24 Jul, 2018

Before the Banker Bake Off

6 Reasons to Cultivate Relationships

Adapted and Reprinted from TechCXO.com

For many of the 30-plus years I have been a CFO, I have promoted investment bankers to entrepreneurs, executives, Board members and investors as a wonderful resource.

Having worked a variety of bulge bracket and boutique firms, I find investment bankers to be among the most generous in sharing their knowledge and insights to develop long-term relationships with prospective clients.

If you really want to know what’s really going on in your industry, I tell people, talk to an investment banker. And, while most business people think about investment bankers demonstrating value in the context of transaction execution, you should cultivate these really smart people before the bake-off… that is, a capital event like an IPO or a sale. Here are six reasons why:

1. Information About Industry Trends. Investment banking firms tend to organize their marketing efforts around an industry focus, they have likely competed for engagements or potentially represented similar firms in your sector. The preparation for these projects is intense and requires significant research and background information. Meetings with bankers can provide an opportunity to learn about important industry trends and recent events and these discussions provide you with a low-pressure opportunity to learn more about their qualifications.

2. Insight About Your Competitors. Investment banking firms frequently attend industry events and may meet with management teams of businesses that compete with your business (whether they win the mandate or not) and often have insight into the business of your competitors.

3. Advice on Business Strategy. Investment bankers see lots of businesses and exits. This experience provides them with a knowledge base to render sage advice on strategy, positioning, pricing, and distribution, etc. Coupled with their knowledge on the values of the businesses upon exit, investment bankers can be an excellent source for advice on strategy.

4. Introduction to Executives. Investment bankers active in your industry sector are networked with executives or aware of executive changes. As your business grows and evolves, you may be looking to add an executive to your team. Investment bankers can be an excellent source for introductions to potential hires.

5. Referrals to Sources of Capital. Venture capital and private equity firms frequently engage investment bankers to work with their portfolio companies. As a result, they have a significant number of contacts with these capital sources. As a growing business, you may find that you require additional capital that does not warrant an engagement of an investment banker. Bankers are happy to provide referral to potential sources of capital as it endears them to you as a prospective client and equity sources for providing a potential opportunity.

6. Feedback on Your Pitch. Since Investment bankers have the opportunity to review plenty of company pitches, they can provide great feedback on the company presentations. Sharing your pitch while developing a relationship with an investment banker is an excellent opportunity to learn about their qualifications in potentially representing your business in the future.

Take note of tombstones for recent transactions in your sector as to which firms are active and target developing relationships with these firms. In addition, BankerAdvisor is a resource for discovering and learning about investment banking and M&A advisory firms that may help you identify firms with a track record focused on your industry sector.

Mike Casey
Founder & CEO