Does reputation matter to investors?
By Dominik Jones
T he individual profile of a CEO can make a huge difference to start-ups or young companies looking for investment.
We discussed this with Paul Billingham, director at Knight Corporate Finance. Paul suggests that the ability to secure investment is often intertwined with the reputation of the CEO. “In many ways a CEO is the most valuable commodity, especially for companies in early investment rounds. Potential investors need to buy into the leader”, he says.
"In many ways the CEO is the most valuable commodity, especially for companies in early investment rounds."Paul Billingham CEO at Knight Corporate Finance
Keep a high profile for investment
Personal reputation matters when you’re looking for funding – it might even help you to secure that first introductory meeting. And investors want to see individuals who can demonstrate confidence and experience, as well as solid growth plans.
Having a high-profile CEO is clearly not as important as having a good business plan, but certainly in early stage funding rounds it can help.
CEOs that are seen as thought leaders in their sectors, that have secured high level media coverage and that regularly speak at industry events are perceived as being more confident and potentially better connected and networked in the industry. There are so many examples, especially in the tech start-up arena, where company brands are inextricably linked with those of their CEOs.
However, there is an argument to say that the bigger the company becomes, the less important the personal brand of the CEO is. And that if you’re a company looking to sell then a notable high-profile CEO can start to become a hindrance.
Keep a low profile for a sale?
‘‘While having a strong personal reputation is extremely valuable when you’re growing a business, the opposite can be true when you’re trying to sell it,” confirms Paul. He argues that, when it comes to an acquisition, the acquirer may be more interested in the strength of the management team than the reputation of the CEO, who may well be exiting as part of the deal. “A company that shows an over-reliance on its CEO is likely to be less attractive to the buyer”, he says.
“A company that shows an over-reliance on its CEO is likely to be less attractive to the buyer”Paul Billingham CEO at Knight Corporate Finance
The line between personal and professional
With regards to how ‘true’ the version of yourself you present in the public domain is, there’s no question that CEOs need to consider the line between their personal and professional lives carefully. CEOs that openly discuss their political beliefs, for example, leave themselves open to criticism. As do those who share too much personal information or preference on social media. “The more you put yourself out there, the more you put yourself up for public scrutiny,” confirms Paul.
Some investors will stipulate how visible and opinionated CEOs should be on social media channels and with traditional media, for example. They have ethical guidelines within which companies in their portfolios must operate. This includes what they can and can’t say about anything considered too political or partisan. There’s a concern that you risk alienating people with your views and inevitably, the values of your company will be bound up with your own personal opinions. Investors can take a dim view of this.
That’s why CEOs need to consider how much of themselves they wish others to see. There have been countless examples of CEOs that have been caught up in personal or professional scandals that have had a considerable impact on the reputation of the brand and the company’s share price.
“Not all CEOs are constantly ‘out there’”, says Paul. “I’ve worked with CEOs who are absolutely paranoid about PR, probably because they’ve seen how it can backfire if it’s not done right.”
In truth, there’s probably a happy medium. A CEO that can attract positive attention for the right reasons is a valuable asset. It’s just important to be mindful that what you’re saying, who you’re saying it to and where you’re saying it all align with the values of the business and what it’s trying to achieve.
Dominik is a trainee account executive, based in the Manchester office