This chapter is from the book
This chapter is from the book
This chapter is from the book
■ Blood Sport ■
A major component of an IPO is that the company’s senior management team sets out on the road, traveling around the country, and sometimes across oceans, for two weeks, pitching to investors in anywhere from 50 to 80 meetings. For many years, each meeting consisted of a live presentation followed by Q&A. With the advent of NetRoadshow, a website where anyone with a browser can view a streaming video of a company’s IPO roadshow, all that changed (see Figure 2.1).
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Figure 2.1 NetRoadshow
Now, because most of the investors will have seen the streaming version, the meetings are essentially Q&A. But the grueling two-week tour, with just as many meetings, is still obligatory because no investor will commit to buying a tranche of tens of millions of dollars based on a canned presentation alone. Ideally, investors want to meet the executives in person, press the flesh, and look them in the eye. The COVID-19 pandemic made it necessary for those meetings to take place virtually. In time, many investors adapted to the physical separation but, whether live or virtual, investors want to engage with a company’s management team, discuss their business, and ask them questions directly.
One of those investors is David Bellet, the founder and former chair of Crown Advisors International, one of Wall Street’s most successful long-term investment firms. David, who was an early backer of many successful companies, among them Hewlett-Packard, Sony, and Intel, explained his intentions:
When I ask questions, I don’t really have to have the full answer because I can’t know the subject as well as the presenter. What I look for is whether the presenter has thought about the question; been candid, thorough, and direct; and how the presenter handles himself or herself under stress—if that person has the passion of “fire in the belly” and can stand tall in the line of fire.9
No one challenges presenters seeking to raise public financing more than Leslie Pfrang. Although Leslie and her partner Lise Buyer are now the principals of Class V Group, a boutique shop that advises companies on how to navigate the complex process of going public, Leslie spent decades as a managing director at both Deutsche Bank and Credit Suisse, leading the positioning and placement of IPOs to public investors. As she puts it:
Public investors, unlike private VCs, cover and own several hundred companies. Steady as she goes is what they are looking for. They want to tuck it away, peek at the transcript once a quarter, and see that the management is performing to plan. That is it. No surprises and no drama. So, investors test new management teams with difficult questions, sometimes asking the same thing in different ways over and over, like a police interrogation, complete with the cigarette smoke. They are as interested in the way management responds under this pressure as they are the content of the answer. The ability of management to stay on message, not flail, and avoid appearing defensive is critical. If they can’t take the heat, the public investor will expect the stock will be volatile and will wait. It is better to vigilantly practice tough Q&A as a blood sport and feel the pain in private than on the public stage.10
The tough questions that David and Leslie ask as investors considering a stock purchase are no different from those of prospective customers considering a new product, prospective partners considering a strategic relationship, pressured managers considering a request for additional resources, concerned citizens considering a dark horse candidate, or even affluent contributors considering a donation to a not-for-profit cause. The challenge in all these situations is how to handle their questions.
One important caveat: All the Q&A techniques you are about to learn require that you deploy them with absolute truth. The operative word in the paragraph above, as well as on the cover of this book, is handle, meaning managing tough questions. While providing an answer is an integral part of that “handling,” every answer you give to every question must be honest, truthful, and straightforward. If not, all the other techniques will be for naught.
As the great American humorist Mark Twain is said to have put it:
If you tell the truth, you don’t have to remember anything.11