Marketing at Venture Capital and Private Equity firms is a trend that is still shaping up. It was in year 2001 that Marry Meeker published her first internet report, which could be tentatively marked as the beginning of Marketing as a function in Private Equity and Venture Capital echelons. Marry Meeker’s influence today can be gauged from the fact that Alibaba’s stock dropped 6.25% on the day of its latest report release.
A lot has happened since 2001, industry grew and contracted at-least twice, first during the dot com bubble crash of 99-01 and then Lehman Brothers aftermath of 07-09. But application of science and art of Marketing at Venture Capital firms is more resounding than ever before. Here are the pillars of a Private Equity and Venture Capital firms’ brand building efforts:
Reputation: Reputation takes years to build. So does that mean a GP which has not seen even a single cycle of fund-raising, investing and harvesting, which typically takes a decade, can’t do anything for years regarding this? Yes, it takes years to build but with emergence of connectivity across the globe, that cycle of years can be short-circuited with Marketing hyper activity at the start. A reputation can be created online in a relatively shorter span and the good news is that online reputation matters as much; and greatly influences the offline reputation too. What is online reputation? It’s the content that is available against your firms name on the net. Its combination of industry reports, PR, blogs, partners’ speaking gigs and any events that you may have conducted in the past.
Communication: Your brand of communication defines how you are seen in investor and investee communities. Communication plays a vital role in your positioning with LPs and entrepreneurs. Great firms focus in multiple aspects of their communication with both of these communities in terms of frequency, quality, availability and relevance. David Skok’s blog ‘For entrepreneurs’ is a fine example of a great communication strategy aimed at investee companies in terms of frequency, quality, availability and relevance. Twitter has also come to rescue the communication efforts of Private Equity and Venture Capital firms. Smart firms are using it to communicate what they stand for
Experience: Nothing speaks louder than an impressive delivered IRR figures from the past. If you have completed a cycle and have returned 5-10X to investors, you are in an exclusive club of a few who can be proud of being there and done that. Softbank’s growth is miraculous for a firm that came into existence in 2004. It’s simply on the back of impressive returns that it has generated for its investors and its Marketing blitzkrieg that follows all its activities. No wonder its 100 billion dollar vision fund closed in record 7 months’ time. So then, is it all over for fund managers starting now? The other alternative is to sell the expertise of partners through a smart content management strategy. Better still is to chose a niche technology that itself is new and there are not many fund managers who can boast of harvesting profitably. Almost all good emerging managers focus on emerging technologies; and who is perceived good there? One who has the most relevant content that can be found online and offline.
Specialization: Branding and communication strategy revolves around pedalling the specialization of a Private Equity or Venture Capital firm. A marketing strategy is weaved around a specialization and would go haywire in case there is no specialization. Specializations that firms chose can be a specific technology like AI, Blockchain, Crypto or a specific industry like logistics or Real Estate. Specializations are also on the cross-sections of a specific industry and a specific tech like AI in healthcare. Investing strategy itself forms specialization in many cases. New strategies like “second seed”, “very late stage funding”, “Pre-Series A” amongst others still have space to accommodate new fund managers. Here it’s imperative to chose a specialization and follow it up with an immaculate Marketing strategy
Methodology: Methodology is what differentiates boys from men in the VC game. A process oriented firm is stable in turbulent times and can beat returns expectations of the investors. A firm that is cut above the rest will have a well documented process for fund-raising, investor relations, investee relations, deal origination and sourcing, portfolio management and an excellent and well timed exit strategy. All VCs claim they have processes but most of the time it just stays just in their heads and is not documented. These processes give a leg up to your marketing effort. Once processes are established, focus can move to reduce the costs of operations, which means more dry-powder for investments and better returns for investors.
….but my fund is small, I may not need marketing!!
An economic cycle bubble bursts every decade or so. With geopolitical tensions in biggest economies, we may be on the cusp of another one. If your fund is small and you don’t invest in Marketing, you may not survive the next bubble burst. Maiden fund is small and second fund may just never come, pretty much wrapping up the business. Also when subsequent fund is 10X size of your last closed fund, without any change in your strategy for fund-raising, it’s bound to fail. Your marketing effort needs to match your ambitions and show you as a serious long-term player in the game.
…..I am into angel investing and I have ears on the ground, I may not need marketing!!
In Angel investing your brand to help entrepreneurs is as important as your wallet size. A well researched report carrying opinions of all entrepreneurs on challenges that they face and how you help is a typical stunt that will tilt the scale in your favor when entrepreneurs sit and chose the best VCs for them
….I am in a very local business, I may not need marketing!!
With the advent of internet, there is nothing that is absolutely local. Highly targeted marketing campaigns for a locality can do wonders for your business.
In conclusion, marketing is the only differentiator between the VCs who crop up in a boom cycle just to go down with the next bust and the ones who are in the game for long term. A sincere Marketing effort shows knowledge, commitment and capability of the VC, all of which go a long way in attracting investors and investees.
I represent Magistral Consulting that helps Private Equity, Venture Capital and Asset Management firms across the globe offshore their marketing activities for better effectiveness and lower costs. For more information, please write to me at email@example.com