Deb Schwartz is the CFO of Cameo, the breakout marketplace that connects consumers with personalized videos from their favorite stars. Prior to joining Cameo, Deb served as CFO of Bustle Digital Group, where she helped them double their revenue and navigate the acquisition of six major brands.
With Cameo, you can hire a celebrity to tell a story for you. But as the CFO and de facto head of IR at a fast-growing startup, you don’t have that luxury. Instead, you have the daunting task of crafting every aspect of your IR strategy, including how you tell your story externally, how that story aligns to your internal operations, and typically play a front-line role in engaging with current and prospective investors.
That’s why we asked Deb for her opinion一how should startups think about IR? We welcomed Deb for a special session with our CFO Guild for a deep dive on IR, covering everything from how IR change at major inflection point, how and when to staff an IR team, and how to leverage relationships with investors and customers to craft the perfect story.
Framework: How IR Strategy Changes at Inflection Points
As with most things at a startup, your IR strategy will evolve as your company matures from early stage to growth stage to life as a pre- and post-public company. Since the need for IR can drastically change between each phase, Deb first broke out some of the most important aspects of IR to nail at each stage of company-building:
At the earliest stages of your company, whether you are pre- or post-product market fit, it is unlikely that you’ve perfected the most compelling version of your external company story. Now is the time to start laying the foundation and long-term vision for how outside stakeholders should perceive your company. This is easier said than done--particularly since executives, in a way, are too close to the company.
One key is to lean on your existing investors. Not only do they have a wealth of experience, they also have more of an outsider’s perspective that you do. If you think about your company’s narrative like a publication, investors should be your chief editors, pointing out gaps and collaborating with you on the piece. This exercise helps you roll out the kinks and helps investors better understand your goals.
Scale through Pre-Public
At this stage of development, growth has taken off and the market (and investors) have significant enthusiasm for the business. The single biggest change at this stage, though, is that investors hold you to a higher standard of operational excellence. New investors will of course want to see proof that you are on the path to achieving the long-term vision you set out early on. But they’ll want this proof in the form of concrete numbers (metrics, KPIs, etc.) that give data-driven substance to your story. In addition, this is typically the first time in a company’s lifecycle when the ability to set and achieve forecasts (sales/revenue targets, product release dates, etc.) is subject to significant scrutiny from investors. In terms of how to leverage your existing investors at this stage, one of the most important things is to think of them as accountability partners to help you maintain disciplined company execution.
As your prepare to become a public company, much of your IR strategy will be governed by fairly well-understood regulatory requirements. You’ll staff the function with an IR subject matter expert, who will give you significant leverage and also bring a perspective on the day-to-day mechanics of great IR. Several of the biggest changes that occur at this stage are (1) your investor base broadens significantly, and you will have more relationships to manage; (2) the nature your investors change, given the difference between extremely aligned, supportive, and “friendly” private markets investors to public markets investors; and (3) you’ll spend an increasing amount of time thinking about and managing stock price volatility.
Understanding the "North Stars" of Effective IR at Any Stage
Be the Source of Truth
IR is responsible for maintaining and growing relationships with investors. To do that, the team needs to provide consistent, crystal clear communications. Investors expect to understand what’s going on in the company一its core business model, growth levers, general timeline to hit certain goals一in order to make informed decisions. Understandably, these details change over time. But IR teams need to keep everyone up to date. Deb shared a story with the Guilds that illustrates just how important effective IR communication is:
“When I first started running IR at Groupon, we did a non-deal roadshow to discuss a new management strategy that we unveiled during earnings. About 10 minutes into a meeting with a portfolio manager, he asked us for an update on a metric that was not mentioned in the new strategy at all. We tried to move on in the conversation, but the question kept persisting. Finally, our CEO stepped in and pointed out that the metric the investor was asking about was an old company strategy that hadn’t been used in several years.”
Deb said this example underscored the need for clear and constant communication with investors. And in a situation where the investor’s understanding isn’t aligned with the real state of the business, it opens the door for investor skepticism to creep in.
Put differently, you must take control of the company narrative… or someone else will. Cameo is a fascinating case study of this principle. As the first marketplace of its kind (making fan interaction a digital product), the company doesn’t fit a traditional framework that investors may try to use to evaluate the company. And in her work at Cameo, Deb has worked hard to take control of the narrative. As one example of that effort, rather than leave the exercise to investors, her team has literally built a de novo bottoms-up model to help articulate just how significant the TAM is for Cameo.
Demonstrate Forecasting Ability
Controlling the narrative is one thing, but you also need numbers to back it up. Proving that your company can generate returns within a specific level of certainty demonstrates your ability to execute its long-term vision. If investors can't model your business accurately because you aren’t making the right disclosures, or you pick the wrong operating metrics, this only fosters doubt within the investor base. This is true even if investors mostly understand your story and believe in the vision. If you’re giving them the wrong inputs and frameworks, you risk missing their expectations.
Particularly in the growth stage, though, you may reach a point where a single model can’t accomplish two distinct goals: articulating the long-term potential of the business, and proving that you have control over the operating levers that enable you to meet forecasts.
One way to bridge this gap: create both short and long term models. With this approach, your short term model is focused on demonstrating your forecasting ability and operational rigor; in other words, your control of the business. The long term model, on the other hand, paints a picture of the company’s full vision. You and investors will understand that the numbers, especially in out years, have a degree of uncertainty. But what the model is meant to demonstrate is the long-term growth potential of the business.
Simple Ways to Drive Leverage from IR
One of the benefits of being a venture-backed startup is that investors often bring expertise alongside capital. A simple way of activating this expertise (with the added bonus of creating more impactful and efficient board meetings) is to circulate board decks well in advance and explicitly ask for inputs and comments. Investors then leave thoughtful comments and questions on each slide . By the time the meeting rolls around, everyone is prepared to have a richer and more focused discussion.
In addition to board meetings, Deb sends a monthly letter to their entire investor base. This letter includes a combination of financial and operational metrics as well as a call for advice on big initiatives that the team is currently working on. Deb also checks in with each investor at least once or twice a year to promote active, continuous dialogue and to ensure that the narrative is still abundantly clear.
Effective IR: Set the Stage for Future Success
IR is one of those things that you don’t realize you need until you really need it. That’s why it’s important to set the stage for excellence in IR from the earliest days.
One key way to do this is to build rigor and structure into IR, in the same way that you would for any other operating motion, whether it’s a fully staffed function or not. For example, set up an investor CRM to log all interactions and touchpoints with existing and prospective investors alike (you can use this CFO Guild Airtable IR template to get started.)
Beyond applying rigor to the process, the second key is to understand and prepare for the next stage -- which is why Deb’s framework is invaluable to know what’s expected of you, and what you can expect from investors, on the road ahead.