On Wednesday January 18th, Canada’s largest annual tech gathering will take place in Toronto, the 2017 Cantech Investment Conference, hosted by Cambridge House International. Companies, investors, and assorted other professionals will congregate to listen and learn about Canada’s hottest tech stories as we move into 2017.
One of the busiest individuals at the Conference will be Babak Pedram, President of Virtus Advisory Group, an investor relations firm with particular expertise in the tech sector. Representing some of Canada’s most-dynamic tech companies, he has his finger on the pulse of Canadian technology. Stockhouse recently had the opportunity to talk to one of Canada’s leading IR professionals in the tech space.
Thanks for taking the time to chat with us today Babak. I understand Virtus does investor relations for a number of the companies that are presenting at the Cantech Investment Conference this year. What does that entail?
BP: Thanks for having me. Yes, we do IR for a number of the companies presenting at Cantech. Our basic function is to act as an intermediary between these outstanding organizations and the capital markets. As a public company, managing the capital markets can be a full time job in its own right and when you’re trying to run a successful organization it can become very distracting. Our job is to help manage this process – from growing the company’s investor base to constant communication and support of their shareholders. Basically ensuring clear and open lines of communication between the companies and their investors.
What advice do you give Technology companies that want to attract new investors? What are some common mistakes that you see some early stage public companies make?
BP: Attracting investors for early stage tech companies can be challenging, but it is certainly doable. I always look at it as a three stage process: getting investors in the room, getting them to stay, and getting them to write a cheque. We find investors want to see three things: a clear and concise business plan, a growth strategy and credibility.
On the first point, a sound business strategy and plan is fundamental. Investors want to see that you have fully thought through all aspects of the business. This includes how you plan to grow the business from such an early stage: revenue growth, customer acquisition, scalability etc. It’s one thing to have an idea, its another to have a thorough and thought-out business plan. But this will only get you a meeting.
To have a shot at someone writing a cheque, you need to build some credibility and be able to show that you not only have a great business plan, but more importantly you have been successful at executing on it. Something tangible you can point to and say “Hey, this is what we’ve done so far, this is how our strategy has changed, and this is what we’ve learnt and here is a couple of quarters of performance to show that we’re on the right track.”. That last point is critical as well: when talking to investors, it’s ok to admit the mistakes and lessons you’ve learned so far. It builds some character and credibility with investors. Nobody thinks that you’re not going to make any mistakes along the way, and by sharing your experiences so far you somewhat de-risk the company.
One of the biggest mistakes that technology companies make, regardless of whether they are a start-up or not, is not working closely with investors and other stakeholders in the capital markets. Working with the capital markets (whether it be raising money, doing road shows, etc.) is not an event but rather a continuous process. It is quintessential that management views their shareholders as integral to their business – constantly providing them updates, supporting them, and taking full advantage of the resources that can be available.
On that note, what makes for an effective investor relations strategy?
BP: It sounds simple, but the real answer is communication. As a CEO, it is critical that you are constantly engaging all facets of the investment community: from retail to institutional and even service providers. As I said before, investor relations is not an event but rather a process, and as a public company, you are going to need the support of the capital markets, but as a CEO you also have to be willing to support the capital markets and its players. So managing the relationships and expectations becomes fundamental to the company’s success.
What trends/sub sectors would you personally suggest that investors pay attention to in 2017? Why?
BP: I’d say to pay close attention to Cybersecurity and Machine Learning. I expect the former to be absolutely huge in the coming years. It seems like every time you turn on the TV or open Bloomberg there is news about someone getting hacked. And not just small companies either – this is happening to massive organizations and governments.
Machine learning / deep learning and IoT is another area I expect to see a lot of capital flow in the coming years. As we move more towards a connected society, I think the devices we use on a day to day basis are going to become more connected as well. We’ve already seen the start of it and I think we’ve hardly scratched the surface. I expect investors to be really focused on these two areas in the coming years! We’ve already seen machine learning become popular in the advertising space with programmatic. These algorithms are actually learning what works and what doesn’t and it is making advertisers smarter. I strongly believe that machine learning and deep learning is going to impact our lives in many different ways in the future.