Starting in 2011, I began a research project with investors of micro-cap companies. The purpose of the research was to determine what drove their investment decisions.
The things I wanted to know were basic. How did they go about finding small company stocks to invest in? Once they found a company of interest, what were the deciding factors that went into their final decision to invest or go look for another company? What did they like in an investment candidate? What did they not like?
I ended the research early this year and started compiling the information.
What emerged was surprising in some ways and not so much in other ways.
Micro-cap investors are very different from investors of larger companies. They are younger and their investment objectives are quite different. Many micro-cap investors are looking for the opportunity that is going to put them on Easy Street. The idea of buying a stock at a very low price and someday (the sooner the better) selling it for a huge profit is the objective and expectation of nearly every micro-cap investor.
I received very few responses from 407 investors that I polled whose objective was “steady growth” or “value” or other terms you hear from investors of larger companies.
While I have much more information to publish on this research project, I have been able to narrow down five items that are important for micro-cap companies.
This item is new for micro-cap companies. In the past, just having a web presence was enough.
Things have changed though…
Investors are using search engines to find new investments. It used to be message boards, and email blasts from promoters and IR entities. Now however, the search engine has become the dominant way that micro-cap investors are looking for new opportunities.
Message boards, stock promotion and aggressive IR has clearly fallen out of favor for micro-cap investors.
Of 407 investors polled, 64 percent were using a search engine to find investment opportunities.
If you want your company to be “in the running” for these investors, you must have a website that is findable. This includes search engine optimization as well as the optimization of your other “assets” such as news releases and other media.
A micro-cap company that will hit the radar of these investors that are searching will have lots of content that is indexed by search engines. Search engine optimization of your company’s website is a necessity.
We found that many micro-cap investors are young people, between the ages of 18-25. They are much more visually driven. It is fine for larger companies to use a lot of text and graphs to convey information to investors. Their investors are much more sophisticated and are mainly concerned with fundamental data.
Micro-cap investors, on the other hand, are stimulated with a “story” and to have that story told in a way that they can understand it. The driver of micro-cap companies is much more about perception and a lot less about fundamentals.
Having a visually appealing website with videos, photos and graphics will catch the attention of micro-cap investors much better than text and numbers.
Along the lines of appearance, ensure your site is mobile responsive. We found that most micro-cap investors are accessing the Internet via tablets and mobile phones. A mobile responsive design will ensure that prospective investors can navigate your site easily.
Just like a website, news releases can be optimized not only for search engines but for syndication as well. Optimized news releases will drive attention and traffic to your company and improve your chance of having your news releases appear on more websites around the world.
How do you optimize a news release? There are resources out there but they are mainly concerned with private companies. I wrote a whitepaper specifically for small, publicly traded companies a few years ago and am in the process of updating it now.
Use of Social Media
Many micro-cap companies have set up accounts on Twitter, Facebook and other social media accounts. However, in most cases, their results have been poor. The biggest reason for failure is a lack of a sustained effort. The company will designate an individual to post about the company and they will do great for two weeks or maybe a month. When nothing happens, they give up.
Another mistake companies make is only posting updates and news about themselves. The most effective use of social media is through sharing information that investors will be interested in. Specifically, curating and sharing positive industry news and resources is a great way to get engagement on social media.
Whom you follow when you are beginning your social media campaign is very important. Following and sharing information from the influencers is imperative to growth of your own company’s influence.
Social media, when executed properly can lead to a lot of engagement, new investors for your company and substantially better liquidity for your company’s stock.
Give Investors a Compelling Reason to Invest
I saved the most important one for last…
You can have a beautiful website that is search engine optimized, great videos, photos and other media, and optimized news releases. However, if you do not present a compelling reason to invest to prospective investors, all the effort you put into the first four items I have discussed here will all be in vain.
Within your company, its business plan, company presentation, videos and photos you have a compelling reason to invest. Some thinking and brainstorming will reveal what that compelling reason to invest is.
When it comes to a compelling reason to invest in a micro-cap company, I like to look at it as visually painting a path to revenues and profitability. In today’s market, the only way for a micro-cap company to first survive and then thrive is by growing revenues and attaining profitability.
There are no EASY buttons anymore. Once upon a time, not so long ago, you could hire an IR firm or a few promotional entities to tell your story for you.
Those days are gone. I have talked to many CEOs over the last few years; their biggest complaint is about IR, and promotion… no one is effective anymore.
The companies that are doing the best on the micro-caps are the ones who have taken responsibility for marketing of their company and the investment opportunity upon themselves.
Maybe the biggest obstacle for micro-cap companies to overcome is the daunting task of changing the way they operate and present themselves in 2016 and beyond. It is not just about the “stock” anymore. It’s about the story and painting that story in vivid colors for investors.
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