This post by Techboard co-founder Peter van Bruchem was first published by our friends at Capital Pitch in November 2016. In the piece Peter highlights the importance of startups investing time in raising their profile even before they are ready to raise capital.
In this post I explore the importance of investor communications or investor relations for startups and suggest that taking an investor relations style approach before raising capital could be beneficial to a startup. There two main reasons for Startups wanting to raise their profile are customers (finding, acquiring and keeping) and seeking investment. In this piece I will focus on investment and will seek to answer four simple questions Why, When, Where and How. Why take efforts to raise your company’s profile when raising capital? Where, geographically should those efforts be focused? When should a startup start raising their profile and finally how can a startup go about raising their profile?
Why should you raise your profile before you raise capital?
When a company wants to raise investment what is the most important thing for it to do? The simple answer is to get noticed by investors, get their attention. It doesn’t matter how good an investment opportunity your startup is if investors, or the right investors, do not notice your company.
There is a marketing or advertising principle called the “rule of 7’ which says that if you don’t touch a sales prospect at least 7 times this will greatly reduce your chances of making a sale. Securing an investor is a lot like selling a product, the product being YOUR COMPANY and how investing in your company is good for the investor and will make the investor money. Studies have shown the likelihood of making a sale goes up with the number of touchpoints. On an aside It might make an interesting piece of research to see how directly translatable this principle is to investments.
I don’t think it is too radical a suggestion that your success in securing investment is likely to be impacted by how many times you get noticed by potential investors.
If an opportunity to invest in your startup comes across an investor’s desk OR inbox they are more likely to read about the opportunity or go to a pitch presentation if they have previously heard about the company and know and like what it does.
Startups should of course exercise a degree of caution when seeking to raise their profile, particularly if they are operating in a very competitive market and disclosing too much about their operations could be detrimental to their operation.
When is a good time to start raising the profile of your startup with potential investors
Investors also like to know about companies before they are actually raising capital. There are a few reasons for this. They may want to get in first before the opportunity is on-market but they also like being able to influence or mould the opportunity into something that fits their preferences and which they believe will be more generally investable. If a great opportunity is presented to the market in the wrong way or with the wrong valuation this can be hard to recover from. Investors may also need time to find out more about you and the market before they are ready to invest.
Your startup may have a limited runway, with limited cash and you are burning through it. If this describes you then you should bear in mind that fundraising often takes longer than you would like so it can be a good idea to plan… start promoting before you are actually ready to formally pitch for investment. But make sure that if you are speaking to investors you make it clear that you are not ready. Be credible, “this is what we are doing at present.. we are not seeking funds just yet but will need to later”.
When is too early to start raising the profile of your startup? If your startup is just at Idea stage the you are probably too early to generally promote your startup, that is unless you have a track record and can raise capital without first developing an MVP and getting market validation.
Where, geographically should those efforts be focused?
Where is the audience you need to connect with… geographically? Many startups are born global, meaning that they have an offering that is not geographically dependant others are very much focussed on a geography or geographies. If we are talking investment… startups in their earlier stages they really need to focus their efforts on getting noticed by investors close to home. Often the earliest external investment for a startup comes from investor located geographically close to the startup, most likely within the same city. Sometimes a startup will secure an investor from further away but this will usually be in combination with a local investor (for example angel groups often syndicate deals to angel groups in other cities. We will probably see a bit of a shift here when equity crowdfunding platforms become more operational in Australia with more early stage investors likely to be less geographically close to their investments.
When selecting which platforms to put efforts into it is important to consider the likely profile of users on the platform, the likelihood of any investors being on the platform and where the investors are geographically located and the likely demographic or profile of those investors. For example, a platform such as Angel List will work better for companies in a region where local investors from the same region are also on the platform.
How – so what can you do to get noticed and get your seven ‘touches’?
There are heaps of different things that startups can do to get noticed and seen by investors which take varying amounts of time and commitment.
You should attend events that you know or suspect investors might also attend, try and get introductions to relevant investors (check their profiles, what they invest in, what stage what size etc). When you are talking with investors it is also a good idea to approach them for advice, particularly if you are not ready to raise. If they are interested in what you are doing keep them informed. As many startups find… if you ask for advice and you might end up getting money.
You can try to get press coverage.. but don’t forget the media wants an actual story which could be anything from a connection to another news story, to a big event like a launch, winning a prize/competition. If you want media exposure to help with a fundraising try getting a story out before you close your round. If things are going along just nicely for your startup but you have no reason for getting press coverage you simply won’t get it. There are some great guides on getting press coverage. There are a couple of great reads on getting press as a startup by Mike Butcher from Techcrunch and Leo Woldrich co-founder of Buffer.
Entering and winning awards and competitions can also open doors for startups and give a great deal of credibility, free publicity and the opportunity to get the word out about your company. This takes lots of time and you also need to have something worthy of winning. (NOTE that entries for the Incite Awards on 16th March.
You can work to be seen as a subject expert by blogging, writing white papers, presenting at conferences etc. If you do this though make sure you are able to leverage your efforts by effectively using social media to distribute any relevant content. Stuart Hall from Perth-based Appbot that does app review tracking is an expert at this, releasing papers and posts on his research. I also know of a company that had a marketing strategy devoted to securing keynote speaking slots at industry events.
You could get loved by the community and your fans will start doing promotional work for you for nothing. Your fans can be particularly useful to help distribute your content via social media.
You could make a video about your company or product and get it to go viral. Why not put a product up on kickstarter and massively exceed your targets. Sorry I am getting flippant here… these examples are both great ways of getting profile but they can involve a massive amount of work and often luck and … results may vary.
I think you can see what I am saying here… getting noticed by investors can take a lot of effort. There are lots of ways of doing which take effort and time and sometimes money. But raising capital can take a lot of effort too. Startups that are not going to survive or thrive without a capital injection need to make sure they get noticed by the right people and should probably start early in their efforts to get and stay front of mind.