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Equity Story Challenges

THE PROBLEM


Why do we often hear from investors that storytelling is key in fundraising and M&A? What changes in this volatile capital market scenario? What are the key components of a good equity story?


We have listed some tips to help entrepreneurs in this process:


Capital Markets


Greater demands on fundamentals require a shift in focus to sustainable growth;


Speed


The pace of technological change quickly makes yesterday's history outdated;


Valuation


It should be another consequence of the future story and a tool for capturing;


Investors


There's no shortage of resources, there's no shortage of good stories.


KEY COMPONENTS


The components of a good story depend on understanding the investor's needs and good evidence of quality execution.


First thing first


Start with your vision and fast facts: capture attention and show value in the first arguments;


Uniqueness


It's your story, make it unique. There are great benchmarks to help with this construction – Perfect Pitch;


Honesty


Be bold but sincere: you can't sell exponential value based on single-digit growth. Transform weaknesses in history into priority projects;


Strategy


What sets your company apart? Why will it be successful? Technology, Product, Channels, Team...?


Openness


The best companies have been rejected by investors dozens of times: be open to rethinking the story, but trust your strategy.


IBM'S CASE


IBM has sought relevance in the Cloud for years, but failed to gain recognition. Its offerings, the acquisition of Red Hat and the accounting of Managed Services together with Cloud have made its history questionable when compared to players such as AWS. Even with significant revenues in “Hybrid Cloud”, the company's valuation did not change.


Hybrid Cloud (IBM) & Cloud Revenues (AWS)




KEEP IN MIND


  • Gathering compelling evidence of a company's capabilities and numbers always takes more time than it seems. If the story does not have strong evidence, it is better to postpone the roadshow;

  • Test your narrative with close and critical investors to refine the equity story;

  • Research global benchmarks: both valuation and business models and activities. This can anticipate problems in the equity story and make it more comparable to success stories in other geographies;

  • The “exit” scenario is constantly changing: what is the probability of the company raising the next round? Are there comparables that have been captured recently in Brazil or abroad? How do these elements contribute to your equity story?;

  • Growth is essential but “Cash is (always was) King!”

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