InvestorSoft Market Entry Strategy for Small Cap Companies

Introduction: Opportunities and Challenges

Before starting a new business venture, it is important to take into account both the potential benefits and possible drawbacks of the undertaking. The opportunities and challenges should be in appropriate balance for the venture to be viable in the long term. When considering the InvestorSoft opportunity, a number of factors present both opportunities and challenges. InvestorSoft offers many benefits that can be set in contrast to those of its competitors.

The greatest benefit the venture might offer its clients is time savings. The service would, for example, offer significant time savings in terms of managing technical problems and waiting for IT revisions by professionals. Investor relations professionals would be able to use the software to update their investor relations website without waiting for third parties to do so. Eliminating this wait time would result in more productive use of resources and ultimately better efficiency in terms of time investment and returns.

Another benefit the software would offer clients is a better image in the investment community. Retail investors thinking of buying stock, for example, would be encouraged to do so by the professional image created for the company. Such an image creates a sound platform for future business, and existing and potential future professional relationships are therefore enhanced by a suitable web presence.

InvestorSoft would also enable companies to better meet the full disclosure requirements of securities regulators. The web presence created by the software would make it easier for companies to provide accessible investor information to clients. This is particularly important in light of recent high-profile scandal cases that have plagued the investment world. An easily accessible, public disclosure of a company's investor policies and principles would further serve to create a favorable image.

Target Market Segmentation

All of the above positive points can be used as selling points to gain an edge in the competitive world of investment software, and they can also be promoted as an enhancement of competitiveness for clients. This does not, however, mean there are no challenges. One challenge is the relatively quick and easy process of establishing a client account and integrating the software into a website, which might raise doubts about the quality and value of InvestorSoft.

Currently, the greatest challenge is probably the fact that the company is relatively unknown in the world of investments. This, combined with questions of quality, could make the initial marketing of the software somewhat difficult. Decisions regarding the target market and positioning will help to overcome these challenges.

There are several potential target markets for the company. In North America, for example, there are more than 8,500 publicly traded companies, of which 2,500 are based in Canada. One way to segment these companies is by market capitalization, which focuses on the total value of outstanding stock for each firm. Other considerations that might influence segmentation include short-term and long-term decisions affecting InvestorSoft's marketing position, brand image building, and market movement.

Micro Cap companies, for example, comprise about 50 percent of those listed on Canadian stock exchanges and have a market capitalization of less than $50 million. These companies tend not to be well-known, since their stocks trade in low volumes among a small group of investors. What makes them an attractive potential target for InvestorSoft is that they generally lack an advanced investor relations program. They could therefore benefit from InvestorSoft by creating a better brand image through improved online investor relationships. Furthermore, these companies can help build InvestorSoft's brand reputation through effective usage. Because of their position relative to competitors, it would be relatively easy to convince them of the value of using InvestorSoft to gain a competitive edge.

Small Cap companies are somewhat larger than Micro Cap companies, with market capitalizations between $50 million and $300 million, comprising about 29 percent of Canada's publicly traded companies. The basic aspiration of these companies is to grow their capital in order to become competitive among larger firms. Like Micro Cap companies, Small Cap firms tend not to be widely recognized, although some have gained a degree of public notoriety. This is also a good segment to target, as most of these companies are already aware of the importance of managing their investor relations effectively. Furthermore, these companies are generally unwilling to commit many employees or significant capital to such efforts, which makes InvestorSoft a particularly suitable option.

Mid Cap and Blue Chip companies, on the other hand, are large enough to invest significant capital and staff resources into their investor relations efforts. It is therefore unlikely that InvestorSoft representatives would be able to easily convince them of the merits of the software. That said, targeting these markets would generate much higher brand awareness and could ultimately prove worthwhile in terms of the firm's long-term survival and growth.

Short-Term and Long-Term Market Entry Strategy

In the short term, it is suggested that InvestorSoft initially target Small Cap companies, since it would require the least effort to convince such companies of the software's merits and of the need to manage their investor relationships effectively. Furthermore, the fact that this segment contains some well-known entities can serve as a long-term vehicle for entering larger market segments. Once a Small Cap company grows into the Mid Cap and ultimately the Blue Chip segments, software adoption and brand awareness will follow. Once InvestorSoft is firmly established in the Small Cap segment, long-term targets can include Mid Cap and ultimately Blue Chip companies.

Building a sound brand foundation at first will require less investment in time and effort than immediately targeting Mid Cap and Blue Chip companies. An additional consideration is that, when starting with Small Cap companies, the software's ease of use and low time investment can be presented as a selling point rather than a reason for doubt about the company's legitimacy in the investment market.

In terms of geography, it makes sense — again in the short term — to initially target the Canadian market, since this is where InvestorSoft is located. However, as brand awareness grows into larger market segments, the United States market can become a long-term target, even as Mid Cap and Blue Chip companies begin to become viable prospects. When entering the U.S. market, the company should consider starting at the Small Cap level once again, from which it can gradually grow toward Mid Cap and Blue Chip opportunities as well.

Small Cap customers represent a good entry point because they are aware of the need to manage investor relations effectively, yet they do not necessarily have the capital or human resources to hire external experts or build an in-house investor relations department. InvestorSoft can therefore be positioned as the optimal solution: the capital investment is relatively modest, the human resources required to operate it are minimal, and all the necessary information and elements are in place to provide investors with what they need. As a short-term entry into the market, these companies are the ideal target, since they are focused on growth into larger market segments and could also serve as a vehicle for InvestorSoft's own expansion.

As a start-up company, InvestorSoft would do well to enter the market that is most receptive to what it offers, while also securing pathways into potentially more profitable markets. Small Cap companies offer the best short-term entry point, with significant potential as a vehicle for broader long-term growth.

Conclusion and Recommendations

In summary, it is suggested that InvestorSoft target the Small Cap market, since it appears to be the easiest to enter and has the greatest need for a service like that provided by the company. Sound establishment in this segment can then serve as a vehicle toward a long-term presence in the Mid Cap and ultimately the Blue Chip markets. It is also suggested that, in the short term, the company use print advertising in the CIRI newsletter as an initial method of raising brand awareness — beginning with a large, prominent display advertisement and following with smaller placements for the remainder of the year. Conference advertising can be pursued in the longer term, once the company is more established. Although it is a more costly option, distribution by direct visits is considered the best way to demonstrate the merits of InvestorSoft without harming brand perception.