Reaching the right investors is crucial to expanding your shareholder base and raising your corporate profile. By developing an effective investor-targeting strategy, you can hone in on the institutional investors who are more likely to commit to companies like yours.
Finding those investors begins with a focused and thoughtful approach. Here are a few steps to help you identify a strong circle of promising, high-priority investor targets.
Understand Investor Style and Metrics
You’ll need to take a close look to find investors who will be drawn to your company’s profile. Institutional investors are often required to analyze a universe of stocks that fit within the parameters of their fund’s investment mandate. This may require a potential investment in a company to fall within a certain size (i.e., market capitalization), sector, stage of development (e.g., clinical vs. commercial), geography, or fit other fundamental or technical criteria (e.g., growth, momentum, or value).
Investors may further narrow the companies they’re interested in by limiting their investment to companies represented within certain indices (e.g., NASDAQ Biotech Index, Russell 2000, etc.) or other fund-specific metrics and characteristics. While researching investors, therefore, it’s important that you understand these parameters so you reach out to those whose interests align with your company.
Some investors’ investment criteria, for example, may inhibit them from buying pre-revenue companies, or companies yet to establish proof of concept — often in the form of a successful Phase 2 clinical trial.
As an analyst, I once pitched a clinical-stage pharmaceutical company to a portfolio manager whose growth fund seemed like an excellent match. Moments later, however, the investor told me he liked the idea but could invest only in stocks with earnings and positive cash flow. A focused targeting strategy can help you avoid pursuing investors whose investment style and discipline automatically exclude your company.
(At the same time, remember that major fund complexes contain layers and layers of people; if one fund manager says no, there may be multiple other portfolio managers and analysts who have funds with investment mandates who may be interested.)
Analyze Investor Ownership
Looking for investors who have invested in or funded similar companies can be another important step in your targeting strategy. This can be tricky in the healthcare sector, where you may use a number of approaches to define your peer group. If you run a biotech company, for example, you might concentrate on close peers by looking at those with the same therapy target or mechanism of action, or by considering those whose products will rely on the same kind of payer.
Cross-referencing shareholders from such hyper-specific peer groups should provide a relevant list of investors who already know and support the industry, allowing you to use your meeting time more efficiently and effectively.
You might build on this list by tracking quarterly money flow data over time to chart investors’ ownership trends and identify those who are committing funds to your space. Looking at the percentage of a portfolio invested in healthcare and how it has changed over the course of the last few quarters might also help you further identify prospective investors.
Diversify Your Conferences
Conference attendance, a key activity for any company seeking to attract market interest, presents a particularly efficient opportunity to meet between 10 and 20 investors in one place over a day or two. Since conferences allow you to strengthen existing analyst and banking relationships and create new ones, we recommend that our clients participate regularly in six to 12 annually.
However, make sure your conference strategy is well planned. Attending a specific bank’s annual healthcare conference is a great start, but look for other opportunities as well. Increasingly, banks are hosting thematic conferences focused on certain industry areas (e.g., gene therapy or immune-oncology) that provide a wonderful opportunity for you to show off your company to a group of investors who have a specific interest in your industry and what you do.
On the other side of the spectrum, if the profile of your company fits, we recommend attending some type of non-healthcare-specific conference. You could, for example, attend a growth conference. These types of conferences often attract generalist investors and portfolio managers. While this type of investor may not be as well-versed in science as some of the healthcare specialists, they have a very deep appreciation of the high growth nature of the healthcare business model and its importance to their portfolios’ performance. Try to target a few non-healthcare conferences a year to give yourself the opportunity to meet new and different investors seeking new, interesting stories like yours.
You don’t always have to book flights or hit the road to meet suitable investors. While conferences and road shows may have their place in your investor targeting strategy, you can also gain valuable face-to-face time with investors by inviting them to an event at your offices.
For example, take advantage of opportunities to host investors onsite, organize an onsite investor day, or take advantage of bank-sponsored bus tours that shuttle investors to a series of brief meetings — an hour or two each — with companies.
Time is always in short supply. Making the most of it with a highly refined investor targeting strategy is a must for all companies. Westwicke’s expert Wall Street professionals, equipped with proprietary healthcare databases and a 360-degree view of the market landscape, can help you find these investor gems. If you’re looking for guidance in developing a successful investor-targeting strategy, please get in touch.