My chat with Andrea James, SVP of Corporate Strategy & Investor Relations at Axon

Investor Relations is the least talked about function in our world of startups. I talked to Andrea James, SVP of Corporate Strategy & Investor Relations at Axon, a public safety technologies company. She has one of the most eclectic backgrounds I have seen. She’s been a stock analyst (an early vocal Tesla bull) and a business journalist. Elon Musk hired her to work in Tesla IR. We talked about similarities and differences across journalism, stock analysis and investor relations. I might have offended her a bit by asking WTF do Investor Relations people do all day, every day.

Disclaimer: Andrea James is speaking on behalf of herself, in the context of expertise she has built up over her career, and not speaking on behalf of her present employer.

Sar: You have been an investigative business reporter, a sell-side stock analyst, and now you run investor relations at a public company. You have done storytelling in equity markets from every possible vantage point. You were a vocal, strong early Tesla bull and later worked at Tesla in IR. I want to talk about Elon but let’s first focus on demystifying the IR function at companies through the lens of your journey!

I tried finding more people who have had the series of jobs you have had, and it was a struggle. Is it common for people in IR to have the trajectory you have had?

Andrea: Thanks for doing your homework on me! I do have an uncommon background. Curiosity is the common thread. I majored in computer science in college because I needed a marketable skill as a first-generation college student. And then, I added a dual minor in physics and communications for the fun and curiosity of it.

To pay the bills in college, I did database analysis for FDIC. But then, after 9/11 happened, I felt like I couldn’t go into a so-called regular job. I had to make current events a part of my career. I switched to journalism and earned a master’s degree in that.

Journalism became my second career love after computer science. In journalism, my first editors put me on the business beat because I wasn’t afraid of math. (To be clear, business math is easy, but many journalists don’t gravitate toward it!). After a few years doing investigative business journalism in Seattle, I was spearfished into an investment bank to do stock analysis. I was a broke newlywed during the Great Recession who needed to make more money.

Stock analysis was a blast but also a crazy-making grind. The fun part was the constant research and nerding out on stocks with buy-side clients. Pulling all-nighters several times a year during earnings season was awful and took a huge toll on my health. After that, it was Elon Musk’s idea for me to do investor relations. I had relationships with all the top Tesla shareholders, so it was a natural transition. So, that’s how I ended up in IR.

Sar: Most of your career has been about telling stories. So, as a journalist, you're trying to, or, cynically, more like pretending, to be neutral, right? As a stock analyst, you get paid to take a perspective. As an IR head, you must be deep in a single company and be extremely careful about what you say. When you think about those transitions, was there a lot of like mindset shifting, unlearning, and picking up new habits that were going on because you went from covering lots of stocks to working at a company? I’m sure your background gives you advantages in your current role compared to your peers with a more traditional path.

Andrea: Fun question! I love being inside a company because I know how people outside the company use the information we put out — because I’ve sat in the media and the stock analyst seats. That’s been hugely valuable.

But the jobs have all been different. Transitioning from journalism to stock analysis was a real wake-up call — especially during my first few months on the job. Beyond the fact that stock analysts try to fit the entire world into a spreadsheet — so-called boiling the ocean — the regulatory environment is new.

Journalists operate under first amendment protections that are near absolute in the US. A journalist reading this would immediately begin to object to all their perceived limitations — because most journalists hold themselves to strict rules on protecting anonymous sources and have an entire code about whether the information was gleaned on the record, on background, or off the record. They are also constantly seeking to operate in a way that would be defensible in a libel suit — not recklessly disregarding the truth and making sure they have two sources to confirm potentially sensational facts, for example. But even with all that, compared with business people, journalists have much more freedom to do their jobs from a legal and regulatory standpoint.

When I moved over to the finance world, I initially thought I would work a beat just like a journalist would — cultivating sources inside companies, getting to know experts, and so on. I ran up against the regulatory limits of that mindset very quickly! Looking back on this now, I marvel at how little I understood about the business world, even when I was covering business as a reporter.

For example, if a stock analyst hears a rumor, she can’t phone a bunch of people asking whether it’s true without risking that behavior as being construed by FINRA or the SEC as spreading the rumor! I remember learning this and asking, “Don't I have free speech?'' And I learned that, no, if you work in finance, you don't have free speech. Wall Streeters don’t have free speech; they have compliance departments.

Do you want another example?

Sar: Please.

Andrea: Ok, when I started as a stock analyst, I covered two companies that sold satellite imagery to the intelligence community. At one point, at an industry conference, I introduced myself to a couple of company employees I was hoping to tap for information, just like a journalist would with her sources. Those employees (rightly so!) turned my name and business card over to their IR department. The IR guy wrote to my boss at the firm to ask, “What the heck is she doing?”

As Bender put it on Futurama, “And that’s how we learned our lesson.”

You can't have company insiders giving you information; that’s against the rules. I was no longer a privileged member of the free press. I stopped cultivating sources and started doing channel checks instead. That was fine by me — I still got to talk to strangers.

Sar: What are channel checks? As an analyst, it’s more about being smart about processing publicly available information. You can't just be buddies with the management team and start factoring that into the analysis. But as a journalist, you could do that, which can be a source.

Andrea: Exactly. Channel checks are one way that stock analysts seek information. It involves talking with third-party companies or visiting stores to determine how a public company performs. If a public company sells its products through third-party distributors, a stock analyst can phone those distributors to ask questions such as, “How is business going? Is business getting better or worse? Is the product flowing? What are you seeing out there?” You phone up the channel to try to guess what a management team will say before they say it. It can be scary to publish something only you know as an analyst. Journalism trains you for that. My byline had been on the front page of newspapers before, so I knew what it felt like to have something no one had and publish it.

Sar: Right, you were comfortable with being out there. This reminds me of Cathie Wood, whose bold, tech growth stocks-centric view is similar to yours. She does a lot of media appearances.

Andrea: I knew Cathie when she started up her fund! Many of the Ark innovation stocks were also ones I covered as a disruptive technologies analyst, such as Tesla, Stratasys, and Protolabs. Going on camera has been an interesting career development for me. I practically resisted it every step of the way — but ultimately, I think you are right —you have to put yourself out there.

When the TV networks had me on, I said no to half the media appearances they requested. The networks seemed very hungry for a woman expert. I remember this one time when Disney theme parks changed prices; a producer phoned me and said, “Hey, can you come on to talk about this?” I responded, “I don't cover Disney. I am not an expert on their business. I’m probably not the expert you want.” But the producer said, “That’s OK, we love having you on, and we’d love to hear your opinion!”

I declined. But, I realized there wasn’t a rigorous process to determine that I knew what I was talking about. Because I cared about my reputation, I would only go on camera when I knew the subject.

Dear readers, take heed. Please be wary of taking the advice of people you don’t know on TV.

Sar: How do you think about the ethics of stock analysts being out there? Because it's common for random people to pull up their brokerage accounts and listen to all these random people on the CNBC panel pumping stocks. People like Jim Cramer. There's an online meme that whatever he says is the opposite of what happens. Did you have to grapple with the consequences of what you were saying on TV? Your analyst days predate much of what we see today with the modern online trading culture.

Andrea: When you get your FINRA licenses, you learn about the concept of suitability. Not every investment is suitable for every investor, right? It's all about your investment time horizon, goals, and level of risk tolerance. I didn’t advise individuals; I advised institutions who were sophisticated investors. ‘Sophisticated,’ in this case, is an industry term with its regulatory meaning; it’s not used as an insult or compliment. It did not fully occur to me that I had a retail following. Then, when I left stock analysis, I began hearing from retail investors who said I had saved their retirement and that they had held onto their Tesla stock despite all the naysayers. My conviction helped them stick by their convictions.

I’ve tweeted about how this blows me away. I’m just so thankful that it all worked out. I’m happy that I had an impact beyond myself — and I’m also glad I didn’t know about it at the time because I might have cared too much, which might have crippled my ability to do objective analysis and stick to my guns. I never hedged my early bullish opinions on Tesla. The critics were on the heavy end of the boat. I’ve come to appreciate the people who follow me and know me from my Tesla analyst days.

Sar: Yeah, it's a different world now than a couple of years ago. So you went from journalism to stock analysis and then to IR. That’s going from talking to buy-side clients as an analyst to doing the same as an IR person. It will sound ridiculous, and I say it with the best intentions, but what do IR people do daily? What happens during and outside of the quarterly earnings season?

Andrea: The way you ask this question makes me think I should have a lot more free time than I do! Ok, let’s unpack it.

First, the quarterly messaging is a giant amount of work. The IR team owns the shareholder letter and the earnings presentation, and we put on a Zoom earnings call, which includes a script for the executives. My current IR team also puts together a video every quarter for retail investors. Most IR teams don't do that.

We stay visible to the Street — this is important no matter what is happening with your stock price.

After we report quarterly earnings, it’s conference and NDR season. An NDR is a non-deal roadshow where you travel around cities and speak with investors. Investor conferences are like speed dating between companies and institutional investors. And then we are present on the phone or on Zoom to respond to the Street. If there are 20 investors or analysts who want to talk with me in a week or so, that’s about 20 hours spent on phone calls. So the calendar books up quite quickly.

I also run the corporate strategy team responsible for mergers and acquisitions, strategic investments, and partnerships. That team runs well and doesn’t take a ton of hours from me — just people management and guidance. But for the first few years, getting it off the ground was a lot of work. We have invested in ecosystem partners as a strategy, alongside VC firms.

And then, you have all of the shareholder interactions regarding governance. For public companies, the board of directors hires the management team and sets the management team’s pay.

That board is elected by the shareholders and is accountable to the shareholders. And so you need to get shareholder feedback; you need to constantly foster dialogue on topics including executive compensation, governance, etc. Your shareholders vote on matters the company cares about during proxy season — so that’s another big use of time. And then, we also have the SEC reporting team, where IR provides input, and ESG reporting, a new focus area that has cropped up in recent years.

A robust investor relations function means that when major company decisions are being made, your investor relations officer has a seat at the table and can bring a shareholder lens to the discussion. Another thing that we think about is our capital structure — the IR function plays a key role in capital raises.

And then finally, your IR person should know your business inside and out. I maintain a three-statement model for when shareholders call me to discuss financials. I must understand our product strategy, how the products work, our customers, and the competitive landscape. Good IR means you’re an internal analyst in your own company. This is so important to me that I’ve done ride-along with police departments and taken voluntary exposure to a TASER device for my current company. IR needs to know the product.

Sar: These shareholder conversations are happening between quarterly earning calls. Do you have to be very disciplined about what you share? Talk about the mindset and approach you believe IR teams should have in these conversations.

Andrea: Always. It helps if a company is transparent in its quarterly earnings webinars and shareholder letters. A company’s public information becomes the basis for contextual conversations with shareholders.

If there's a question coming up repeatedly, there’s an opportunity to address it in the next quarterly update. For instance, our most recent earnings video quickly segmented capital allocation priorities in our R&D investments. We answered a repeated shareholder question in a video with an animated pie chart. (Link to video)

Companies benefit from adopting an open, non-defensive posture with the investment community. We recognize that it’s an investor’s job to ask questions because they manage money for their clients.

Sar: A handful of very large passive funds managers like Vanguard and BlackRock own a slice of most companies and tend to be some of the largest shareholders for most companies. When you have shareholder conversations, do you prioritize the active guys like hedge funds?

Andrea: First of all, passive investors aren't allowed to make trading decisions based on the fundamentals of your business. I only talk to active shareholders about business fundamentals. I speak with active asset managers, including long-short hedge funds.

Sar: But does IR interact with passive shareholders at all? In a way, it makes sense that you don’t talk fundamentals with passive holders. They are passive for a reason! But, it simultaneously feels strange since they still have voting rights and influence!

Andrea: You nailed it! Companies can talk with the governance and proxy voting teams at passive funds. You are correct that all active and passive investors vote on executive compensation, board composition, how many shares a company can issue to employees, and every other proxy issue. So there is an ESG-focused relationship with passive investors.

Interestingly, active shareholders usually tend not to vote against management teams. They'd rather just sell the stock if they don’t like what the management team is doing. But passives vote how they want to vote. And that's a very interesting dynamic for a public company. That is why what BlackRock CEO Larry Fink thinks about ESG matters to public companies.

If big passives like Vanguard and BlackRock have the two biggest votes in your company, and if they don't agree with what you want to do, you can't do it. And a company can't say to BlackRock, “Hey, just sell the stock rather than vote against what I want to do.” Their ownership is tied to an algorithm, whereas how they vote is tied to areas in which they wish to influence companies.

From the outside looking in, I believe that the senior people at BlackRock understand that they have a lot of influence over companies and feel obligated to use that influence in a way that aligns with their values. Consequently, we have conversations about sustainability, diversity, and other matters, with the passive funds. But they aren’t asking about gross margins or revenue growth. They’re asking if you’re managing your carbon emissions properly. This is all a relatively new phenomenon that has cropped up over the past five years. (BlackRock also has actively managed funds within, but I’m talking about the passive ownership here.)

Sar: Where does the Investor Relations team sit within an org chart? Which other teams do you work with throughout the year?

Andrea: The IR department usually reports to the CFO. My recommendation is to have someone with a finance background running investor relations. It’s nearly impossible to be effective unless one speaks the Street’s language, which is financial. Investor relations should work closely with the executive team, financial planning and analysis, accounting and SEC reporting, and the legal team.

The IR team should also work cross-functionally with every other team at the company. That’s the only way to represent your company’s amazing work to investors.

Sar: What documents is your team responsible for when you guys do earnings calls?

Andrea: The shareholder letter is the IR team's baby, we put that out, and now we have an earnings video, too. The production value of these videos continues to scale. We help the management team to address the topics we know shareholders want to hear about and will likely ask about.

Sar: What is the importance of the shareholder letter internally?

Andrea: It’s a lot of work to put out a shareholder letter, so it helps to treat it as a mechanism that helps ensure everyone stays on the same page. The process fosters a discussion that deepens total company alignment four times a year on a word-by-word basis.

Sar: When you were an analyst speaking with IR people, were there things that weren’t making sense to you or didn’t appreciate enough that you have a different perspective now that you are in the IR position?

Andrea: The biggest surprise I had from moving from sell-side analysis to IR is that 50% of the job is internally facing. As an analyst, it’s easy to think that the IR job is all external facing because the analysts regularly interact with the IR person.

But, I do a lot of internal facing work. You're helping to drive alignment. You are feeding information back into the business. You end up being a thought partner to the executives.

The other thing is that I like to promote compliance and financial literacy internally. (I also love having an excuse to interact with other business functions, such as engineering, supply chain, sales, people ops, etc.) It is natural for employees, especially those compensated in stock-based compensation, to have questions about share volatility. The IR team can foster an intellectually safe environment for employees to ask questions. Senior leaders often say, “We don't manage the company for the day-to-day stock price.” That’s the correct answer for a management team in response to share volatility. But the IR team can help make it okay to be curious. I try to help people understand what we see in the markets.

The IR team is also a partner in promoting and fostering a compliance culture. Remember that mindset shift I mentioned above? It’s important that employees at public companies also know the regulatory landscape. Everyone needs to win right and stay out of trouble.

Sar: What is something startup founders tend not to understand or fully appreciate about public company investor relations?

Andrea: First, it’s that the Street is a different landscape than the VC world—with only occasional overlap. You see this sometimes when private company valuations diverge wildly from public valuations and a company IPO’s and trades off in the public markets. Public markets trading drives daily pricing discovery, whereas private companies only mark to market when they do a round.

There is also a big difference between a pre-IPO company and a public company — you don’t want to IPO too early and subject yourself to the daily scrutiny of the public markets, as well as the regulatory burden until you’re ready.

Public company investors and analysts will pick over your GAAP financials in excruciating detail— with refreshed numbers four times a year. They will compare lines in your financial statements, calculate ratios, and conclude how healthy the company is — and it’s your IR team’s job to anticipate and clarify where there might be misperceptions. Also, the migration over to GAAP reporting sometimes doesn’t feel intuitive for founders. Founders don’t have to become experts in accounting, but it’s important to recognize that the public markets will demand robust disclosures and explanations about the financial health of your business.

The capital markets investment community is its own culture — many players know each other — with its taboos and unspoken rules. I don’t even know how you know the rules unless you’ve been immersed in it for a while.

From perusing your Substack, Sar, I can see differences in how VCs think about the world and investing. It is different from the world I know of sell-side analysts, buy-side analysts, portfolio managers, and other types of people who work in equities asset management. For example, a public markets investor will establish a position in your company and then trade around it depending on factors that sometimes have nothing to do with their belief in your long-term growth prospects. If your company valuation grows quickly in a short time, funds might trim back their holding to maintain their weighting of your stock, depending on the fund objectives and their rules. It’s important not to get defensive about that. Or, you might have a shareholder whose assets under management are smaller relative to the big guys but holds a significant position in your company — and they might need to trim all their holdings a bit to free up capital to buy some hot IPO or whatever. Or, a fund might be chasing cyclical or macro trends, and you sit in a sector that just fell out of favor. (Hello, SaaS spring 2022!) The point is that the markets are open every day from 6:30 am until 1 pm pacific, and your company’s value bounces around minute-by-minute. A good IR team can help you make sense of the chaos and identify what’s in your control.

Sar: Right, you guys are like customer support where the customers are shareholders in your context. It is about keeping your ears open, collecting feedback from the market, and then communicating internally to the right teams. Switching gears. What do you think we are not paying enough attention to? It does not have to do anything with what we talked about

Andrea: Well, we could talk about investor relations and finance all day — since that is my day job! I have many side interests and passions, mostly relating to how to design a thriving life. I wear a lot of hats in life, as an executive, a mother, a wife, and so on. I’ve also overcome a lot of personal trauma, so I think I bring a whole-life and whole-person perspective to many of my interactions. I’m interested in people. So, when you ask, “What didn’t we cover?” my mind immediately goes to wanting to ask you about you, your life, your hopes and dreams, and your professional aspirations.

Tell me about how long-form interviews like this tend to be received.

Sar: Ha! I like to keep the spotlight on others. We talked about your tough upbringing when we first connected, and I saw you touch on it in a few old interviews. I find it very inspiring. Given how upbeat you are about life, I never could have guessed your history. Perhaps we will get into it the next time we do another such chat! Let’s end by talking about the internet’s greatest and most competent troll. Do you have any takes on what's going on with the Elon Musk Twitter drama?

Andrea: Now that you fed your readers vegetables, you want to give them candy.

Are we not entertained? I remain a Tesla investor and customer.

When the Twitter lawsuit against Elon dropped, I stayed up and read it instead of going to bed. I like to read source documentation like lawsuits and SEC filings — and because Elon is Elon, the Twitter lawsuit contained a poop emoji. Unreal!

It’s all fascinating, and I have either worked with or know the key players, and I can loosely justify this as being relevant to my job. But is it? I have to laugh at myself.

To people who sit in professional seats like ours — at the intersections of tech, law, finance, and journalism — such events are our version of the daytime soap opera. Right? I know guys who wouldn’t be caught dead watching Real Housewives of Atlanta, but they know how many kids Elon has and can name all his girlfriends. I first observed this phenomenon, by the way, when the Tiger Woods scandal went down years ago. Every finance guy I knew followed that! Some dramas are just tabloids for business people. History will be kind to Elon Musk.

Sar: Any predictions on what happens in October?

Andrea: I predict with high conviction a media circus. I have low to medium conviction in speculating that Elon buys Twitter— it may be at a lower price than originally agreed. If that does happen, I would not be surprised if he re-IPO’d later, at a higher valuation. Even if Elon loses, he’s going to win.