» Investor Interaction: Credible Connections

This Marketing and Sales Executive Think Tank was hosted at Hydrogenics by Daryl Wilson, President & CEO, Hydrogenics.

1. How do you gain traction with financial backers and compel them to sit up and take notice of your business opportunity?
2. What public relations activities support your relationship-building efforts with prospects, customers and investors?

What we learned

• Misconception of clean-tech being “huge” needs to be proven
• Money is not easily attained; instead focus on one specific solution to a specific need
• Investigate third-party endorsement
• Explore government grants
• Be leery of PR
• PR focus on targeted customers and investors
• Utilize established support network

Challenges of finding financing; public versus private

• Investors are only interested in return; it’s about business – not research projects
• Depends on stage of company; proven sales with cashflow is a lot easier than a start-up company
• Not enough information about the Clean-Tech sector in Canada
• If investor is knowledgeable about the business, there is greater potential for successful financing
• Be leery of “pump and dump” technique: US public companies express interest in buying shares to increase their own.  After share increase, deal is ‘dumped’
• More opportunities in Europe and Middle East, however Europe can be more expensive
• Biggest challenge is how to position your company to get highest validation
• Qualify and shorten timeframe for financing.
• It is looked upon negatively if financing is looked for outside of Canada
• US is more aligned to “our” thinking
• Difficult to attract right investor based on successful track record, trust factor

Why is it easier to gain financing offshore than at “home”?

• Capital markets are tight
• Access private funds through third parties
• Raising guarantees is different in Canada; dollar-to-dollar guarantee
• A lot of preconceptions and misconceptions in Canada; “a big herd mentality” and “flavour of the quarter”; limited ability to hear company’s story, preoccupied with the herd mentality
• Investors who have available funds want to hang on to them unless there is a high percentage return, like a “lottery ticket”
• US might be easier but only because audience is larger
• “Capital pool” can assist but can be very expensive
• Improve your process,  narrow down target investors for greatest potential
• It’s like a funnel, keep that funnel filled

Finding sources of revenue – how to qualify investors

• Be honest with yourself about who is willing to invest
• Focus on grant route
• Fast support from IRAP (Industrial Research Assistance Program)
• Investigate Green Finance; properly qualify investors 
• Locate in-kind contribution for matching funds, not necessarily cash
• Build credibility with already established government funds
• Multiple stages in technology world is not seen anymore
• Convertible debt turns into equity
• “Dragon’s Den” analogy: what are you willing to give up to bring IP to a stage that is more marketable?
• MaRS networking highly efficient because companies are pre-selected
• Get a quicker NO; be more aggressive in decisions
• Feel out timing and go when timing is right’ go with “this is your chance” attitude

Public relations (PR) is difficult to measure; what are you doing in PR to communicate with investors?

• PR can create a lot of “noise”; needs to be newsworthy with success and/or “humanitarian” stories; 10:1 return
• Articles in Energy magazine
• Connect yourself with a few key associations/municipalities to get the word out
• Cannot be a meaningless release, document track record
• Go to events and partner events, but be leery of tradeshows as they can be expensive and time consuming
• Collaborate with large partners in industry, stand on their shoulders to appear larger
• Nurture the “few” investors
• Provide Education about energy management
• Have someone speak at an event to come across as a “leader”
• Rent a hotel for series of events without physically being at a tradeshow
• Gaining credibility is what carries successful PR and, in turn, investment discussion
• IR/PR depends on strategy and appetite
• Stimulate blue sky interest to stimulate investors; Bloom Box has done a
  great job on PR
• Draw on third-party PR; articles can be more credible when someone else says it versus you saying it
• Utilize your lead customer for good PR
• Tyler Hamilton, Toronto Star business columnist, (his column Clean Break, appearing every Monday in the business section) can be contacted for feedback

Attendees:

• Astris Energi Inc.
• Cachet Cleantech
• Global Earth Products
• GreenCore Composites
• H2Green Energy Corporation
• Hybridyne Power Systems
• Remco Solid State Light Inc.
• Yield Energy Inc.