LEAD ARTICLE

Practicing IR at a cryptocurrency, AI, or biotech company can be a little like teaching Emmanuel Kant to undergrads. The topics are extremely difficult and there is precious little to offer by way of mnemonics or simplified study guides.

Veronika Oswald, London-based Investor Relations Director for Cypherpunk Holdings, which is listed on the Canadian Securities Exchange, is an engineer by trade. Yet even she struggles to explain how her company – which invests in cryptocurrency and privacy technology companies – operates. “Technology is very close to my heart, but I cannot say I understand blockchain completely,” admits Oswald. “Every day and every week, you hear about a new development.” 

Oswald compares the current IR challenges to what earlier practitioners faced during the dot-com boom. “People want to know what the technology is going to be achieving rather than how it works at the technical level,” she says, adding, “You didn’t need to know how the Internet works to explain why investing in early Internet companies made sense.”

Laura Kiernan, CEO and Founder of High Touch Investor Relations, based in Toronto and New York City, does IR for a number of companies, including VIQ Solutions, an AI-driven voice and video capture technology company headquartered in Mississauga. She notes that telling a story about AI or blockchain can be like “explaining calculus” and so the fundamentals of IR and good storytelling take on heightened importance.

For Kiernan, one advantage of being an IRO at a cutting-edge technology company is the audience itself. “You’ll find that investors are some of the most curious people on the planet, and the same with analysts,” she says, “They just love learning new things.” 

Simplify Without Oversimplifying

IROs at companies with highly technical products find that education is front and centre in their daily lives. “The education part is unbelievably important,” says Sue Ennis, Vice President, Corporate Development and Head of Investor Relations at Hut 8 Mining, a digital asset mining company based in Toronto.

Ennis says that at earlier financial services positions, “you didn’t have to explain what a mutual fund or an ETF was...People got it. Those industries have been around for almost 100 years. But because Bitcoin is relatively new, i.e. since 2008, and has only been considered a serious investment by institutions within the past two or three years, the education piece is so much bigger than before.” She notes that even when talking with tech savvy investors, “you often have to literally start from scratch.”

Ennis is a believer in diagrams and other tools that give prospective investors a way to visualize what Hut 8 does. She notes that in her investor deck, two full pages of the appendix are devoted to how Bitcoin transactions work.

For many AI, cryptocurrency, and even biotech start-ups, the task of making a very complicated story comprehensible begins when a company goes public.

Take AbCellera Biologics, a Vancouver-based biotech with a microfluidics technology for identifying single antibodies. David Frost, Partner at McCarthy Tetrault LLP in Vancouver, notes that there was “an enormous effort in the prospectus to distill down succinctly and accurately what the actual technology is and what the applications for the technology are.” He continues: “We’re talking about tens of hours, by teams of people – the underwriters, the company, and counsel – to refine that communication.” He continues: “It’s a skill, a real skill.”

Frost believes that because of the technical demands, biotech IROs will ideally have completed a master’s in science. “You’ll have your 30-second elevator pitch, but then you need to explain how that technology applies in a practical way and answer investor questions.” For this reason, he’s convinced that “the background of the IR individual is quite important.”

Even with the requisite academic bona fides, the pressure to keep educating oneself continues. Take Hut 8 Mining, for instance. Ennis has been in traditional financial services and IR for nearly 10 years, and has worked in cryptocurrency for the past four.  She notes that she still devotes hours a week to understanding the underlying concepts and to reinforcing her knowledge. 

Not everyone agrees that telling a cutting-edge tech story is all that different from telling a more mainstream corporate story.

Montreal-based executive advisor and former IRO Lorne Gorber explains that IROs are extremely valuable at new tech companies for their bread-and-butter IR skills. “Not only do they have contacts in the investment community, but they have the internal list of subject matter experts they’ve had conversations with and can validate at some level.” Gorber emphasizes that a seasoned IRO would know that “the mad scientist doesn’t always show terribly well” and would find a better communicator to explain technology applications.

Often, what investors truly want from cryptocurrency and other high-tech companies requires a delicate balance between entering the weeds of futuristic technologies and providing simple, catchy explanations.

Christian Sgro, Technology Research Analyst at Eight Capital, is familiar with how IROs in this space tell their stories. He observes that it’s “very difficult to find layman’s terms for any of these topics without glossing over the parts that differentiate one company from another."

Knowing Your Audience

Hut 8 is pursuing an IR strategy that is noteworthy. “It isn’t just about calling institutions and retail advisors anymore,” says Ennis. “You have to respect and get ready to leverage social media and the huge, decentralized hedge fund that is the Reddit groups, the Robinhood traders, and the Wall Street Betters because they have a tremendous amount of influence over stock price.” 

“When Joe Vafi from Canaccord or Kevin Dede from Wainwright issues a report, that only goes to a select group of advisors and institutions. Accredited retail investors don’t have access to that material,” she says. In contrast, the Hut 8 group on StockTwits has 16,000 followers along with individuals she calls “mayors,” who strive to understand the financial nitty-gritty and are keen to report sentiment to her – sentiment that she can pass on to her Board and to CEO Jaime Leverton.

Linda Montgomery, a Toronto-based thought leader in IR and digital assets, agrees with Ennis’s approach, noting that in the world of blockchain, which is essentially a decentralized, distributed ledger, decentralized communities have “elevated importance.” 

What’s more, she points out that the retail community for blockchain and crypto has its own unique attributes, notably, that it skews young. That said, she notes that “a lot of these investors are quite smart and they have engineering backgrounds. They have a different relationship to tech and social media.”

Flipping the Script: The Future

Montgomery explains that even an IRO in the most hidebound sector needs to know about blockchain, AI, and crypto because these advances are spurring a drive toward fully digital exchanges. 

“Value is becoming digital, and the representation of value is becoming a token,” says Montgomery. “So IROs need to be thinking about what does digitization mean when anything of value can become digital.” She notes that NFTs, or non-fungible tokens, which are stored on a blockchain, are transforming concepts of value in art and sports memorabilia, but this same innovation could apply to other assets as well.

Cryptocurrency exchanges, she says, represent “a whole shadow financial system that is more transparent, more streamlined, and faster. There’s no reason why a trade needs to take three days to settle.”

Montgomery urges IROs to begin learning about digital assets and cryptocurrency exchanges because these developments are poised to disrupt traditional capital markets. “Why,” she asks in concluding, “should IROs be watching and learning about all of this? Because this is ushering in a new era of investor relations.