Investor Relations is strangely an afterthought for many a management team, especially in fast growth sectors like technology. While they will spend large sums for PR advice in the never- ending battle for positive headlines, rarely is that the case for IR.

Indeed, there are many examples of relatively large market cap companies staffing IR at a junior level, or totally outsourcing the function to an outside agency.

Come again?

IR matters. And it matters a lot more than many managers seem to think.

First, even writing that seems counterintuitive. After all, the share price is a visible and daily measure of a company that is of concern to any manager. That’s particularly true for newly public companies that are “untested” in the eyes of most investors.

Consider a simple metric — tech unicorns are defined as having minimum market caps of $1 billion (although scores and scores are much larger). So for the “just there” unicorn with $1 billion of market cap, ten basis points (one tenth of a percent) of public valuation is worth an incremental $1 million, and for argument’s sake I’ll assert a good IR is worth at least those ten basis points. That’s a decent return for investing in a company’s IR capability. That math is even more compelling for the $2 billion, $5 billion, of $50 billion market cap (you get the idea).

But most portfolio managers would tell you that good IR is worth a lot more than a few basis points. There are plenty of examples of companies in the same industry having meaningful valuation gaps driven by management credibility and good visibility into one company’s strategic and financial prospects versus others— essentially the foundation of effective IR.

To an investor good IR means that the company offers the financial metrics needed to independently evaluate the company’s performance and prospects. It means the company provides a clear investment story about what it is and how it will grow and compete successfully. It means that senior management have developed credibility with the market by offering insight and guidance that are grounded and factual and not fanciful spin. It means the company is seen as accessible and responsive to investors and understands that creating value for them is important.

IR is also critical to senior management. Good IR means the company has a good understanding of the market’s view of it and its competitive space. Good IR means management is less apt to surprise the market in credibility damaging ways.

And credibility of senior management is hugely important to investors. Most surveys of portfolio managers will cite management credibility as the first or second most important factor when evaluating a potential investment in a company.

Too often management seems to think IR is not worth the effort because “markets will be markets” and the ability to influence them is limited. That’s just foolish. Markets are made up of collective human judgement. And human judgement, even the proverbial “wisdom of crowds” is hugely subject to perception. At its core, good IR is all about protecting, preserving and enhancing the credibility of a management team, which is critical to influencing market perception. That takes time, resources and dedication, but it is one of the most important things that any management team should strive for. That will not happen by underinvesting in IR.