How Small-cap Companies Can Identify And Target Opportunities in a Crowded Market

How Small-cap Companies Can Identify And Target Opportunities in a Crowded Market
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This article was originally published by IR Magazine.

Top tips for growth and success

Navigating crowded markets and capturing investor interest is a challenge for small-cap companies in today’s competitive business landscape. But with the right strategies, even the smallest players can stand out and seize opportunities for growth and success. At the recent IR Magazine Forum – Small Cap in New York, leading IROs and service providers came together on a panel to share actionable advice for targeting and engaging potential investors in a crowded market.

Targeting and outreach remain top priorities

Effective outreach strategies, whether through do-it-yourself targeting, brokered roadshows or digital channels, ensure your company’s story is conveyed to those most likely to invest in, understand and support its goals. In an increasingly competitive market, it’s imperative to find ways in which you can be successful.

One effective strategy for small-cap companies is proactive targeting, as recommended by the forum panelists. Reaching out directly to potential investors via email can be highly advantageous. As panelist Matthew Esposito, head of IR at Gannett, explained: ‘Buy-siders appreciate direct outreach from issuers. Dealing with barriers such as brokers often adds an additional layer to the whole process.’

Another area of focus should be identifying high-potential targets, not just well-known and established names, even if they represent smaller funds. Ask yourself ‘Who’s the best fit for our company? Does it invest heavily in our space? Who’s the most likely to take a meeting?’ Prioritize these questions over fixating on the size of an investor’s assets under management.

Additionally, it’s vital to communicate your company’s story effectively and simply. At the forum, Benjamin Hackman, head of IR at Spire, suggested clarifying what sets your company apart in its industry and what makes it unique compared with others. It’s not about quick wins; it’s about building lasting relationships with investors that are aligned with your long-term vision.

Lastly, make the most of all the tools at your disposal. While conducting your own outreach is essential, consider tapping into established relationships and resources on the sell side. If available, explore the benefits of collaborating with third-party targeting firms that have connections to companies you might want to engage with.

Turning passive awareness into actionable results

Utilizing data that may be overlooked can prove helpful for targeting and outreach. Many companies possess valuable datasets they haven’t explored. Turning this data into actionable insights can drive informed decision-making and enhance your IR strategy’s effectiveness.

How can you be innovative and resourceful when working with data you already have? Consider website subscribers, conference calls, earnings calls and email subscriber lists. These are all channels where investors express interest. Analyzing these lists and identifying those that aren’t current investors can be a good indicator of who you can proactively reach out to.

A company’s non-objecting beneficial owner list is another often underused dataset. This list represents a company’s non-reported shareholder base, which can account for anywhere from 20 percent to 80 percent of a total shareholder base, depending on the company’s size. And according to Irwin’s research, it is nine times easier to encourage current shareholders to invest more than to acquire new investors.

To make this data work effectively, define a target investor profile that can guide your efforts to understand your shareholder data. Analyze the data so you can assess investor gaps and identify potential opportunities. If you don’t have the budget for a CRM to streamline this process, you can search 13F public filings, company websites or LinkedIn for company data and manually search for portfolio managers, fund prospectus documents and press releases.

Measuring the success of your efforts

Measuring the success of your targeting and outreach is essential for refining your strategy. Regularly tracking metrics and conducting post-engagement evaluations ensures your efforts align with the company’s broader goals.

Here are some key measurement recommendations:

  • Implement a multi-step follow-up approach to track meeting conversion rates. Don’t be discouraged if it starts low; three to five high-quality meetings with potential investors is a win
  • Measure email click and open rates to gauge audience engagement. This helps you create and disseminate content that resonates with your audience
  • Track event attendance and initiation of analyst coverage. Correlate activity to any subsequent buyers and report to management on your efforts
  • Measure the growth of your audience and investors. For example, check whether there’s an increase in earnings call participants.

Pinpointing potential investors that align with the company’s vision and financial goals can lead to more efficient capital allocation and stronger partnerships in the long term. Strategic targeting can strengthen a small-cap company’s credibility and increase its chances of securing the necessary investment for long-term success in a competitive landscape.

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