Internet Capital Group consists of a network of some 70 ‘partner companies,’ all of which are actively engaged in business-to-business e-commerce. ICG, which undertook its IPO in August 1999 at $6 per share to raise $204 mn, saw its stock rise as high as $212 before this year’s ides of March brought its valuation back down to its current trading levels in the $30s. The company represents a new breed of corporate organism: a hybrid of holding company and venture capital firm with a dash of conglomerate thrown in. Wall Street, with its penchant for slapping quick labels on companies it can’t readily categorize, sometimes calls ICG and its peer companies ‘internet incubators’, given their proclivity to snap up just-formed firms, supply them with infrastructure essentials (such as human resources, legal, marketing and technological support) and then accelerate their growth.
While ICG has been incubating B2B progenies such as Commerx, a virtual marketplace where buyers and seller in plastics can meet and do business, and PaperExchange.com, a virtual trading floor for the pulp and paper industry, its IR director, Sherri Wolf, has been incubating its IR efforts. Just as ICG’s companies are not created from scratch but acquired for their strategic fit, Wolf (who is also an MD of the company) brought to ICG some heavy-duty, if unusual, credentials when she started her job just over a year ago. Indeed, had she stayed in her previous position she would have been making calls to the company, not taking them as their corporate spokesperson – for Wolf came to ICG from Adams Harkness & Hill, where she covered emerging growth and technology companies (including CMGI, the Boston-based internet company that is one of ICG’s main rivals. In 1999, Wolf was identified by Institutional Investor magazine as a ‘home-run hitter’ for being the first on Wall Street to recommend this well-performing stock). Wolf’s unusually fresh perspective on IR seemed good enough reason to undertake this interview with her on May 30, 2000.
IR: Let’s start with a review of your background leading to to your position as an analyst and then on to head of IR at ICG.
SW: I graduated in 1990 from Columbia College with a BA in economics. It was a liberal arts program, not business, but during college I did two internships, one at Cowen & Co and one at Merrill Lynch where I got my first exposure to Wall Street. After college I joined Salomon Bros’ training program where I rotated through several positions, including a stint in the CFO’s office during the treasury scandal. I enrolled in MIT’s Sloan School of Management, which had a focus on the application of technology and entrepreneurial efforts were encouraged. After Sloan I joined Adams Harkness & Hill, a Boston-based investment bank focusing on emerging growth companies. I was hired as an associate and became an analyst in 1996. I began covering networking and IT services companies. Then in 1996 I picked up coverage of CMGI, which was a local story. When I left in May 1999 I was covering half a dozen companies.
IR: So what was the offer ICG made that you couldn’t refuse?
SW: There were several reasons. I saw
the job as an opportunity to be part of the internet growth phenomenon, not just sit on the sidelines observing it as an analyst. I also had a great deal of respect for the team at ICG and what they had built. Given my experience following CMGI, I thought this was an opportunity of a lifetime. The position also offered me an opportunity for professional development over time; somewhere down the road I may take a more active part in the venture capital or investment side of the business. And finally, there were lifestyle considerations. At Adams Harkness & Hill I had a grueling travel schedule, and put in lots of overtime during earnings season.
IR: And now?
SW: Now I travel more than I did before as an analyst! This was just one of the misperceptions I came to the job with. There are several components to my job that create a demanding travel schedule. Managing our corporate IR efforts requires attendance at numerous conferences; I also participate in roadshows for our IPOs and follow-on offerings. We meet with shareholders around the country regularly as well. This is in addition to working with our partner companies, which are also located across the US. In the beginning it seemed achievable to get my hands on the pulse of each company. But now I have to admit it’s too much to do. Even though this was one of my favorite parts of my job – helping our newest companies position themselves – I’ve just hired an associate to take over interfacing with our partner companies.
IR: When you were setting up your job did you have any special ideas based on your experience as an analyst with IR departments and IROs?
SW: As an analyst I’d generally go directly to the management team of a company I was covering for an answer and avoid the IR office. Many IROs I worked with just didn’t seem to be in the flow of the information I felt I needed. They didn’t have access to strategic information I felt was necessary to do my job adequately. So one of the first things I made known when I came on board at ICG was that I wanted to be involved in decisions at a managerial level. I’m an MD of the company, so I’m aware of the major decisions. There aren’t any disclosure issues involved: I’ve developed a sense of what to talk about and what not to talk about.
IR: So do all the analysts come to you directly now?
SW: No! I thought my background would encourage analysts to call me. Some find my perspective useful. Others go directly to management. That’s okay since I think it’s important for management to build relationships with the investment community. About 70 percent of calls go through me, and 30 percent through management.
IR: Do you think working for an investment bank or brokerage house is a good training ground for IR?
SW: Definitely. I understand what the institutions want. I also know the portfolio managers, many of them personally, and I have a good sense when a meeting has gone well, based on the content and attendees. I have many relationships from my former job that I am building on every day. I also think my financial training makes me more useful because I can provide analysis that the analysts are looking for. Another aspect of my job where having been an analyst is extremely helpful is in helping our partner companies position themselves with the investment community.
Also, because we use our stock for acquisitions, and since everybody has options, there’s a high level of interest in the investment community’s perspective on the company.
IR: What about individual investors? Obviously you didn’t deal with individuals much, or at all, when you were an analyst. How do they affect your job now?
SW: When I first started I didn’t realize what a large component of my job they would be. But they account for a significant part of our float – and an equally significant amount of our time. Communicating with individuals was a learning process that took a lot of effort. Here again we’ve hired someone to focus exclusively on the retail segment so they can have better access to information. It’s a difficult task, since many individuals communicate with each other through message boards, and you don’t have an opportunity to interfere or interact. But I see the IR mission as marketing our stock to the retail community as well as the institutions. And the approach to these two markets is as different as business-to-consumer and business-to-business marketing.
IR: How has your perception of the IR job changed now that you’re on the other side of the fence?
SW: Frankly, when I first started doing IR it was an adjustment. I missed being directly involved in the equity markets. I was no longer working in a capacity that is the core competency of the firm. Being a part of corporate operations just didn’t seem to have the same cachet. But now I feel the role is actually quite strategic.
Also, when I first started, ICG’s stock skyrocketed and I didn’t have much to do with the sell side – no analyst was going to recommend a stock priced that high. Now that it has fallen off somewhat I think my role has been more useful to the Street.
It seems to me now that there are two types of IR people: those who just set up meetings and those who can be central to the strategic direction of their companies. My goal is to build out an effort that can be helpful to our partner companies and instrumental in maintaining our stock as a valuable currency.
