6th AVCA 2006 Annual Venture Capital

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  • 6th AVCA 2006 Annual Venture Capital

    1. 1. 6 th AVCA 2006 Annual Venture Capital & Private Equity Conference The Strategic Value of Investor Relations To GP Success Tuesday, 7 November 2006 Dakar, Senegal
    2. 2. Contents <ul><li>IR in a PE context </li></ul><ul><li>Core strands of IR </li></ul><ul><li>Governance </li></ul><ul><li>Operations </li></ul><ul><li>Communication </li></ul><ul><li>Measuring the impact of IR </li></ul><ul><li>Conclusion </li></ul>
    3. 3. IR in a PE context <ul><li>‘ THE STRATEGIC MANAGEMENT OF THE RELATIONSHIP BETWEEN THE GP AND ITS LPs; POTENTIAL LPs AND OTHER INFLUENTIAL OPINION FORMERS IN THE INDUSTRY’. </li></ul>
    4. 4. Core strands of IR <ul><li>Governance </li></ul><ul><li>Operations </li></ul><ul><li>Communication </li></ul>
    5. 5. <ul><li>GOVERNANCE </li></ul>
    6. 6. Governance – Capital alone is not enough! <ul><li>Reputational impact of investee governance scandal </li></ul><ul><li>LP avoidance of GP due to poor investee governance </li></ul><ul><li>Investment protection </li></ul><ul><li>Transparency and disclosure </li></ul><ul><li>Effective Board </li></ul><ul><li>Optimal exit strategies via legal contracts, vigilance, engagement </li></ul><ul><li>Element of good governance in the exit premium </li></ul>
    7. 7. Governance – AVCA member best practice <ul><li>Sector acceptability for investment </li></ul><ul><li>Ethical investment </li></ul><ul><li>Reputation of investment partners </li></ul><ul><li>Integrity, legal and best practice observance by investee </li></ul><ul><li>Financial risk controls practiced by investee </li></ul><ul><li>Match between governance policies of investee and GP </li></ul><ul><li>Identification of an acceptable buyer upon exit </li></ul>
    8. 8. <ul><li>OPERATIONS </li></ul>
    9. 9. Operations – Dedicated IR resource <ul><li>Driven by LPs now being viewed more like customers </li></ul><ul><li>IR has moved from the back office to the core in 10 years </li></ul><ul><li>Hiring of IR professionals at Partner level </li></ul><ul><li>New PE firms employ IR professionals from inception </li></ul><ul><li>Optimum asset utilisation through reduced role dilution </li></ul><ul><li>Keep LPs updated over life of the fund </li></ul><ul><li>Form new LP relationships to counter LP turnover </li></ul>
    10. 10. Operations – IR support during fundraising <ul><li>Pre-follow-on vehicle LP perception studies </li></ul><ul><ul><li>firm </li></ul></ul><ul><ul><li>partners </li></ul></ul><ul><ul><li>performance </li></ul></ul><ul><ul><li>prospects </li></ul></ul><ul><li>Gauge realistic target fund size </li></ul><ul><li>Managing of oversubscribed fund </li></ul><ul><li>Maintain LP relationships </li></ul>
    11. 11. Operations – IR due diligence support <ul><li>LP view on level of PE market maturity: </li></ul><ul><ul><li>governance </li></ul></ul><ul><ul><li>stability </li></ul></ul><ul><ul><li>transparency </li></ul></ul><ul><ul><li>stable management teams </li></ul></ul><ul><ul><li>depth of quality management teams </li></ul></ul><ul><ul><li>proven repeatable track records </li></ul></ul><ul><ul><li>locally-based GP teams </li></ul></ul>
    12. 12. Operations – IR due diligence support <ul><li>LP view on GP: </li></ul><ul><ul><li>attribution analysis </li></ul></ul><ul><ul><li>decision making process </li></ul></ul><ul><ul><li>deal origination </li></ul></ul><ul><ul><li>cashflow </li></ul></ul><ul><ul><li>portfolio NAV </li></ul></ul><ul><ul><li>investee NAVs </li></ul></ul><ul><ul><li>portfolio company site visits </li></ul></ul><ul><ul><li>depth of culture/strategy </li></ul></ul><ul><ul><li>shared vision </li></ul></ul>
    13. 13. Operations – IR due diligence support <ul><li>GP view on LP: </li></ul><ul><ul><li>objectives of investment programme </li></ul></ul><ul><ul><li>quality of PE investments </li></ul></ul><ul><ul><li>financial robustness </li></ul></ul><ul><ul><li>potential conflicts of interest </li></ul></ul>
    14. 14. Operations – IR screening/due diligence support <ul><li>GP view on investee: </li></ul><ul><ul><li>quality of entrepreneurs </li></ul></ul><ul><ul><li>level of market attraction </li></ul></ul><ul><ul><li>market leading potential </li></ul></ul><ul><ul><li>strength of business plan </li></ul></ul><ul><ul><li>competitive advantage sustainability </li></ul></ul><ul><ul><li>bankability of exit route </li></ul></ul><ul><ul><li>convincing valuation </li></ul></ul>
    15. 15. <ul><li>COMMUNICATION </li></ul>
    16. 16. Communication - Perception challenges <ul><li>‘ Information is a huge problem’ </li></ul><ul><li>‘ There is a perception that PE in Africa has not worked’ </li></ul><ul><li>‘ Prospective investors believe that PE in Africa does not work’ </li></ul><ul><li>‘ One of the biggest problems that PE faces is exits’ </li></ul><ul><li>‘ We need to promote and stimulate the domestic capital market’ </li></ul><ul><li>‘ Demonstrating competitive returns will attract investors’ </li></ul>
    17. 17. Communication - Perception challenges <ul><li>‘ The tricky bit is to show capital can move in and out’ </li></ul><ul><li>‘ There’s a need to show that value can be protected’ </li></ul><ul><li>‘ A number of VCs are looking for investments’ </li></ul><ul><li>‘ Entrepreneurs do not know where to access capital’ </li></ul><ul><li>‘ Lack of information on how to access funds is a big impediment’ </li></ul><ul><li>‘ Trust is an issue of concern’ </li></ul>
    18. 18. Communication – The basics for PE <ul><li>Any communication must be: </li></ul><ul><ul><li>relevant </li></ul></ul><ul><ul><li>easily understandable </li></ul></ul><ul><ul><li>trusted </li></ul></ul><ul><ul><li>comparable </li></ul></ul>
    19. 19. Communication – Privacy is not an option! <ul><li>PE by definition prefers privacy </li></ul><ul><li>Privacy in PE is increasingly unfeasible </li></ul><ul><li>Media attention is transfixed </li></ul><ul><li>PE is a relationship business </li></ul><ul><li>Communication influences the quality of relationships </li></ul><ul><li>By definition therefore communication is critical to success </li></ul>
    20. 20. Communication – When? <ul><li>Successful raising of new fund </li></ul><ul><li>Making of a significant investment </li></ul><ul><li>Exiting an investment </li></ul><ul><li>In a crisis </li></ul><ul><li>Maintain the discipline of ongoing media relations </li></ul>
    21. 21. Communication – Key messages <ul><li>Reputation, Reputation, Reputation </li></ul><ul><ul><li>good governance </li></ul></ul><ul><ul><li>sound business principles </li></ul></ul><ul><ul><li>quality LPs </li></ul></ul><ul><ul><li>quality portfolio </li></ul></ul><ul><ul><li>experience and ingenuity </li></ul></ul><ul><ul><li>thought leaders </li></ul></ul><ul><ul><li>depth of team quality </li></ul></ul><ul><ul><li>team stability </li></ul></ul><ul><li>Perception is everything </li></ul>
    22. 22. Communication - Typical opinion formers <ul><li>LPs </li></ul><ul><li>GP peer group </li></ul><ul><li>SMEs </li></ul><ul><li>Journalists </li></ul><ul><li>Potential employees </li></ul><ul><li>Policy makers </li></ul><ul><li>Investment banks </li></ul>
    23. 23. Communication - Typical platforms <ul><li>AGM </li></ul><ul><li>Website </li></ul><ul><li>Media </li></ul><ul><li>Conference calls/one-on-ones </li></ul><ul><li>Annual reports </li></ul><ul><li>Newsletters </li></ul><ul><li>Case studies </li></ul>
    24. 24. Communication - AGM <ul><li>Definitive IR exercise for GPs </li></ul><ul><li>Significant line item in marketing budget </li></ul><ul><li>A chance to differentiate </li></ul><ul><li>Reflects the ‘health’ of the GP </li></ul><ul><li>Pre-AGM soliciting to get the balance right </li></ul>
    25. 25. Communication – AGM – Summary best practice <ul><li>Reaffirm LP reason for investing, and remaining invested </li></ul><ul><li>Present a unified message </li></ul><ul><li>Let LP get broad sense of GP team </li></ul><ul><li>Ensure LPs leave with your key messages clearly understood </li></ul><ul><li>Portfolio company CEO(s) presentations can add value </li></ul><ul><li>Be transparent about portfolio performance </li></ul>
    26. 26. Communication – Website – Summary best practice <ul><li>Should inspire visitors to act on the information provided </li></ul><ul><li>Keep it simple, from address, to navigation, to software </li></ul><ul><li>Keep it within the legal and regulatory framework </li></ul><ul><li>Regularly update visitors with latest website developments </li></ul><ul><li>Provide information in timely manner, and date-stamped </li></ul><ul><li>Be able to monitor usage </li></ul><ul><li>Review your peer’s websites to ensure competitiveness </li></ul>
    27. 27. Communication – AVCA member website review <ul><li>Make sure it works; is up to date and typo-free! </li></ul><ul><li>Appoint a dedicated communications executive </li></ul><ul><li>Team bios </li></ul><ul><li>Background on LPs </li></ul><ul><li>Resource balance for Investors and Investees </li></ul><ul><li>Press releases </li></ul><ul><li>News articles generated </li></ul><ul><li>Governance facts </li></ul><ul><li>Business principles </li></ul>
    28. 28. Communication – Media <ul><li>Today’s media is a 24/7 window on YOUR world </li></ul><ul><li>Local and global audience, watching, reading and listening </li></ul><ul><li>Fundraising and exiting will be keenly monitored </li></ul><ul><li>Crisis will be punctuated </li></ul><ul><li>Invest in media training </li></ul><ul><li>Make time for media relations </li></ul><ul><li>Invest in and maintain media relationships </li></ul><ul><li>Recognise that to work well, the benefits must be mutual </li></ul>
    29. 29. Communication - Media <ul><li>Be media-friendly </li></ul><ul><li>Be articulate </li></ul><ul><li>Realise the value of your ‘thought leaders’ </li></ul><ul><li>Guide journalists </li></ul><ul><li>Understand the rules of engagement </li></ul><ul><li>Respect journalist deadlines </li></ul>
    30. 30. Communication – AVCA member media review <ul><li>3 page Google and member website news search </li></ul><ul><ul><li>news articles covering 20 members </li></ul></ul><ul><ul><li>114 news articles </li></ul></ul><ul><ul><li>78 different publications </li></ul></ul><ul><ul><li>local and international publications </li></ul></ul><ul><ul><li>broadsheet, tabloid and trade press </li></ul></ul><ul><ul><li>print, radio, TV, wire and web exposure </li></ul></ul><ul><ul><li>themes – new fund/exits/investments/thought leadership/contextual/ </li></ul></ul><ul><ul><li>conferences/LP movement in GP funds/hires </li></ul></ul>
    31. 31. Communication – CRISIS! <ul><li>A crisis disrupts the normal flow of business </li></ul><ul><li>Stems from lack of understanding of your world </li></ul><ul><li>Hampers fundraising ability </li></ul><ul><li>Impedes future investment activity </li></ul><ul><li>Inflicts measurable losses in value </li></ul><ul><li>Time consuming activity </li></ul><ul><li>Impacts reputation </li></ul>
    32. 32. Communication – CRISIS! – A port in a storm <ul><li>Brand threat or brand opportunity; have a crisis plan: </li></ul><ul><ul><li>due diligence of situation </li></ul></ul><ul><ul><li>in house team/external counsel </li></ul></ul><ul><ul><li>trained credible spokespeople </li></ul></ul><ul><ul><li>SME involvement </li></ul></ul><ul><ul><li>3 rd party support </li></ul></ul><ul><ul><li>LPs first, then the public….. if you can </li></ul></ul><ul><ul><li>100% honesty </li></ul></ul><ul><ul><li>factual </li></ul></ul><ul><li>Less what happened; more how it’s handled </li></ul><ul><li>Critical to have friends in the media </li></ul>
    33. 33. <ul><li>MEASURING THE IMPACT OF IR </li></ul>
    34. 34. Measuring the impact of IR – At the fund level <ul><li>Raise funds at minimum cost </li></ul><ul><li>GP differentiation in competing for funds </li></ul><ul><ul><li>degree of acquisition of new investors </li></ul></ul><ul><ul><li>degree of recommitment of current investors </li></ul></ul><ul><li>Ease of exit </li></ul><ul><li>Tracking public perception towards the GP </li></ul><ul><li>Comparison of T&Cs with market benchmarks </li></ul><ul><li>PE increasingly competitive against other asset classes </li></ul>
    35. 35. Measuring the impact of IR – At the macro level <ul><li>Stimulates economic growth </li></ul><ul><li>Creates wealth </li></ul><ul><li>Generates employment </li></ul><ul><li>Nurtures skills transfer </li></ul><ul><li>Promotes productivity enhancement </li></ul><ul><li>Generates tax revenue </li></ul><ul><li>Alleviates poverty </li></ul><ul><li>Supports industrial diversification </li></ul>
    36. 36. <ul><li>CONCLUSION </li></ul>
    37. 37. Conclusion <ul><li>Behind all of this is a Communications Plan </li></ul><ul><li>The Plan must be underpinned by a rigorous preparatory phase </li></ul><ul><li>An ongoing sporadic approach does not yield a return </li></ul><ul><li>An ongoing systematic approach yields a return over time </li></ul><ul><li>GP patience for PE returns suggests an inclination to engage </li></ul>
    38. 38. <ul><li>THANK YOU </li></ul>
    39. 39. <ul><li>Kojo Adomakoh </li></ul><ul><ul><li>Business Development Manager </li></ul></ul><ul><ul><li>Tel: 0044 (0) 870 703 6248 </li></ul></ul><ul><ul><li>Fax: 0044 (0) 870 703 0301 </li></ul></ul><ul><ul><li>Mob: 0044 (0) 789 993 8741 </li></ul></ul>

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