As mentioned in the previous post, I recently had the opportunity to discuss the main challenges facing the financial function with Christian Fife. We mention some of the novel competencies any inspiring CFO should develop. But we also talked about investor relations.
Christian started out by mentioning that any start-up working on a novel project must secure funds to design, develop and manufacture its product or service. Clearly, no client will pay for a product that does not exist yet. So, founders look to investors to get the necessary capital to turn their idea into a tangible offering. This obviously means raising funds and doing so, founders get acquainted with investors.
Later on, as the offering hits the market, the founder will connect with its commercial client, that is, the one that pays for the service or product. Over time, one would hope that the funds coming from the commercial client will exceed the funds coming from investors.
However, even in publicly listed companies, such as Palantir, investors continue to add capital to the company despite the fact that the organization is losing money. Reaching the break-even point may take much longer than expected. It took Amazon 10 years, as an example.
Clearly, if one wants to secure a durable capital influx, one must never forget to entertain the best relationship with its investors. And that’s when and why investor relations managers are so critical.