How IROs Can Create an Engaging and Effective Investor Deck

In our last article, we discussed the SEC’s proposed rules regarding ESG disclosures, their implications, and how IROs can prepare their organizations for this change. In this bulletin, we discuss the key elements that IR teams should focus on to build a compelling investor deck.

An investor deck is one of the most important tools that a company and its IR team can use to convey the company’s investment thesis and value proposition to investors. We discussed in our October 23, 2020 IR Bulletin that an investor deck is one of the most important ways for IROs to propagate their company’s investment thesis and is a leading source of company information for the investment community. However, an investor deck that fails to effectively capture the company’s story, value creation, long-term vision, key KPIs/metrics/catalysts, etc. will fail to grab investor attention, which is already low given that investors typically meet multiple companies per day and only remember companies with a strong value proposition. Therefore, narrating the company’s story through an effective investor deck that covers key aspects is important for IROs. Doing this will not only help companies to acquire greater mind share of potential investors, but will also help them gain their wallet share.

We believe IROs should keep the following points in mind to create an engaging and effective investor deck:

·        Aim to create a lean deck. Follow the ‘10/20/30’ rule if unsure about the number of slides. While it is challenging to convey a company’s value in a limited number of slides, IROs should – to the best possible extent – focus on building a lean deck. A deck that can be restricted to 10 slides is remarkable, while 20 slides should be considered the upper limit of the acceptable range. This is because if the management is presenting the deck live, then there will be too many slides to cover. This can result in low audience/investor interest and may leave little time for the Q&A session. If unsure about the number of slides, IROs should follow the ‘10/20/30’ rule. The rule, laid out by marketing specialist Guy Kawasaki, says that an investor deck should be limited to just 10 slides, be delivered within 20 minutes, and use fonts smaller than 30 point size. If there are more than 10 slides, include a 'Table of Contents' section at the beginning of the deck so that investors/analysts can quickly go to what they perceive to be an important slide.

·        Ensure that your investor deck has a compelling story – in line with your IR narrative. IROs must ensure that their investor deck narrates a compelling story, which answers why their company is unique, important, and valuable. It is important to keep the storyline of the deck same as the company’s IR positioning, or investment thesis. A misalignment between the storyline in the deck and the company’s IR positioning may cause uncertainty among investors, leading them to seek information from unverified, third-party sources. Further, IROs should aim to cover their investment thesis in no more than 7-8 bullet points in a single slide upfront. The idea is to quickly garner investor attention at the beginning of deck and provide them with a high-level view of the company’s prospects. The investment thesis would include, but is not limited to, a company’s moat, size of the addressable opportunity (TAM), growth strategy, fundamentals, model metrics, valuation, and upcoming catalysts. These points can then be turned into individual slides and can be expanded on in detail later.

·        Highlight key model metrics, milestones, and catalysts so that the Street can stay on top of company’s performance and identify positive tradable events. One of the most important elements in an investor deck is the company’s model metrics which provide investors with insights into the sources of value creation. These metrics are different from sales and EBITDA estimates, and typically include other KPIs like order book, customer acquisition cost, average revenue per user, customer retention rate, monthly website traffic, net promoter score, etc. These KPIs act as inputs to the valuation model prepared by investors and analysts; therefore, defining them in the deck – along with any forward-looking guidance on these points – ensures that all stakeholders understand the model metrics accurately and consistently. In addition, a good investor deck will typically highlight the milestones (operational and financial) that a company targets to achieve in the foreseeable future, as well as other developments and news that may act as catalysts for the stock and create positive tradable events. 

·        Develop the investor deck keeping in mind of your audience and proactively address key questions that they will have. For IR decks, the target audience typically consists of different types of investors and analysts. As a result, IROs should aim to answer the following two important questions through the deck: 1) How does their company make money? and 2) How will investors make money along side the company? Addressing these two questions will provide investors with a clear explanation of the company’s business economics and its capability to deliver long-term value creation for shareholders through earnings growth, dividends, buybacks, and other value unlocking moves.

·        Consider embedding a corporate video within the deck and get an independent review on the video. While a typical investor deck has static content, adding or embedding a corporate video in the deck is a good way for IROs to present their company’s story in a more engaging fashion. When making your corporate video, ensure that it is short enough to maintain investor attention but long enough to cover your company’s investment thesis. IROs should get an independent review on their corporate video and have the short (5 minute) and long (20 minute) versions ready.       

·        Maintain a consistent theme across all slides. There are many moving parts in an investor deck; therefore, ensuring consistency is key as inconsistent colors, fonts, and formats can make the company look unprofessional and distract the audience from your message, thus preventing investors from absorbing important information. To bring uniformity in the deck, IROs should ensure that all slides are connected by a singular theme. They can do this by 1) selecting a subset of colors that matches with the company’s theme, 2) restricting themselves to no more than three fonts, and 3) consistently formatting the fonts, images, bullet points, animations, backgrounds, etc. across all slides.

·        Avoid text-heavy slides and judiciously use visuals and graphics. To explain a company’s proposition thoroughly, it is possible for an IRO to feel obligated to add more text in their slides. However, the more text investors read, the less they are able to filter and absorb. Thus, it is important to ensure that investor decks do not have text-heavy slides. An alternative is to use clear, self-explanatory visuals and graphics, which can drive home the point much quicker. Moreover, IROs should note that they need to be judicious with the use of images as too much of it, or a poor chart selection, can distract investor attention.

·        Define the IR contact person at the end of your deck. This is a small yet crucial detail that many companies forget to add in their investor deck. A designated IR contact is responsible for communicating investors queries and interest to the management, crafting the response based on management inputs, and ensuring seamless communication between all stakeholders. As a result, having a clearly-defined IR contact person – along with direct contact details – is an important part of any investor deck.

About Intro-act

Intro-act optimizes corporate access in the post-MiFID II era. Intro-act’s machine learning prediction engine targets the most likely institutional buyers and sellers of a stock in the next 90 days and offers independent research to promote efficiency and transparency throughout the corporate access and investment process.

Intro-act’s services facilitate higher-quality meetings based on superior preparation for both investors and corporate executives because of centralized access to critical materials, including video, models, commissioned research, and agenda materials. The result is converting more investor meetings into shareholders and improving the ROI on corporate access.

Intro-act’s founders have over 50 years of experience (DLJ, Fidelity, First Call, OTR, Thompson Reuters) in capital markets, corporate access, and building investment research businesses. They realized that a regulatory change (MiFID II) would compel corporate investor relations to become increasingly responsible for servicing and growing their investor pool but would need to do so with fewer resources. Intro-act was created to help corporations fill this void. We use machine learning to predict investor behavior, analyze factors influencing investment decisions, and provide independent research services for investors and corporate IR officers. 

For more information: www.intro-act.com