25. The Sound of Ka-Ching!
Scale the “You”
If you’ve ever tried to have an important conversation on your mobile telephone from a busy airport terminal, a crowded restaurant, or a noisy street, you’ll appreciate the solution developed by Audience, Inc., a Silicon Valley company. Using sophisticated software algorithms and integrated circuits that mimic the dynamics of the human ear, Audience’s technology separates the background noise from the human voice and transmits conversations with crystal clarity. Investors appreciated Audience’s technology—and the 316% Compound Annual Growth Rate of their revenues—when they went public in May 2012. The stock was priced above the anticipated range,1 and then rose 12% higher on the first day of trading.2
Investors related to Audience as end users of mobile devices, but they also related in their primary roles as investors because Peter Santos, the company’s CEO, made the connection for them in his IPO road show. After describing Audience’s revolutionary solution—with a simple but dramatic demonstration of how the technology enhances a mobile conversation on a noisy street—Mr. Santos punctuated his presentation by scaling the “you.”
If you or billions of other mobile phone users want to have not just narrowband calls but wideband calls, to be able to have video in addition to voice calls, want to be able to enter addresses or search strings using your voice instead of typing it on a keypad, and if you want to do all these things in a noisy mobile environment, you have a much higher bar in terms of acoustic signal processing.... Audience has solved those problems.
Because Mr. Santos scaled from the single “you” of a mobile phone user to the implied multiples of “you,” represented by the “billions of other mobile phone users,” he demonstrated the large market potential for Audience’s technology. But he didn’t stop there, he went on to widen the opportunity for that same technology to address several other applications and several other markets; all of which is music—as clear as an enhanced mobile phone call—to investors’ ears, music accompanied by the sound of a ringing cash register: Ka-Ching!
Scaling the “you” was a lot easier for Mr. Santos than it was for the CEO of a medical device company whose product treats diabetes victims. In her IPO road show, the CEO could not address the investor audience as individuals for two reasons: less than 10% of the population has diabetes3 and, far more important, she might have made her audience feel uncomfortable by associating them with a debilitating disease. In her road show she went right to the big market by describing the 25.8 million children and adults in just the United States who could be helped by her company’s product. Ka-Ching!
The CEO of another medical device company, whose product is a minimally invasive surgical tool, had it a bit easier. I coached his IPO road show and, during our sessions, role-played a potential investor. In the final rehearsal of his presentation, the CEO held up his minimally invasive surgical device, looked at me and said “With this device, you can make a better incision.” I shook my head and said, “I don’t make incisions.” He thought for a second, held up the device again and said, “So you can see, if tens of thousands of surgeons want to make better incisions, they’re going to have to buy this device from us.” Ka-Ching!
Do the calculations for your audiences and add value.
Scale the “you,” and listen for the rewarding sound of Ka-Ching!