs too complex. They need to be focused, simple and convey one thing that the audience can grasp easily (namely; growth).

Also, colors matter, so keep that in mind. While bright colors are good, bright red has negative connotations (think; panic button or alarm) so you’ll want to stay away from that one.

If you have a strong narrative and you stick to keeping things simple and authentic, an IPO roadshow will likely have success. MacBride says they rarely fail completely, which she describes as having investors say they’ll buy the stock at much less than what the company believes it’s worth. “Doing a good job,” she says, “is the difference between pricing in your range and pricing above it.”

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