Why the Time Has Come to Market a VC Firm with Purpose
September 6, 2017 by Tim Turpin
In today’s world, consumers increasingly vote with their wallet – choosing companies they respect and chose to support over companies that do not align with their world view. In a recent article, “Competing on Social Purpose,” the Harvard Business Review provided an excellent overview of what sets great consumer companies’ outward story apart from the rest, and strategies for growing a brand that matters.
The same notion applies to venture capital firms as they court entrepreneurs and investors. As the spotlight and occasional scandal hits the venture capital industry, marketing—proactively managing and communicating a firm’s story—plays a more crucial role than ever to not only attract higher quality startups and limited partner dollars, but to retain a respected place in the business world. Some leading firms have worked toward a higher purpose from day one: For example, almost 40 years ago, NEA’s founders set out to create a firm that would last for 100 years or more based on the foundation of a low-ego organization that that backs entrepreneurs solving some of the toughest problems in technology and healthcare.
Making great returns over several decades is hard work but legendary investors have emerged because of their hard work. Even though it can take years to build a great brand, it only takes a few seconds to destroy it. Moving from a newbie firm to an industry-renowned unicorn-maker backing companies that can change the world while successfully telling your story also takes goal-setting, strategy, and well-executed tactics. And being good citizens. Here we expand upon three major ways to evaluate the “whys” behind telling your story to market a VC firm.
Why define and strive for purpose?
Times have changed. In the early days of Sand Hill Road, entrepreneurs went to great lengths to get funded by top VCs. Just getting a meeting with a kingmaker was a big deal, let alone a term sheet. Over the last decade, the tables have turned. The best entrepreneurs can raise money from anyone, and with the added flow of money from overseas—or the newest craze: millions within minutes initial coin offering (ICO)—some entrepreneurs skip meeting a VC and go straight for the quick cash. Smart entrepreneur-focused investors, like Mike Maples and Ann Miura-Ko of Floodgate Fund (founded in 2010), saw early on that the best entrepreneurs could have their pick of investors, built a vastly different type of firm focused on backing iconic founders unafraid to take early risks and they have excelled since.
Today, VCs have to differentiate themselves and offer something more than funding in order to compete for entrepreneurs and LP money. While creating a unique offering and place in the ecosystem, many successful VCs have learned that having a greater purpose and serving a broad community could result in better outcomes.
For example, while Eric Chin (Crosslink Capital) and Michael Jung (Founders Circle Capital) practiced their day jobs as venture capitalists, outside working hours in 2005 they created Alpha, an invitation-only, no B.S. organization that allows founders to support and learn from each other through all the hard stages of building a successful technology company. During founders-only dinners they address questions like: How do you found and scale with the right team? How do you foster diversity? How do you win a major partner who could someday acquire your company? When is the right time to IPO or accept a buyer’s offer? As curators of this growing Alpha community, Eric and Michael have made a major contribution to the startup ecosystems in San Francisco, New York, Los Angeles and other emerging tech hubs. Think other VCs would want to see their deal flow?
Goals: Marketing to attract startups vs. investors and beyond
A bigger-picture way to direct your marketing strategy and position yourself in a unique part of a larger conversation involves asking yourself: What positive impact do you want to make on the industry? Are you passionate about creating jobs? Shaping the political landscape? Does the broader public need education on how a technology really works? Do you want to promote diversity? Can a societal problem in an emerging market be solved through technology?
New funds and venture rounds are announced every day. Figuring out your broader marketing goals and strategically aligning all of your actions to support these goals will help your VC firm look beyond your next board meeting and enter a broader conversation around topics about which people genuinely care. It will affect how you invest, how you select and serve your portfolio companies, thus making your firm more genuine.
You will also need a goal to attract those who will help your firm enter a broader conversation and fulfill a higher purpose: Your portfolio companies and your investors. However, the actions you take to attract new, quality startups that contribute your greater purpose differ greatly from the actions you take to attract newer and bigger investors who make fulfilling that purpose financially possible. Investors in their earlier rounds of funding may want to market themselves to be on the radar of more and better startups. Market to other investors when you’re ready to raise a round bigger than what you can do with your current assets.
Strategy: What should you highlight about yourself?
After determining what your VC firm stands for, choose which aspects of the firm you would like to highlight in order to support your goal. What makes you unique? Your portfolio companies? Investors who can open doors in Japan or China? Services you provide? Where you came from, your investment approach, and your stage of investment (ie seed, series A, etc.) all hold keys to differentiation.
For example, OWL Ventures focuses its portfolio around education technology startups. By making their purpose—to meaningfully drive improvement in student achievement—clear and theming all marketing efforts around this purpose, the company attracts like-minded startups and investors.
Another example: In 2014, Scott Sandell, General Partner at NEA, helped co-found a Diversity Taskforce within the National Venture Capital Association to improve the diversity of the NVCA Board of Directors and the entrepreneurial ecosystem as a whole. This reflected well on NEA and allowed the firm to align itself with a stand on diversity, which is a long-term effort that the venture capital industry continues to work to improve upon.
Tactics: Which ones should you use?
Blog posts, interviews on television, social media, or launch events? With so many tactics to choose from, a clear understanding of your audience as well as yourself provides a guiding light while building your marketing plan.
A clear picture of your audience includes knowing more than their location, stage or demographics: What does your audience care about? Where do they go for information related to what you provide? Who do they respect? If your ideal startup founder gets management tips from podcasts, you want to be there. Become a guest on a podcast or start your own.
Make sure your tactics play to your individual strengths and style. Are your firm’s GPs very analytical in nature? Researching, compiling, and releasing a report on a topic your audience cares about could be key. Do your leaders love to expound upon industry trends and news to anyone who will listen? Send them to speak at a conference or on a television interview. Or start a Medium page and amplify your posts by sharing them across social media including LinkedIn.
Some firms act much like a media company: New hot topics are introduced through a well-orchestrated campaign. When Andreesen Horowitz began investing in blockchain companies, the company kicked off an educational push to teach the broader startup and investor ecosystem about the topic. The campaign included media interviews, a white paper, a social media campaign, and more. Even the agency’s podcast, a16z, started devoting many episodes to blockchain and cryptocurrency.
As VC firms continue to market themselves more, a larger goal that puts the firm at the center of conversation plays a greater and greater role in success. Firms find success by using a sophisticated approach to defining goals, highlighting strengths, and understanding an audience. Small firms do not need to copy what the big players are doing to market a VC firm but instead need to carve out their own niche in order to become known for something the company’s investors sincerely believe.
About the Author
Tim Turpin has 20 years’ experience in developing public relations and integrated marketing programs for venture capital firms and technology companies.