From seed to tree: finance function and investor delight
Organisations and businesses need to understand that to grow and grow exponentially, they need to have a symbiotic relationship with their investors.
This piece is not about start-ups and young entrepreneurs.
“It’s about the investors who are wooed by businesses and pump money into the Indian business ecosystem. It is about ‘Investor Delight’ which is not equivalent to appeasement. It’s about making them quote your company as one of the positive examples in their portfolio which can only have a positive spin off for all concerned.”
India is the third most preferred economy by venture capitalists and private equities. What businesses need to understand is that Venture Capitalists and Private Equity investors are seeing potential in India, yet, they are looking at more mature and sound businesses/ ideas. After the head over heels rush a couple of years ago, investors are being cautious. They are beginning to understand that the growth spurt of start-ups has slowed down and businesses are beginning to settle down and find their niches.
These developments need to be communicated to investors regularly by CFOss and founders so they are well informed.
In the world of super communication where news flies and bad news travels 10 times faster, it is not ideal that the CFO/CEO/founders keep the investors informed only in set frequency. A combination of cadence based, event based and even informal means of communication increases the bond between businesses and investors. This helps to increase visibility and build a sense of trust that is an essential component in any relationship.
Many CFOs we meet today have understood this secret and spend a considerable part of their time in communicating with investors and analysts. The CFO needs to communicate on an ongoing basis and provide an assurance in the direction and pace of growth of the business. It is important for the CFO to be seen as an ‘independent’ yet dependable person, with the ability to provide transparency as well as insights on all aspects of the business.
Any kind of misinterpretation can have significant implications on the company concerned. Larger organizations build investor relations teams who work closely with the CFO and who feed information or analysis relating to the company or the industry which could be of importance to analysts who track the company's shares closely. Regular engagement with the market/investors and with the analysts is crucial in building investor confidence.
A mature business is one which is a living morphing entity that has changing needs. Entrepreneurs and CFOs need to understand that investors don’t put money into businesses just for returns without a fiduciary responsibility and hence need to leverage them to have meaningful conversations and request an introduction to other companies in their portfolio. CFOs can compare, analyze and adopt best practices. Also, they could help in client referrals and help build a platform for the investee firm to build a presence in the relevant industry forum. Organizations and businesses need to understand that to grow and grow exponentially, they need to have a symbiotic relationship with their investors.
Then… the magic happens!