You’re raising capital, you’ve been working with a professional advisory firm, you’ve put together an attractive set of figures, and you’ve chosen where the matter will be distributed. While it may seem that most of the hard work is out of the way, in this fourth article on capital raising corporate advisor Dr Mark Rainbird explains how the way you communicate can make or break an offer — regardless of how good it is.
Do you find it concerning when you receive an e-mail from a client or colleague who can’t spell, construct sentences or articulate things in a professional manner? Perhaps the e-mails themselves are always late or sporadic?
The fact is that communication plays an immensely important role in the day-to-day business operations and the ability to express things clearly and without ambiguity is vital to ensure that people carry out their jobs effectively.
Nowhere is this more applicable than in the act of raising capital. The use of language in these contexts needs to be subtle, considered and convincing—perhaps to a greater degree than in most other business interactions.
As discussed in my previous article, there are certain things that—by law—can and can’t be said while raising capital. This is, of course, depending on the level of disclosure required by the capital raising method you are utilising. However, there are a few rules that I feel are universal when acquiring shareholders and maintaining a beneficial ongoing relationship with them.
This is an incredibly easy step, but one that’s often overlooked. One of the clearest indicators of a company’s professionalism is their capacity to ensure that all written materials are free of grammatical and spelling errors.
Make sure that all investor materials are analysed a number of times before they are sent out. While some people will overlook poorly constructed sentences or nonsensical apostrophe usage, there are many that will see it as a sign of laziness or carelessness. Not exactly an image that’s appropriate when trying to persuade investors in the reliability of your company.
Be objective with adjectives
Treat describing words with the utmost of care. Words like “amazing” and “incredible” are best left out when describing your business.
A strong sense of objectivity is necessary when creating compliance documents or any other collateral to do with your offer. If objective language doesn’t cut it, then perhaps it’s best you re-evaluate whether or not your business should be looking for shareholders.
It is important to note that you cannot mislead or “entice” investors — the language used should reflect the facts.
Don’t be overzealous in your description of the offer’s potential
Many board members and business owners—experienced and inexperienced alike—make the mistake of telling prospective shareholders that the business is going to make all involved millions of dollars. This is not necessary.
While it can be easy to get caught up in the excitement of your company’s progress, a realistic set of financial forecasts, appropriate future plans and a fair share offering should be your main tools required in order to win over backers.
Investors, and particularly those of the sophisticated variety, are likely to be turned off by overblown visions of grandeur.
Ensure there is a consistency to your messages
Before you offer equity in your business it is necessary that you have defined a key set of messages and commitments that can be communicated to all interested parties.
By ensuring a sense of congruency between your communications, you are minimising the chances of shareholders becoming disgruntled should they start speaking to each other—particularly in the case of your company encountering financial issues.
These key messages should be consistent throughout the offer document, capital raising process and in newsletters and other similar collateral. One of the main goals in communicating with your stakeholders is to build trust. By building trust you are more likely to find investors willing to invest in your venture.
Due to the highly regulated nature of equity offerings, one ill-thought-out piece of communication could result in significant penalties (e.g. for a small scale offer you cannot advertise to the public).
It is therefore of the utmost importance that board members agree on what can and can’t be said by all parties during the period of capital raising.
Maintain quality, meaningful communications after the raise
All businesses with shareholders should have a number of processes in place that help to keep investors up-to-speed with the company’s movements.
This should be a mix of investor information meetings, regular electronic or physical mailouts, as well as shareholder updates that fall under the regulatory requirements of the capital raising method you’ve utilised.
Remember that a successful capital raise is about much more than just obtaining investors: you need to do your best to keep them satisfied with their investment. As such, all communications need to be honest, timely and diplomatic—certainly in times of growth, but more particularly in times of crisis.
The high degree of regulation around raising capital calls for communication to be carried out in a careful manner and there are clear guidelines about how to do this appropriately. However, everything that is said, written and sent needs to be well-crafted if you’re going to have any chance of convincing people to put their hard-earned dollars into your company.
It’s not about deep semantic understanding: it’s about common sense.
Dr Rainbird is the MD of Bluemount Capital and has over 15 years capital and M&A experience, having held senior executive positions in private, private equity, ASX and Government organisations.