The Importance of Investor Relations Consulting for Startup Enterprises, Part II
Last time, we discussed the importance of investor relations consulting for startup enterprises. As we recall, startups, regardless of how sure they are of their product or service, face great difficulty in establishing themselves in the market. Their offering may not yet be trusted by customers or investors, and they have to compete for market share with more established companies that possess much deeper resources. Such challenges are greatly exacerbated in a struggling economy. A skilled investor relations consultant can help startups navigate these difficulties by strategizing an effective visibility campaign, helping startups navigate the oftentimes complex world of regulations, and by putting the startup in contact with networks in the investment world.
To see the benefits of investor relations consulting in such cases, it is useful to examine case studies. Furnari Scher LLP is a firm that, among other services, provides investor relations counseling specializing in "helping clients become attractive for investors and joint venture partners." They feature a team of consultants who have experience as both attorneys and entrepreneurs. As such, they are specially equipped to provide legal expertise to startups. A brief discussion of some of their success stories provides a glimpse into the benefits of effective investor relations consulting.
Technological and medical entrepreneurs oftentimes must pass stiff licensing requirements in order to get their products to market. For example, Furnari Scher LLP worked with a group of scientists who sought to "develop a minimally invasive tool to detect breast cancer using laser technology invented at, and patented by, a preeminent national lab." This technology "was at least four years away from receiving the government approvals required to sell the device." Therefore, the company needed funding to pay for further research. Furnari Scher LLP was able to introduce the client to an investor who was able to produce the money necessary "to complete a 200 patient clinical feasibility study and [to assist] the company in structuring and executing three rounds of private placement securities offerings." This story illustrates how an effective investor relations consulting firm can take advantage of investment networks to help a startup successfully place its product or services.
Another challenge facing companies seeking funding are trading regulations. A company that gets on the wrong side of state and federal regulators can easily go under due to heavy fines and probationary conditions. Furnari Scher LLP worked with a medical technology company that faced challenges while seeking funding. Those problems included state investigations after a manager "made some technical mistakes while offering securities in a private offering." Furnari Scher LLP helped this company by advising it regarding the removal of its rogue director and by serving as a liaison between the company and the investigation. Management was thus able to focus on company operations during a critical period, all the while Furnari Scher LLP engineered "favorable settlements with state regulators, often obtaining significant reductions (up to 80%) in fines originally contemplated by regulators." This story illustrates the potential benefits of having access to investor relations specialists who have the knowledge and experience needed to navigate regulations.