As a Partner at SPMB, Natalie Ryan has seen firsthand that the demand for Investor Relations (IR) executives has never been greater. So how do you hire the best Vice President of Investor Relations for your business and set them up for long-term success?
With the accumulation of both traditional IPOs and SPACs, special purpose acquisition companies, it’s no secret that 2021 has been a record-breaking year for IPOs. Even in the midst of the Covid pandemic, the U.S. stock market has been at all time highs allowing these new public companies to raise remarkable sums of cash. With an unprecedented number of new public companies looking to prove their long-term value and maximize their share price, the demand for strong Investor Relations (IR) executives has never been higher.
If you’re a soon-to-be or new public company, how do you find the right Investor Relations hire for your business? Furthermore, how do you position the role to attract the most qualified candidate in a hyper-competitive talent landscape?
Know the credentials for the best Investor Relations executives:
A unique quality of the IR function is that there’s no sole career upbringing, which means that there’s a wide variety of candidate backgrounds. So how do you know which credentials create the best IR leaders? Let’s explore the most common types of backgrounds to answer this question:
Equity Research Background:
- The benefit of hiring a Vice President of Investor Relations with a background in equity research is that they understand what Wall Street (“the Street”) and investors are looking for when assessing the value of stocks. In turn, this can give them the tools and knowledge to get the best overall market coverage and present the strongest financial image to “the Street”. If they have previous experience covering your company’s industry, they can bring a wealth of knowledge — including relevant financial models, competitive analysis, and potential business hurdles.
- The downside of a person coming straight from equity research into an IR role is that they often lack the critical experience of being embedded in the business, which is only gained from having a corporate IR or strategy role. Having an internal role is the only sure-fire way for someone to gain the experience of fostering trusted internal relationships — which can include providing counsel on strategy to the CFO and CEO. This is necessary so Investor Relations can bring the knowledge from “the Street” to light.
Investor Relations Agency Experience:
- The advantage of finding an IR executive with agency experience is that they likely possess a wealth of knowledge from participating in, oftentimes, over a hundred earnings calls per year, versus a corporate IR executive who typically has 4 calls per year. Additionally, they have been exposed to a variety of business models and have extensive experience working with different types of executives/personalities. They also have a network of other IR agency experts that can provide support and feedback while corporate IR teams are usually 1-4 people groups.
- Similar to the equity research background, I’ve found that leaders with an agency upbringing, like The Blueshirt Group, have a broad understanding of IR but they haven’t gained the opportunity to go deep into a company’s inner workings. Without your IR leader being inside the business, they only know what they are told, and therefore, can’t give complete advice on a narrative and the market’s reaction without intimately knowing the full story.
Traditional Finance Upbringing:
- Some companies position the Investor Relations function as a rotational role for up-and-coming finance leaders to balance out their backgrounds. This is a beneficial upbringing as most of my clients require their IR hire to have a certain level of financial literacy. With this background, a candidate will likely be confident in communicating the financial metrics to analysts and shareholders and be able to bring a wider strategic lens to the role.
- When targeting this type of profile, I make sure that the candidate has had enough time in the IR seat running the quarterly earning calls and has a track record of success building relationships with the investor community. In my experience, the top IR executives have helped a company weather a few storms — and they tend to enjoy working with companies that are misunderstood by the market and have high growth potential. When a company’s story is misunderstood, it presents a huge opportunity for an IR executive to make a meaningful impact. It’s not uncommon for companies to see a drop in their share price after their IPO. This is especially true of software companies in instances where there are product features and advances on the roadmap that may take some time to achieve.
PR/Communications Qualifications:
- A successful Vice President of Investor Relations will have exceptional verbal and written communication skills because the role requires them to be the face of the business to the broader industry, Wall Street and its investors. Marketing and/or Public Relations (PR) skills are quite transferable to core parts of the IR job including being the primary spokesperson for the investors & analyst community and building all of the quarterly earnings materials including call scripts, earnings releases, and Q&A documents for the executives.
- A PR/Comms background alone would not be sufficient to successfully step into an IR role due to the depth of financial reporting knowledge that the function demands. I tend to shy away from this background unless a candidate has a clear track record of success directly in a corporate IR role.
Now that you know the different backgrounds of IR executives, you can scope your Vice President IR role to attract the top candidates by targeting strong #2s in Investor Relations or expanding the function to IR+.
It’s a competitive market for IR talent so how can your company stand out? Here are two ways to make your VP IR role more appealing:
- Open your search to include strong #2s in Investor Relations ready to make a move into a top corporate IR role. This can expand your talent pool and allow you to bring in a hire who is hungry to make an impact. If you pursue this search strategy, you’ll need to vet how much of the role your candidate is driving today and determine whether she/he has the confidence, executive presence and experience to stand on their own.
- Expand the role to IR+. This is another attractive option, especially if your sights are set on bringing in a more seasoned ‘been-there-done-that’ executive. An IR+ role may be a great fit for your organization, particularly if there are skill gaps in your finance, strategy, and/or corporate development groups. A few of the most common IR+ scoped roles include: IR + Finance (General); IR + Treasury; IR + M&A Finance/Corporate Development Finance; IR+ Special Projects/Strategic Initiatives; IR + Strategy; IR + Public Relations; and IR + ESG (Environmental, Social, and Corporate Governance).
For corporate IR to have true success, the VP of IR needs to be a strategic partner and thought leader to the business and “the Street”.
In an ideal scenario, you would hire an executive with a perfect blend of experience. Since that’s difficult to find and, therefore, quite uncommon, my suggestion is to hire a reputable retained executive search firm. At SPMB, we help our clients cut through the market noise and identify the blindspots of each IR background so you recognize the potential weaknesses of an incoming IR leader. In turn, this allows you to balance their skillset with the team you already have in place.
If you’d like any additional guidance on how to set up your IR function for success or need help hiring your Vice President of Investor Relations, contact me at natalie@spmb.com.
SPMB’s Recent Work | Investor Relations Projects
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- Menlo Ventures | Head of Investor Relations | Venture capital firm
