For more than 30 years, Gary Kraut has been a breakthrough force in the field of investor relations. And as Paul Cordasco reports, the firm he founded continues to lead the way.
Ask Gary Kraut what he did before he counseled companies on investor relations and he says, ?I was a child.? In many ways, IR was also a child. When Kraut founded GA Kraut & Company in 1969, he was just 25 years old. Richard Nixon was beginning his first term as President, the Beatles were still releasing albums, and Bill Gates was in junior high school. At the time, IR was a small communications niche that few people knew existed, and even fewer understood. It mostly dealt with compiling annual reports and setting up meetings with investors. ?I used to tell people I was a salesman,? says Kraut, reminiscing about the first few years of his firm. ?It saved me the trouble of trying to explain what I was really doing.? After graduating from Boston University in 1966, Kraut worked for a few years in PR, including a stint at Ketchum, MacLeod & Grove ? Ketchum?s predecessor firm. As a young man in New York, Kraut stumbled upon a course in investor relations at The New School taught by Richard Cheney, a financial communications veteran who would eventually become chairman of Hill & Knowlton. While in the course, Kraut, who admits to knowing little about finance at the time, learned that one of the major retail brokerage firms was looking for a head of PR. He got the job, and went through the firm?s broker training course. Nevertheless, 1969 proved to be a rough year for the stock market, and although Kraut had been harboring entrepreneurial aspirations, they were hurried along by the economy. ?In 1969, the market tanked,? explains Kraut. ?As a result, they were paying me so little that although my job wasn?t in jeopardy, my entire budget was.? Kraut started his firm with less than $200, which he mostly spent buying his used typewriter from the brokerage firm. He moved into a one-room office in Manhattan with Sandy Teller, a fellow communications pro he knew from Ketchum who had decided to start his own PR firm. In many ways, it was a brave new world for both the young Kraut and IR. ?I had taken the course and it had interested me, but I didn?t know anybody in IR,? explains Kraut. ?There were very few IR firms. Looking back, IR was really just a toddler then.? Since those early days, GA Kraut has grown into a major IR consultancy, with a roster of Fortune 500 clients that includes defense contractor Lockheed Martin, oil services giant Schlumberger, and paper products manufacturer Georgia Pacific. Kraut can now also claim a full-time staff of 15, including several employees with backgrounds in finance. Nevertheless, Kraut has remained off the radar to many, as he continues to gain clients mostly through word of mouth, investing little in marketing. He says his aim has always been to lead a small firm that builds its business slowly based on reputation. Kraut also says he avoided expanding into financial media and press relations because his clients benefit from his laser focus on communicating with shareholders. ?IR is a very special discipline,? says Kraut. ?I knew I could do one thing very well, but not necessarily two things very well. There are plenty of folks who do financial media well, so I figured I couldn?t be the best at both, and focused all my attention on IR.? Kraut also seems to have unusually good foresight. In 1980, he opened up an office in Japan just as the Japanese economy was about to embark on a remarkable bull run. The move was virtually unprecedented for an IR firm at the time, and marked a turning point for GA Kraut. ?We started taking clients to Asia, and we saw we had lots of success there, so we decided to open an office in Tokyo,? says Kraut. ?It was there that we started working for some really substantial American companies, and many were so pleased with our work that they retained us in the US as well.? Kraut?s prescience has also led him into ventures outside his firm. In the mid-?90s, he saw the potential in one of his employee?s ideas. The staffer wanted to build and market an exhaustive and constantly updated electronic database of institutional investors. That venture became know as BigDough.com and is now a household name in the IR world. Kraut?s latest venture, GovernanceMetrics, finds him partnering with PR veteran Gavin Anderson. Conceived nearly a year before the Enron scandal broke, GovernanceMetrics is a corporate-governance benchmarking tool aimed at institutional investors. Scheduled for an official launch in November, GovernanceMetrics has already signed up investors managing about $2 billion in assets. Kraut says the biggest changes in IR have occurred in the last 10 years, and have been brought on by technology. He says products like BigDough have made clients much less reliant on IR firms for their Rolodexes of institutional investor contacts. Instead, Kraut says clients continue to look for one thing: good advice. ?The most important part of IR today is good judgment,? says Kraut. ?Good investor relations is not a science, it?s an art. A big part of what we do is based on old-fashioned street smarts.? Teller says that while a lot has changed since he and Kraut split that one-room office back in 1969, much has remained the same. ?One of the best things about Gary Kraut is that he?s built that business all by himself, but he?s still the unassuming guy I shared an office with,? says Teller, who runs Sandford Teller Communications, a successful one-man shop in New York. ?There?s a lot of people in this business who let you know who their clients are and how many homes they have and whether they fly first class within five minutes of meeting them ? that?s never been Gary?s style.? ---------- Gary Kraut 1966 Graduates from Boston University 1967 Starts working in PR at Ketchum, MacLeod & Grove 1969 Starts GA Kraut & Company 1980 Opens IR office in Tokyo 1998 Helps launch BigDough.com 2002 Planning to help roll out GovernanceMetrics
