Investor Interest in Meeting Private Companies Continues to Grow

By Lee Stettner and Ashu Vats | article

Over the past several years, investors have increasingly expressed a strong desire to meet with and get to know management teams and their business prior to an initial public offering (IPO).  Making a personal connection with founders and company leaders, better understanding the sector, business model and key points of differentiation in advance of an S-1 filing contributes significantly to the eventual decision to invest — or not invest — in an IPO.  This trend initially led to the widespread implementation of a formal “testing the waters” (TTW) meeting process where private companies conduct mini roadshows with investors.

As we near the midpoint of 2023, it is clear that investors continue to take the process a step further, expressing interest in investor meetings with management teams even further in advance of a potential IPO so they can begin tracking the progress of the company.  Of particular note, the demand for meeting management teams remains high even in a slower IPO market and is one of the most common pieces of feedback ICR Capital hears from the buyside.  Therefore, companies contemplating an IPO or raising another private round should consider how to begin developing relationships with institutional investors well in advance of a formal process.

Typically, many initial introductions are through 1x1s at conferences or a pre-IPO non deal roadshow (NDR). Investors find value in developing early relationships with management teams and often look to meet with them up to 3-4 times before the testing the waters process. These meetings are a productive way for them to meet with many companies and the same holds true for management teams.  While these meetings can be seen as a “dress rehearsal” for an IPO roadshow, non deal roadshow meetings are critical in creating a strong first impressions by articulating a compelling story that will attract investor attention and support.

Based on our extensive experience, we have compiled a list of some of the most common questions investors are asking. Being prepared for these (or similar questions) ahead of your investor meetings can help you make a strong first impression. Keeping responses concise and direct is a good way to frame your answers. If there is information you are not comfortable sharing in response to questions, it’s fine to indicate that, and to the extent possible, provide perspective that addresses the topic in some fashion.

Sample Investor Questions:

1. What problem are you solving for? What is your company’s mission?
2. What differentiates your product or service and how were you able to achieve this differentiation?
3. Can you explain your market opportunity and size? Has it changed given the current economic environment?
4. What are your growth drivers?
5. Can you discuss your customer profile – size, type of business, region, etc.?
6. Why do you win? Why do you lose?
7. Can you discuss your capital runway?
8. How are you balancing sustainable growth and achieving near-term profitability (if not already profitable)?
9. How has inflation and the current rate environment impacted business? Any issues with customer retention?
10. Have you had to make headcount/personnel changes for cost management purposes?
11. How are you thinking about the long-term in terms of going public or alternative means of liquidity?

If you are interested in getting more involved in the private company conference circuit ahead of an IPO, performing a non deal roadshow, or conducting a private capital raise, ICR Capital has the expertise to guide you. Connect with the ICR Capital team to discuss your pre-IPO investor engagement strategy.