Enterprise software can be a significant expense for many businesses, and IR software can be no exception. Yet, like every other enterprise software product, your IR software should be able to demonstrate return on investment (ROI). Learn how to evaluate the value of your investor relations software through quantitative and qualitative measures.
Note, there’s no one size fits all approach to determining the ROI of your investor relations software. Every company’s goals, stage and capabilities are different, as such we have included several different ways to assess the impact software can have on your investor relations function.
There are a number of definitive quantitative metrics that can help you assess the value of your IR software. Among them are investor ownership metrics, meetings and deals completed, time savings, broker fees saved and overall valuation/cost of capital.
On average, 75% of equity financings for public companies are filled by current shareholders, therefore knowing who your shareholders are is extremely important in getting deals done quickly and efficiently. Furthermore, on deals where an investment bank or placement agent is involved, companies will have more leverage to negotiate the fee on the transaction if they have a better handle on who their shareholders are (fees are typically 3-7% of the amount raised). On deals where an investment bank or placement agent is not involved, being able to fill the deal yourself using the knowledge of your current and potential shareholders will save you the cost of the fees altogether, potentially saving millions in fees.
A straightforward way to determine the ROI of your IR software is to compare an investor’s ownership vs the activities or events that you’ve had with that investor. This can be measured if those activities/events have been properly logged in your IR CRM. For example, if a firm increased their position after you met with your contact at the firm, you can determine if your activities are impactful relative to your efforts.
Your IR software should make it easy for you to calculate how much time you spend with each investor and if that's a good use of your time. There's a perfect balance between diversifying your shareholder base, but also making those discussions count. This balance will be different to each company, so having a dashboard that displays ownership compared to activities and events can help you determine the right balance and where you should focus your efforts.
One of the biggest challenges IROs face is getting in front of new investors. Effective outreach takes time, especially when you have to search for investors and vet them yourself. Your investor targeting software should be able to save you time and effort in the search and vetting process by cutting out the noise. For example, using targeting criteria such as geography, peer holdings, and average investment size can help you pre-qualify investors before you spend any time on outreach; this will help ensure that any meetings you book are with investors that are a good fit for your business.
If your targeting software makes your investor targeting more efficient, you will be able to measure these results with the quantity of new shareholders in a given period and with the value of their investments. This should also result in a tangible impact on the time spent researching and contacting investors.
IR software should be able to save countless hours for your executive team by making it easier to delegate and collaborate with IROs and advisors. Having a central source of truth for all things IR makes it easier to manage relationships and compile necessary information for presentations and reports. Instead of relying on advisors or searching various documents and tools for data, your IR software should be able to deliver key insights and reports instantly, saving you time and effort.
Additionally, an IR CRM that integrates with your email can help executives delegate specific conversations and tasks to IROs. Not every investor inquiry needs to be handled by the CEO or CFO, and often enough their time is better spent on other activities. Every email that your IR software redirects from executives to IROs represents minutes of time savings, and can swiftly add up to several hours saved each month.
Turnover in any business is inevitable, but in relationship-driven functions like investor relations employee turnover can be a major setback. Restarting your investor relationships from scratch is not only time consuming, but it can appear unprofessional and affect the trust that investors place in your business.
Your IR software can save you months of catching up and relationship building by providing context on previous discussions. Logged information such as previous investments and given feedback will save time on the discovery process and expedite normal business processes. This can also give you an advantage in lowering your cost of capital given that it is often easier to raise capital from existing or previous investors rather than a net new investor.
On average, 75% of equity financings for public companies are filled by current investors, therefore knowing who your shareholders are is extremely important in getting deals done quickly and efficiently. Furthermore, on deals where an investment bank or placement agent is involved, companies will have more leverage to negotiate the fee on the transaction if they have a better handle on who their shareholders are. On deals where an investment bank or placement agent is not involved, being able to fill the deal yourself using the knowledge of your current and potential shareholders will save you the cost of the fees altogether, potentially saving millions in fees.
In addition to improving your communication capabilities with shareholders, your IR software should also make it easier to communicate, track and target sell-side analysts, thereby improving the visibility of your company among the investor community. Investor relations software that allows you to access sell-side research and estimates can improve your capacity to build relationships with key analysts in your sector.
All things considered, if your IR software is effective and utilised well you should see results reflected in your valuation and cost of capital. Obviously there are a number of other business performance metrics factored into your valuation (as well as sentiment), but with all other things being equal your IR software can help you increase your valuation and lower your cost of capital over a period of time. An increase in valuation can be a direct result of more effective investor targeting and shareholder communication.
In addition to quantifiable measures, you should also notice qualitative improvements in your IR process as a result of your IR software. The main qualitative measures of value for IR software include external feedback and ease-of-use.
Your IR software should make it fast and efficient to solicit feedback from shareholders. Your holdings data should make it apparent when shareholders are buying or selling (within the limits of holdings reporting), and it should be seamless to then contact shareholders to discover what drove their decision, should they be willing to provide it. The feedback you are able to get with close monitoring is immeasurably valuable as it creates data points that allow your management team and Board to make more informed strategic decisions. By integrating your investor data with your IR CRM you’re able to efficiently gather qualitative feedback from investors without having to fumble between tools, spreadsheets, or other colleagues/advisors.
When your tools are a hassle to use, you end up not using them; picture a rusty swiss army knife that requires another tool to pry apart the blades, or a fancy printer that can send a fax to outer space but won’t print black and white documents when it’s out of yellow ink. It doesn’t matter how robust your software’s capabilities are if it’s frustrating and time consuming to get the information you need.
Many advancements over the last few years have made IR software faster and easier to use. Rather than a swiss army knife that’s only useful in certain situations, picture an organized tool rack where every full sized tool you need is within reach. The same way you wouldn’t want to use a swiss army knife to build a bookshelf, you don’t want to use clunky or outdated software when more efficient alternatives exist. Modern software can provide a massive boost to productivity by making it faster and easier to access information.
While there’s no one size fits all equation to measure the ROI of IR software, there are a number of different ways you can assess its effectiveness. The best IR software makes it easier to communicate with shareholders and analysts, faster to find pertinent data, and generally more pleasant to use.