What does an Investor Relations firm do? And why does a company need an Investor Relations team?
I’ve got the answer. Or at least: I’ve got a good starting point for you.
Most large public companies outsource their Investor Relations duties. Or they build their own Investor Relations department inside their business.
This article will overview what an IR team does, when you need to hire one, how they work, and important questions you should ask when hiring an investor relations firm.
What is Investor Relations?
Investor relations is a business function that all public companies must have. Legally, they are required to.
A good Investor Relations team (or abbreviated as “IR team”) can help grow a company and raise your stock price.
How Investor Relations Firms Work
IR firms take care of:
- SEC filings
- Hosting special investor days
- Managing analyst expectations
- Quarterly conference calls
A good investor relations team works with the CEO, lawyers, and accounting department to relay information to investors.
They are the intermediary between your company and Wall Street.
Who Should Hire an Investor Relations Company?
Small- and medium-sized publicly traded companies who don’t have their own dedicated team should hire an IR firm.
Not the Fortune 100. Most big companies like Apple and Amazon and Tesla have a dedicated team of employees who manage their Investor Relations.
Please note that my list of Investor Relations firms isn’t about hiring an IR firm for “Fix this problem right now” situations. It’s meant to be more of a long-term relationship.
For “OMG we need to fix this NOW!”-type situations, you want to hire a crisis communications firm or a proxy firm, which is outside of the scope of this article. The best company I could recommend for that is Prosek Partners. I’ve chatted with Josh Clarkson there and he’s been a helpful resource. If there’s enough interest in a list of these types of firms, I’ll put something together. Email me if you have any input on that.
When Does a Company Need Investor Relations?
First: imagine that you are the CEO or Founder of a very successful company.
As your company grows, you establish plans to sell your stock to the public or to a larger pool of investors.
Now you need to hire an investor relations firm, also known as an IR firm, in order to:
- Follow legal guidance,
- Communicate company results, and
- Help attract new investors.
Or perhaps you’re already leading a publicly traded company… but you want to outsource your investor relations responsibilities, like quarterly conference calls and investor days.
Or maybe you hate your IR firm and want to hire a new one 😂.
But who do you hire? And who do you trust to handle your earnings report announcements?
How to Hire an Investor Relations Manager: Ask These 3 Questions
If you’re shopping for IR firms or want to hire an investor relations manager for your business, here are a few questions you should ask.
(1) Who do you work with?
What’s your list of clients like? How does that compare to what my company does?
For example, if an IR firm mainly works with REITs or biotech companies, how will your company fit into that area of expertise? Another example is insurance. There are specific IR firms who have a deep knowledge of that space and all of the related rules and regulations.
(2) Who will you assign to my company’s IR team?
How long have they worked there? Do they truly deserve their Vice President title, and do they know their stuff?
If you’re not paired up with a partner or senior-level employee, that’s a red flag. You want to work with someone who can use their experience to communicate big news and offerings.
(3) What are some examples of your successful work?
How did your firm help a public company better share their message to investors to raise their valuation? How did your firm help deflect any negative attention, or deal with activist investors?
How to Host an Investor Day
Investor days are an opportunity for business owners and managers to communicate with their investors.
Many companies use an investor day to present their best results and future outlooks.
There are two types of investor days:
- In-person events, like a small conference or investor day presentation
- Virtual events, like a Zoom meeting
Many investor relations firms and departments will be entirely responsible to host the investor day presentation. This often includes:
- Presentation from the CEO,
- Updates about quarterly or annual results,
- New business initiatives and explaining new products, and
- Questions from analysts.
I called a friend of mine who recently took his company public. I asked him about his experience in hiring and working with an investor relations firm.
What he said shocked me:
“They all suck. But some are better than others.”
If you’re a founder or CEO planning to take your company public, or if you’re hiring a new IR firm, I hope this list makes your experience suck a little less.
Let me know if you have experience working with an IR firm that you want to share.