The Early Prep IPO Readiness Guide
The Virtual IPO Roadshow: Retooling a Classic for the New Normal
Over the last few months, we’ve seen open houses, schooling, and even concerts take virtual root and bloom like daffodils. But the digital versions of old stalwarts aren’t relegated to our personal lives since companies, too, have had to make some mighty adjustments as well. And you don’t have to look further than the virtual IPO roadshow for proof of how organizations have adapted to these strange times.
But like online learning and digital open houses, there’s a certain knack to the virtual roadshow that isn’t necessarily intuitive or obvious, even for tech-savvy CFOs. That’s exactly why we’re going to roll up our sleeves and dive into the topic, discussing the basics of a roadshow, why it plays such a critical role in the IPO process, and a few best practices to ensure a virtual version is as efficient and effective as possible. So let’s dig right in because the NASDAQ beckons.
What Is an IPO Roadshow?
Whether in-person or virtual, your roadshow provides essential information to potential investors before your initial public offering. Conducted together with your underwriting firm, the roadshow is an opportunity to present critical information about your company, including:
- The background and history of your company
- Your executives
- Company pillars or missions
- Financial performance metrics
- Future goals, sales targets, budgets, growth projections
Think of your roadshow as a sales pitch to the IPO market and particular groups within the institutional investor community, where you’re aiming to put your best foot forward and generate some interest and excitement around your IPO. It also gives investors a chance to ask you questions and, more importantly, for you to shine like a diamond when answering them.
Traditionally, a roadshow involves going from city to city – hence, the term roadshow – and meeting anywhere from 1 to 8 investors at a time. The size of the IPO also determines the duration and scope of the roadshow, where a smaller IPO might involve ten cities in 12 days, but a larger one could involve 50 potential investors or more over a month or two.
The Virtual IPO Roadshow
Now, if you pause for a moment and think about what we just described, there’s actually very little about a classic, in-person IPO roadshow that doesn’t translate exceptionally well to a virtual environment. Granted, the venue obviously changes but, aside from that, you’re still trying to present yourself in a favorable light, fielding questions from investors, and conveying essential information about your leadership team, history, and goals.
Long story short, a well-designed and thoughtful slide deck goes an awfully long way in satisfying all of the major components of a traditional IPO roadshow. In fact, many companies have really embraced the virtual roadshow to great success during the COVID-19 pandemic, including Zentalis Pharmaceuticals and other biotech companies, Pexip, and Vroom, to name just a few. And because of these successes, some areas of the institutional investor community wonder if the roadshow will ever go back to its purely in-person roots, even after the coronavirus is thankfully behind us.
Advantages of a Virtual Roadshow
No matter your particular feelings about the idea, there are certain advantages to a virtual roadshow that a traditional model simply cannot compete with.
One of the objectives of an IPO roadshow is to cover as much ground as possible. However, there’s nothing efficient about scurrying around the streets of New York City to give the same presentation to different investment bankers.
With a virtual roadshow, you can sit in your office in Phoenix, Houston, Tulsa, or wherever you might be headquartered, not worry about masks and social distancing, and give the same presentation three or four times a day to I-banks spread out across the globe.
As we’ve witnessed in recent months, the unexpected and unforeseen can happen at any time, and when it does, the equity capital markets can seem like an extremely dramatic roller coaster ride. But if you’re just beginning a coast-to-coast tour set to last two or three months, the marketplace could look very different by the time you finish.
A virtual roadshow removes much of that exposure to changing stock market dynamics since you can present your company to more investors in a far shorter period of time. In other words, less time on the road means market volatility has less opportunity to kick your IPO in the shins. With so much changing on a seemingly day-to-day basis, what happened last year or even last month can seem like an entirely different world from today.
Hotels are expensive. Airfare is expensive. Eating at restaurants a couple of times a day, using rideshare apps or renting a car, and just everyday expenses – they all add up to a hefty tally when you’re on the road for long stretches at a time.
For a company on the verge of life as a public entity, all of those costs add up quickly. Naturally, a virtual roadshow keeps all of those expenses in your pocket, where you can put them to much better use.
If a potential investor requests additional information or has a follow-up question in a virtual roadshow, operating within a digital environment makes it much faster and easier to address those follow-ups. And better communication can only boost your efforts in the long-run.
Suppose you’re taking advantage of the digital environment and expanding your virtual roadshow to far-flung corners of the planet. Since you’re expending far less time, effort, and resources using a virtual model, you now have the flexibility to tailor your presentation to particular investor groups or geographies.
For instance, EU-based banks might expect something different from your presentation than their Asian counterparts. Using a virtual roadshow means you’re not trying to retool your presentation on a laptop at midnight in a hotel room somewhere in an unknown city. Instead, you can hunker down and put some thought and effort into the different iterations of your presentation and truly customize each one for your audience.
Disadvantages of a Virtual Roadshow
Granted, everything isn’t hunky-dory when using a virtual roadshow instead of an in-person format, particularly since the investment community is still trying to wrap its head around the concept.
Change Is Scary
If the capital markets are anything, they’re traditional. There’s a particular mindset deeply ingrained into the industry, where change is scary and should be avoided at nearly any cost. Naturally, that means you’ll probably get some resistance and pushback for conducting a virtual IPO roadshow, at least with especially old-school investors.
This could be a particularly challenging hurdle for a low-profile company with a smaller IPO or a business with a higher risk profile since it’s already more difficult to draw interest and attention from investors under those circumstances. Without that in-person presence, it’s easier for a virtual roadshow to slip through the cracks and become out of sight, out of mind for investors.
Similarly, key cornerstone investors are typically accustomed to face-to-face meetings. Granted, those meetings are more about the pre-IPO or private equity phases. Nonetheless, it’s still something to keep in mind since you could very well face the same reluctance to meet in a virtual environment from both cornerstone firms and institutional investors.
Lack of Control
In-person meetings allow you to leverage your abundance of innate wit and charm to control the room. Well, even if you’re not especially comfortable in front of a group, you’re still able to control the environment better than a virtual setting.
There’s simply so much out of your control when it comes to video conferencing. Technical issues could rear their ugly heads, phones ringing, people knocking on doors, and countless other distractions – these are all things that typically don’t occur during a traditional IPO roadshow.
Building on the previous point, an in-person roadshow is an event in and of itself. Each stop generally consumes about half the day and usually involves lunch and some downtime to get to know the investors on a somewhat more personal level.
Obviously, a virtual roadshow doesn’t offer that level of camaraderie. Yes, everyone can eat their turkey sandwiches in front of their computer screens during a Zoom video conference, but it’s just not quite the same. A traditional roadshow is inherently more social, and there’s really no two ways about it.
Virtual IPO Roadshow Best Practices
It goes without saying that a virtual roadshow is neither a panacea nor a death sentence for your IPO. Just like most things in business – and life – there are both good and bad aspects of it. In our opinion, however, if you take certain precautions ahead of time, a virtual roadshow can be a great opportunity for your company’s future.
Conduct a Dry Run
Technical glitches happen. But if you conduct a dry run before your virtual investor meetings, you can eliminate many of those glitches, probably even most of them, before presenting your pitch.
As mentioned above, you probably won’t feel as connected with the potential investors as you would in-person because of a lack of camaraderie. Therefore, it’s important to stay top-of-mind with investors, maintain communication, and quickly answer requests.
As a best practice, you can send out weekly emails or even physical information like pamphlets and folders. Anything you can do – within legal boundaries, of course – to stay connected is helpful.
Many companies even hire outside PR or advertising agencies to handle this type of task. While it certainly represents an additional cost during the process, the ROI for such an expense could be spectacular if it attracts capital that you would otherwise miss out on.
Articulate Your Story
Lastly, whether a virtual roadshow or in-person, articulating your story well is critical for success. Nail down the narrative, be compelling, and make sure your presentation is both airtight and completely fluid.
Also, as we said before, tailor your presentation to your audience, including any additional information that a particular group or region would appreciate. You want to ooze confidence without a hint of arrogance and, although it goes without saying, make sure your business model and use cases are clear, concise, and compelling.
And remember, Embark will be here throughout your trials and tribulations, triumphs and near-misses with additional insights and expertise along the way. Sure, even past this coronavirus pandemic and lockdowns, this brave new world might seem quite odd at first. But if you address a virtual IPO roadshow with a well-informed, even choreographed strategy, you set yourself up for success, maybe a bit of stock exchange glory to boot. So go update that Zoominfo profile and start your preparation because there’s much work to be done.