An equity story is the story a company uses to tell potential investors about itself and to convince them of its ability to generate value.

A credit story is something a company uses to tell potential creditors about itself and to convince them that its cash-flow and profit margins are stable.

As it turns out, the stories companies tell about themselves to potential financiers help the financiers decide whether to invest in their shares or extend them credit. The stories even help financiers figure out how highly they value the company.  Bankers are human after all!

Well, okay, the stories are a little different from your average bedtime fare — in fact, it is critical that the financiers not fall asleep while you tell them a story! We find out that (we’re simplifying here) pension fund managers are more likely to enjoy a story beginning with  “Once upon a time…”, while angel investors, not surprisingly, would rather go for “In a not too distant future, in a galaxy not so far away…” 

The two stories are not necessarily contradictory. “An equity story is most likely the first chapter of your book, whereas the credit story comes later — probably chapter 10,” says Alberto Casorati, summing things up nicely.

We also learn how investors use the multiples method, taking the EBITDA (yes, we also explain what this is) of the company and deriving the enterprise value based on that EBITDA and on the story the company tells about itself.

So stories do matter. This is why, it turns out, the EIB advisors also help their clients develop these stories.

Both of our guests, Paulina Brzezicka and Alberto Casorati, are advisors in the Innovation Finance Advisory Division at the EIB. Alberto has more than 12 years of experience in banking, having worked at Citibank and Intesa Sanpaolo in London. He graduated from Bocconi University in Milan. Paulina, a graduate of University College London as well as Bocconi University, started her career in the mergers and acquisitions advisory team at Bank of America Merrill Lynch in London.  She joined the EIB Group in 2013 initially as a private equity investor at the European Investment Fund.

Today Paulina and Alberto advise innovative companies on bankability and access to finance as well as working with the European Commission on a number of studies on access to finance in high priority sectors such as digital, bioeconomy, life sciences and the circular economy.

Subscribe to A Dictionary of Podcast in the iTunes podcast app or on other podcast platforms. Also, don’t forget to rate the podcast, if you like our show! You can suggest topics for future podcasts by tweeting Matt or Allar. We’re @EIBMatt and @AllarTankler.