Bridging the Silicon Valley/Wall Street Gap

Bo Park

"Move fast and break things.” “Ask for forgiveness, not permission.” “Fail fast, fail often.” These are words that tech startups live by. They’re also words that scare the daylights out of bankers and lawyers.

Stories about the tensions between Silicon Valley and Wall Street are well-trodden territory. Big banks worry they’re losing talent to trendy unicorns. Journalists claim the “center of power” is shifting west. Experienced businessmen complain that tech wunderkinds in hoodies can’t stop burning cash.

This article is featured in O'Dwyer's Nov. '16 Technology PR Magazine

But for all the scuffles, the technology industry centered in Silicon Valley and the financial sector based in New York need each other. After a few rounds of successful financing and rapid growth, tech companies generally start thinking about their futures in the public markets, and Wall Street starts sizing them up as potential longer-term investments.

Tech companies at this stage have a choice. They can keep telling the same stories about their businesses that have worked in the past, or they can adapt to their new audience. For some, being able to get through to investors and other financial audiences can seem like an impossible code to crack. In many cases though, building those relationships and dialogue early can set a tech darling up to evolve into a successful publicly-traded company with a strong position from which to grow and succeed in the long term.

From growth hacking to TAM

Successful tech companies generally have a compelling growth story, product-market fit, and differentiation. They are the “Amazon of X,” the “eBay of Y,” or the “Apple of Z.” They’ve successfully convinced VCs to give them money at high valuations and built a large and loyal customer base.

But Wall Street speaks a different language. To build credibility with the investors that you most want to attract — those who will want to follow the company for the long term — you must find the storylines that not only paint compelling picture of your growth opportunity, but also explain the ways you’ve mitigated risk and positioned your company for success operationally. Investors and analysts who look at companies from this perspective tend to have set methodologies for evaluating businesses and may be more risk-averse than VCs playing a numbers game where losses are expected — as many as three-quarters of VC-backed startups fail — in the hunt for the next home run.

Identifying the right financial storylines for a tech company should start with a clear-headed analysis of the business and surrounding landscape. Look at the last round of funding and how the business and competitive landscape have evolved since then. Have competitors gone public? Been acquired? Have large players like Salesforce or Google entered the market? What are the realistic growth projections for the coming years? Using the answers to these questions to inform your own perception of a reasonable valuation is the first step in preparing to speak to Wall Street audiences.

The next step is to understand — and help shape — the industry context in which Wall Street views the company. While entrepreneurs like to say, “We don’t have any competitors” and “We’re creating a new category,” investors and other financial audiences need to understand how you fit into the market. That assessment determines not only who the company’s “comps” are, but also which bankers would handle an IPO. To ensure there isn’t a disconnect between external perception and your internal understanding of the business, start showing how you fit into your industry early. Influencing that first impression can have a big impact on how your business is perceived for many years to come.

Finally, start communicating like a publicly-traded company, even before an IPO. Identify the storylines that demonstrate the value of your business today, not just its potential for the future. Public companies ultimately have to be able to explain their financials and tell the story in between the numbers. That means discussing your growth drivers, your challenges, and the external factors shaping your results, and guiding the audience to understand why the company is in a strong position.

From TechCrunch to WSJ

But communicating isn’t just about having the messages down in writing. You have to know where to seed your messages for them to reach your target audience. The media environment hasn’t only become more fractured when it comes to politics. Today, it is easy to read only the publications that appeal to you — which is why you can forgive tech CEOs for assuming financial audiences are just as likely to have seen that big feature in The Verge as if it were in Fortune.

To communicate with Wall Street, expand your target media universe to include publications read by investors on a daily basis. Even if you don’t have major financial news now, ensure that your company’s spokespeople are meeting with business and financial journalists to start building relationships and foundational understanding of your company before you need coverage.

From SFO to LGA

The mantra in Silicon Valley may be “fewer meetings,” but when it comes to Wall Street communications, face time is still key. A phone call or Google Hangout can’t replace a meeting or cup of coffee at an investor conference.

Schedule media tours around your executives’ trips to New York and prioritize business journalists who don’t know as much about your business and space. Secure speaking opportunities at business-focused, cross-industry events, and take time to sit down with industry analysts that journalists trust and cite in their coverage. Even if it doesn’t result in a story in the near-term, a background meeting can pay dividends far into the future if you become a trusted source on your space for a top-tier journalist.

Anyone who’s spent more than a few hours in San Francisco and New York knows that the two urban hubs have drastically different cultures. But theirs is a common thread that runs through both: people want to be part of a good business and a good story. Every tech company that has made the transition from startup to unicorn to publicly-traded company knows that each phase has its own challenges and its own storylines. Learning how to communicate clearly and compellingly to the relevant audiences for each is a challenge, but the solution isn’t a secret code. If you have a strong business, story and strategy, Wall Street is ready to listen.

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Bo Park is Managing Director and Head of Tech PR at ICR.