Investor targeting can be a delicate art and precise science. Casting your net too wide can leave you with an unfocused pool of contacts; on the other hand, too many filters can be restrictive and close you out of conversations with the right people.
Using technology to hone your targeting approach can help uncover investors that prior relationships and sell-side support alone cannot. Using the right tools can help you funnel investors into your investor relationship management solution with as broad or narrow a scope as you need.
Let’s examine how technology can help you hone in from a broad top-of-funnel approach to a narrower bottom-of-funnel scope of investors.
Using technology to understand your peer holders The easiest investors to find will be those that own or have previously held positions in your peers. These investors will likely care about your business and will be easy to find by examining your peers’ current and historical shareholder bases. For example, if an investor holds your peers but not your stock, you know it’s likely to be interested in your business and will make a strong initial target. Peer analysis is often a good starting point for companies to build their initial investor targeting strategy.
Maintaining a database of your peers and using technology to help you track their investors’ movements can help you identify investors that would be interested in your stock. You can zero in on potential investors by targeting those that have recently increased their position in your peers.
Think outside the (geographic) box After nailing down your peer database, you can start to go deeper and begin narrowing down your list according to investor location (country of residence) or geographic investor ownership (countries or regions where they already have investments).
Filtering by investor location is helpful if you plan to do any on-the-ground investor outreach activities, such as conferences or roadshows, as it allows you to focus on a geographic area. Filtering by geographic ownership narrows down potentially interested investors.
For example, if your business operates in the eastern US, you may be able to find investors with a specific interest in that region.
It’s important to note that not all investors are in major financial hubs. Some industries have secondary and tertiary investment hubs that are not always on Wall Street’s radar. Increasingly sophisticated investor targeting software can show you investor hotspots for your sector and direct you to increase your presence in new regions.
Advanced filtering technology to narrow your search You can further narrow your investor targeting database by adding additional filters. As well as geography, the right technology can help you search for investors based on predetermined criteria such as market capitalization, sector/sub-sector or investment style.
Many investors might invest in your peers or your region but it wouldn’t be feasible to speak to all of them. Even if you can reach out to hundreds of people, it would still take days to process which ones are or are not a good fit based on those criteria alone.
If you know what type of investment style aligns best with your business strategy, however, you can narrow your database to only include investors with a conducive investment style. Within seconds you can narrow your investor targeting list down from hundreds of prospective targets to just a few highly qualified investors.
Using technology to filter out ill-suited investors, you can refine your strategy to spend less time on discovery and more time speaking with suitable investors. You will then have more time to personalize your outreach, refine your pitch and build a strong reputation.
Differentiated data: Finding non-reporting investors Generally, investors that do not report holdings are family offices, smaller hedge funds, investment managers and retail investment advisers.
Targeting investors that don’t report holdings may seem counterintuitive, but these investors are less likely to be solicited by others and have the potential to be long-term partner shareholders. These types of investors can be ideal for businesses looking to lower their cost of capital and diversify their shareholder base.
While we have seen incredible growth in the assets under management held by non-reporting investors in the last few years, sell-side analysts can sometimes overlook these investors as there are simply too many to cover efficiently.
Only some data providers have information about unreported investors, making it critical to ensure your investor targeting software includes these groups.
Final thoughts Having the right IR software allows you to be flexible with your approach so your targeting strategy can be as effective as possible. Modern IROs should stay creative in their targeting approach, and having the right investor targeting technology in place can help you be more strategic in your outreach.