Charlie Du Cane, commercial director at Seastar Maritime, on the art of pitching shipping projects to investors
My grandfather was a banker after the war. On his desk at Lehman Brothers he kept a beautiful gold and leather bound book, with the apparently self-confident title What I Know About Foreign Securities. Curious visitors would open the book, only to discover page after page of pristine whiteness; it didn’t contain a word.
As an aside, I have wondered if there is a book like that with the title What I Know About Pricing Container Securities sitting hidden in the vaults of a certain Norwegian bank. It would explain a lot.
It’s all about how you fluff the chicken
Anyway what my grandfather was doing with that book was telling a subtle story. Until the 1980s Lehman Brothers made most of its money advising companies on deals that took place less 200 miles from its William Street office. So the book was really saying- we might not know how to underwrite the Aswan Dam, but in North America- we are the people you need on your side.
Such storytelling is a vital tool in the arsenal of any fundraiser, and that is especially true in an industry like shipping where it’s often hard to see the pure mathematical impetus in putting money to work in any sector.
This came home to me a couple of years ago when I first started looking at raising money to buy ships and a friend who owns a hedge fund very kindly agreed to talk me through how to pitch. I turned up at his office with reams of information about the ship we were looking to buy, why they were the best ships in the market technically, and projected returns that reflected an optimism that some would call hubristic. After a cursory glance my friend looked irritable and confused: “Your returns are crap, and I can’t see why I should invest in you even if they weren’t.”
Puzzled and hurt I went to see a senior marine banker, who had spent many years successfully raising capital for OSV projects. Given the extraordinary negatives that sector has produced, only a master teller of ‘happily ever after’ fairy tales could have done that. On hearing my dilemma he sat me down and explained. “It’s all about how you fluff the chicken. Make sure your potential investor understands they simply can’t bake the cake without you, and that this is a cake everyone is going to want a slice of.”
Start your pitch by understanding what investors want to hear
His point was clear. You tell a story well enough and you can get people to invest in any old bird, even a half-rotten dead pigeon that’s only claim to fluffiness is the feathers you have just drawn on it with black marker. Let’s be honest, all of us who have invested in shipping in the last decade have eaten cakes that tasted worse than that sounds because someone has sold us a story that turns out to be half-baked.
A great example of good story telling in shipping is the recently unveiled green shipping project by Vogemann. As they acknowledge themselves in their prospectus, newbuildings aren’t that popular compared to secondhand vessels at the moment, but they lay out a quite compelling case as to why potential investors have to “spend money to make money”. By mixing into their story blockchain financing, green technology and crowdfunding, their messaging is so tuned in to what investors are looking for in 2020 that I have no doubt they will successfully raise the capital they are looking for. Therein lies the point. They have started their pitch by understanding what investors want to hear, then tried to make their offering as close to that as they can. With the right story the numbers actually become just one part of the package, and possibly a subordinate one.
So back to my blunt friend with the hedge fund. With new stories to tell, I went to visit him a while ago, and rather than showing me the door, our initial conversation forgotten, he seemed enraptured with the idea of owning a ship- especially if we could name it after his eldest daughter. I don’t actually think the numbers were much different from my initial deck, but if you see a bulk carrier called the Henrietta launching anytime soon you will know I have mastered the art of financial story telling.
“Lipstick on a pig…..?”
This item is a bit confusing in the sense that it seems to justify the dubious sales tactics of embellishment and exaggeration into smart business practice when, in fact, the narrative contains tacit fraud. It also exposes the screaming amateurism of bankers and financiers when it comes to shipping and the suggested ROI prospects. With every new generation comes a new crop of bright, shiny banking whiz kids who are trying to earn their commissions on any deal- no matter how bad- and there is an inexhaustible audience of people with cash waiting to be fleeced by glossy prospectuses and heady sounding banking and investment corporations in London and New York who know how to apply cosmetics.