It’s well known that there’s a pervasive gender gap in venture capital. Not only are women underrepresented in venture capital in terms of the number of women-founded companies, but they are also underrepresented when it comes to leadership positions in the industry. While there’s been some progress in recent years—female CEOs secured about 14% of all VC investment in the US in 2019, compared to … ... read more
How Investment Banks Can Better Leverage Their Networks
Investment banking is a relationship-driven business. According to Danielle Fugazy, a Contributor at Axial, when business owners decide to exit their business—either by way of a sale or a merger—and enlist the help of an investment bank, “the key is finding which investment bank is the right fit.” As Fugazy explains, exiting a business can be one of the most difficult decisions a business owner ever has to make.
“The decisions that go into the process seem endless. What type of sale should they be pursuing? Do they want to remain at the company in some capacity? How can they protect their employees? What price can they sell for?”
In order to win deals, investment banks need to prove to clients that they have established strong relationships with decision-makers, including private equity firms and strategic acquirers. As an investment banker, the key to success is your ability to leverage your network.
Relationships are not binary
Many investment bankers treat relationships as binary—you either have a relationship or you don’t. LinkedIn and other traditional social networking platforms reinforce this view, using vanity metrics such as the number of connections or number of followers to determine the strengths of your relationships.
Just because an investment banker knows decision-makers, doesn’t mean he or she has strong relationships with them.
Trust is key
As Trevor Hulett, a managing director at St. Louis, Missouri-based investment bank R. L. Hulett & Co. explains, “We need to win their trust and this takes time” Their business is their baby. It’s their blood, sweat, and tears that have been sacrificed to build the business over many years and you need to earn their trust before being brought into the inner sanctum.”
A key way to build trust is to pull back the curtain on the true strength of your relationships. It’s not enough to simply show clients a slide in a deck with a bunch of logos of who you know instead prove your value and the strength of your key relationships. Using Affinity, IEG Investment Bank Group can clearly showcase the strength of its relationships to potential and existing clients with complete transparency. As Mirko Heide, Managing Director of IEG, explained:
“Our clients want to know that we have key access to decision-makers. We’re able to show them this by showing them the core of our CRM system—Affinity. It’s about being honest and truthful—that is what matters to clients.”
Many of Affinity’s investment bank customers create Affinity smart lists of potential acquirers during a pitch to a prospective client. During your pitch, you can showcase exactly who you know, how well you know them (i.e., the strength of your relationship with them), and your date of last contact.
Relationship history tells a powerful story
While the date of your last contact with a potential acquirer or other decision-maker is powerful in that it implies the “freshness” of a relationship, there are other metrics that are also important and can be showcased using Affinity. Another important metric is the length of the relationship. Clients want to know that you’ve stood by them in good times and challenging ones. Geoffrey Smith, a managing director with Harris Williams, an investment bank specializing in M&A advisory services in Richmond, Virginia has explained,
“Hopefully, you also have some references you can put them in touch with that have worked with you and can attest to how you perform in the good times and the bad. Clients often learn the most about their advisor when things are tough versus when they are going well.”
Delve into the details
Affinity’s Smart Lists also allow you to delve into the nitty-gritty in terms of specific decision-makers—and showcase this to potential and current clients.
Which details matter? Caroline Corner Managing Director at Westwicke, a strategic consulting firm, has delineated several important criteria for selecting ana investment bank.
- Experience with the particular type of transaction you’re looking to pursue. Each transaction type is unique, and investors specialize in different transaction types.
- Experience in your sector, and especially, your subsector. Corner explains, “the best banking team for you is one with detailed knowledge of your industry.”
- Recently completed a transaction in your sector. Corner explains, “The world of finance is in constant flux. What excited investors six months ago may be exactly what they don’t want today.”
By filtering lists according to transaction type, sector experience, and transaction recency, you’ll be able to ensure that you’re best leveraging your network and empowering your clients for success.
Showcase your entire team’s relationship
Single-threaded relationships with investment banks can be a recipe for disaster. Savvy clients want to know that there is a strong team working on their behalf and that this team has strong relationships to key decision-makers. As Smith explains,
“Every founder should be really tuned into the team that will be working with them. It’s very easy to get swayed by one person. That person can be very convincing in a meeting. But owners need to ask how that person will be involved in the process and who else they will be working with. One of the most important people may be the vice president. You need a consistently strong team from top to bottom.”
Affinity is a source of truth for all your team's relationships, regardless of where partners are located across the world. By showcasing your entire team’s relationships in Affinity, you’ll be able to demonstrate the depth and breadth of your network and, in turn, instill more confidence among prospective and current clients.
With the COVID-19 outbreak, investment banks are experiencing a new normal. While markets and transactions may be more volatile, what is not volatile is the importance of relationships. Relationships will always pave a path for success in investment banking. In our world of unprecedented change, relationships are more important than ever.