If your business is looking to grow and attract new investment, a key step to consider is investor targeting. Indeed, understanding what kind of investors your business might need is a move that is as underestimated as it is important in assessing how to attract (and retain) the right investors.
The importance of investor targeting can be considered on several levels. Firstly, targeting allows you to identify new sources of capital by engaging investors who are ideally suited to your business. To attract new long-term investors, it is necessary to identify and refine the profile of potential shareholders who are most likely to stay with the issuer in the long run. Once the investors who best align with the business have been identified, a strategy can be developed to convince them to invest and involve them in the shareholder engagement process.
How investor analysis is done
Investor targeting involves identifying the types of investors who are missing from the current portfolio and analysing those who might be interested in the offering. This helps to plan which investors to look for when it comes to attracting new financial resources. In addition, understanding the reasons for changes in their shareholder base allows company leaders to develop a strategy to engage and retain investors based on the motivations that emerge from the research.
To implement investor targeting, a few steps must be followed. A relatively simple step for small and medium-sized companies is to analyse the current shareholder base to understand its composition. Next, once you have identified the directions in which you want to move, it is important to create a plan with goals to be achieved, profiling potential investors and figuring out the best ways to reach them. If possible, it may also be interesting to analyse (and potentially even approach) competitors' shareholders as they certainly have knowledge of the industry and your business.
Customising your research is another important step, for example by identifying fund profiles that align with your company's key metrics and taking advantage of any relevant figures within your organisation. Engaging portfolio managers, emphasising topics of interest to them related to the company, can be an effective strategy to attract the attention of generalist investors.
The advantages of considering 'alternative' channels
A differentiating factor could be to look beyond the most commonly used classical channels and instead include alternative finance instruments such as crowdfunding or minibonds in the search. Indeed, companies often struggle to make their messages known outside their own network. Consequently, a well-organised equity crowdfunding campaign can become an effective and innovative marketing operation to engage existing contacts, find new supporters and maintain relationships over time.
With due differences, targeting investors can also be a very useful process in the case of issuing mini-bonds. The difference is that in the case of mini-bonds, investors do not become part of the share capital but become creditors to whom the company will repay the debt incurred.
If you would like more information on how to attract the right investors for your company, contact us now for a no-obligation call.