6th AVCA 2006 Annual Venture Capital
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Transcript of 6th AVCA 2006 Annual Venture Capital
6th AVCA 2006 Annual Venture Capital & Private Equity Conference
The Strategic Value of Investor Relations To GP Success
Tuesday, 7 November 2006
Dakar, Senegal
Contents
IR in a PE context
Core strands of IR
Governance
Operations
Communication
Measuring the impact of IR
Conclusion
IR in a PE context
‘THE STRATEGIC MANAGEMENT OF THE RELATIONSHIP BETWEEN THE GP AND ITS LPs; POTENTIAL LPs AND OTHER INFLUENTIAL OPINION FORMERS IN THE INDUSTRY’.
Core strands of IR
Governance
Operations
Communication
GOVERNANCE
Governance – Capital alone is not enough!
Reputational impact of investee governance scandal
LP avoidance of GP due to poor investee governance
Investment protection
Transparency and disclosure
Effective Board
Optimal exit strategies via legal contracts, vigilance, engagement
Element of good governance in the exit premium
Governance – AVCA member best practice
Sector acceptability for investment
Ethical investment
Reputation of investment partners
Integrity, legal and best practice observance by investee
Financial risk controls practiced by investee
Match between governance policies of investee and GP
Identification of an acceptable buyer upon exit
OPERATIONS
Operations – Dedicated IR resource
Driven by LPs now being viewed more like customers
IR has moved from the back office to the core in 10 years
Hiring of IR professionals at Partner level
New PE firms employ IR professionals from inception
Optimum asset utilisation through reduced role dilution
Keep LPs updated over life of the fund
Form new LP relationships to counter LP turnover
Operations – IR support during fundraising
Pre-follow-on vehicle LP perception studies
› firm› partners› performance› prospects
Gauge realistic target fund size
Managing of oversubscribed fund
Maintain LP relationships
Operations – IR due diligence support
LP view on level of PE market maturity:
› governance› stability› transparency› stable management teams› depth of quality management teams› proven repeatable track records› locally-based GP teams
Operations – IR due diligence support
LP view on GP:
› attribution analysis› decision making process› deal origination› cashflow› portfolio NAV› investee NAVs› portfolio company site visits› depth of culture/strategy› shared vision
Operations – IR due diligence support
GP view on LP:
› objectives of investment programme› quality of PE investments› financial robustness› potential conflicts of interest
Operations – IR screening/due diligence support
GP view on investee:
› quality of entrepreneurs› level of market attraction› market leading potential› strength of business plan› competitive advantage sustainability› bankability of exit route› convincing valuation
COMMUNICATION
Communication - Perception challenges
‘Information is a huge problem’
‘There is a perception that PE in Africa has not worked’
‘Prospective investors believe that PE in Africa does not work’
‘One of the biggest problems that PE faces is exits’
‘We need to promote and stimulate the domestic capital market’
‘Demonstrating competitive returns will attract investors’
Communication - Perception challenges
‘The tricky bit is to show capital can move in and out’
‘There’s a need to show that value can be protected’
‘A number of VCs are looking for investments’
‘Entrepreneurs do not know where to access capital’
‘Lack of information on how to access funds is a big impediment’
‘Trust is an issue of concern’
Communication – The basics for PE
Any communication must be:
› relevant › easily understandable› trusted› comparable
Communication – Privacy is not an option!
PE by definition prefers privacy
Privacy in PE is increasingly unfeasible
Media attention is transfixed
PE is a relationship business
Communication influences the quality of relationships
By definition therefore communication is critical to success
Communication – When?
Successful raising of new fund
Making of a significant investment
Exiting an investment
In a crisis
Maintain the discipline of ongoing media relations
Communication – Key messages
Reputation, Reputation, Reputation› good governance› sound business principles › quality LPs› quality portfolio› experience and ingenuity› thought leaders› depth of team quality› team stability
Perception is everything
Communication - Typical opinion formers
LPs
GP peer group
SMEs
Journalists
Potential employees
Policy makers
Investment banks
Communication - Typical platforms
AGM
Website
Media
Conference calls/one-on-ones
Annual reports
Newsletters
Case studies
Communication - AGM
Definitive IR exercise for GPs
Significant line item in marketing budget
A chance to differentiate
Reflects the ‘health’ of the GP
Pre-AGM soliciting to get the balance right
Communication – AGM – Summary best practice
Reaffirm LP reason for investing, and remaining invested
Present a unified message
Let LP get broad sense of GP team
Ensure LPs leave with your key messages clearly understood
Portfolio company CEO(s) presentations can add value
Be transparent about portfolio performance
Communication – Website – Summary best practice
Should inspire visitors to act on the information provided
Keep it simple, from address, to navigation, to software
Keep it within the legal and regulatory framework
Regularly update visitors with latest website developments
Provide information in timely manner, and date-stamped
Be able to monitor usage
Review your peer’s websites to ensure competitiveness
Communication – AVCA member website review
Make sure it works; is up to date and typo-free! Appoint a dedicated communications executive Team bios Background on LPs Resource balance for Investors and Investees Press releases News articles generated Governance facts Business principles
Communication – Media
Today’s media is a 24/7 window on YOUR world
Local and global audience, watching, reading and listening
Fundraising and exiting will be keenly monitored
Crisis will be punctuated
Invest in media training
Make time for media relations
Invest in and maintain media relationships
Recognise that to work well, the benefits must be mutual
Communication - Media
Be media-friendly
Be articulate
Realise the value of your ‘thought leaders’
Guide journalists
Understand the rules of engagement
Respect journalist deadlines
Communication – AVCA member media review
3 page Google and member website news search
› news articles covering 20 members › 114 news articles › 78 different publications › local and international publications › broadsheet, tabloid and trade press› print, radio, TV, wire and web exposure› themes – new fund/exits/investments/thought
leadership/contextual/conferences/LP movement in GP funds/hires
Communication – CRISIS!
A crisis disrupts the normal flow of business
Stems from lack of understanding of your world
Hampers fundraising ability
Impedes future investment activity
Inflicts measurable losses in value
Time consuming activity
Impacts reputation
Communication – CRISIS! – A port in a storm
Brand threat or brand opportunity; have a crisis plan:
› due diligence of situation› in house team/external counsel› trained credible spokespeople› SME involvement› 3rd party support› LPs first, then the public…..if you can› 100% honesty› factual
Less what happened; more how it’s handled
Critical to have friends in the media
MEASURING THE IMPACT OF IR
Measuring the impact of IR – At the fund level
Raise funds at minimum cost GP differentiation in competing for funds› degree of acquisition of new investors› degree of recommitment of current investors
Ease of exit Tracking public perception towards the GP Comparison of T&Cs with market benchmarks PE increasingly competitive against other asset classes
Measuring the impact of IR – At the macro level
Stimulates economic growth
Creates wealth
Generates employment
Nurtures skills transfer
Promotes productivity enhancement
Generates tax revenue
Alleviates poverty
Supports industrial diversification
CONCLUSION
Conclusion
Behind all of this is a Communications Plan
The Plan must be underpinned by a rigorous preparatory phase
An ongoing sporadic approach does not yield a return
An ongoing systematic approach yields a return over time
GP patience for PE returns suggests an inclination to engage
THANK YOU
Kojo Adomakoh
Business Development ManagerTel: 0044 (0) 870 703 6248Fax: 0044 (0) 870 703 0301Mob: 0044 (0) 789 993 8741