I was talking to one of my clients the other day… he's a Founder/CEO and he was frustrated because investors didn't understand his business as well as he thinks they should.
I see this a lot. Particularly with Founders / CEOs.
"But all the information is in our S1," he said.
*Sigh*
"Ok. I understand," I told him. "But do you realize what an investor goes through every day? Even if they all read your S1, they did so when you went public...which was 16 months ago, along with a zillion other companies. Do you remember all the details of everything you read last year? Oh...and not everyone read your S1. So the onus is on you to tell them your story in a way they will understand."
He still didn't believe me and grew increasingly frustrated.
I continued, "Think of it this way. You spend 70 hours a week thinking about one company. Your best investor might spend 4 or 5 hours per quarter (so about 20 mins a week) thinking about and researching your company. They're dividing their time between many other investments and so despite the fact that many of them really are "the smartest guys in the room," with fancy degrees from esteemed institutions, they're also super busy, distracted, and overwhelmed.
This is not to say management teams can talk down to investors or that they won't "get it." Not only will they "get it," they'll also talk to your customers, suppliers, and former employees to find out all your dirty secrets. But the ones who do that have already found interest in your story and either own it, are short it, or are close to doing either.
But nobody should just assume investors have done all the work ahead of their first meeting with a company. Some investors will do that. Others will not be as prepared. And management teams have to be ok with either approach. If a CEO is going to be irritated that every investor hasn't read every white paper on his website or watched all his demos, then he's unlikely to garner a ton of investor support because his meeting schedule is going to be pretty darn light.
As a general group, investors want to be educated… tempted even, by the tantalizing aspects of a story in order to get interested. They want to hear a good story that reminds them of stocks that have worked for them in the past. And THEN they'll go do the work. Again - not ALL investors act this way… plenty do extensive research ahead of their introductory meetings with management teams because they view such meetings as a privilege, not a right. But not everyone acts this way and neither approach is right or wrong… it just is the way it is and management teams have to deal.
The point is this: when talking to investors, management teams should not make the presumption that the entirety of their audience is fully "up to speed" on every detail or nuance of the story. Instead, I recommend they take an approach that continuously educates and updates the Street on the virtues of the company and regularly provides incremental updates that gradually increases the Street's collective understanding of the company.