An underwriter acts as a gatekeeper between institutions and companies. Some would argue that underwriters are not important, but we disagree. Underwriters perform the vital functions of keeping track of what investors want to buy and grooming companies for financing.
The right underwriter for a company already knows the right investors. His bank has already financed a company’s competitors and has a strong sector focus. If the underwriter does not understand a sector, odds are he will be much weaker at picking the targeted investors.
The relationship that matters is the underwriter’s equity sales team’s relationship with institutions. The relationship that matters less is the company’s relationship with the broker. If a company has an excellent relationship with an underwriter that is not capable of delivering results, that relationship is a net loss for the company.
When picking the right underwriter, we have a few rules. The underwriter must have the following:
· experience in the company’s sector
· experience in the offer size range the company is looking to raise
· a history of supporting companies post-raise
· a history of delivering to companies what they press release during the initial fundraising process
Choosing the right underwriter is much like choosing between a used Ford and a used Chevy. Every underwriter will be stronger in some area or another; it is important to understand where an underwriter is weak so that the company can get additional support in these areas.
Of course, you could always just hire us to pick for you.