What came first: The public relations or the venture capital?
A colleague recently attended one of the ‘boot camps' for start ups and reported
an interesting comment from one of the venture capitalists: they get about
10,000 business plans a year, and maybe fund a dozen or two. That translates
to odds of 1,000:1 The chances of an entrepreneur getting any visibility
on that radar is pretty slim, unless they already have some industry
visibility. A few entrepreneurs have figured this out, and it's why the
savvy ones fund their public relations program before they even get venture
capital. If you don't like 1,000:1 odds, and you're in the same goldrush
with the other technology entrepreneurs, then you might want to increase
the odds in your favor with some dot.com pr.
In this race for funding, where differentiation and perceived ability to
succeed can be the deciding factor, entrepreneurs are a lot like politicians
in the election process. They have to get elected - by their customers,
employees, potential stockholders (IPO) and lastly (but usually one of the
first in order) the venture capitalists. The race for venture capital is
a lot like a tight race for elected office, and often becoming a winner depends
on acting like a winner. In political parlance - are you electable?
An example that comes to mind is the Massachusetts gubernatorial race of
1994. For those of you who are not political observers (politics happens
to be a blood sport in Massachusetts) - 1994 was the year of the ‘outsider'
- liberal icon Ted Kennedy was in a race for his political life against Mitt
Romney (of Bain Capital) and Republican William Weld was running against
acerbic Boston University president John Silber, who was described as "Joe
six-pack with a Phd" (nowadays he would be Jesse Ventura with a Phd) for
the governor's office. In the end, Weld won by a micron-thin margin of 50,000
votes out of 3.5 million cast. What cost Silber in the final stretch was
his tendency to make blunt comments. As one political commentator remarked
in the days following the election - "If he had just started acting like
a governor the last two weeks of the campaign - he would have won."
In this sense - if an entrepreneur wants to get ‘elected' by a venture
capitalist, then they have to beat come-from-behind odds to clinch the election.
Part of this is both acting like a winner early-on, and also giving the
perception that your vision, management team and products are ‘electable'
(first for funding, then to an IPO.)
This perception can be helped along by your public relations program. Your
public relations program raises your industry visibility among the ‘talent
scouts' and industry watchers. It also shows that you are aware of how the
serious industry players value public relations - and by implication, that
you are also a serious player.
Creating the perception that you're electable is a result of many things,
but a contributing factor is how you portray yourself in your public relations
program that is focused the media, your customers, industry analysts, the
venture capitalists.
There are several different roles for you to play in this election, depending
on how far along in the race you are in terms of the maturation of your vision,
your team and your products. Just as the candidates act differently before
and after the primaries, and coming down the home stretch to election day,
so should your dot.com public relations program:
I have a dream...In this stage, you have an idea, but not much else.
This is OK if you are known in the industry, or have done it before. For
example, Steve Jobs has ridden this concept for most of the last 20 years.
But if you're an unknown, and you don't have ‘knows' on your team, the chances
of getting serious attention are back up there at 1,000:1. Who you get to
sign up with your dream says a lot. A public relations program that focuses
on your vision and embryonic team helps in this stage. Caveat: Watch out
for the concept of the CEO as the ‘star' or ‘celebrity'. If the CEO is not
a founder or major stockholder - it's downright dangerous - as a number of
companies have found out the hard way. The trials of Sunbeam and ‘Chain Saw'
Al Dunlop are the subjects of a current book on how this concept can go very
wrong.
Proof of concept...In this stage, you've perhaps developed an e-commerce
function or implemented some technology for a company or companies, and you
want to commercialize the technology or concept. You see the industry application
for the vision, but the client companies don't, can't or won't - hence they
didn't fund you. But you've already done it, and you're beyond the dream
stage. Here you would want to show how you're going to build the company
and market the technology (partners, alliances, etc.) Helps to have some
people on your team who have done it before. Focusing your public relations
on what you did in the proof of concept stage, and who is interested in it
now can support you here.
Definitely scalable...Here you're viable, but need the financial resources
to make the quantum leap to being a major player. This would involve stressing
the target opportunities you intend to go after, and the resources to get
there - and stay there. These days, this often involves hiring a lot of people,
so recruiting and staffing will chew up a lot of the budget. Demonstrating
that you can pull people on board (and public relations helps in recruiting,
too) shows both that you're scalable, and a good salesperson. A program that
showcases ‘momentum' builds credibility in this phase.
Pre-IPO...Here you need to make that final push - like the DSL companies
that had to build their networks nationally - to be positioned to capture
market share. Takes a lot of bucks to ramp that up quickly, but the momentum
is played off in the IPO. Here you're demonstrating that you're ‘electable'
- rounding up the opinions of a lot of industry cognoscenti, executives and
experienced observers
Keep in mind that positioning your company (or business plan) with the venture
capitalists is not too dissimilar from how they will position an equity offering
with institutional investors. Certain investors have certain preferences,
and it's best to know them, so you pitch to the right ones. In a similar
vein, if you structure your public relations program with the preferences
of your ‘most probable' venture capitalists in mind (such as using in your
public relations materials and interviews some business-success analogies
to companies they have funded), that helps pre-condition the market.
The velocity of events in the dot.com technology era is fast, and
ever-increasing. It's similar to the short window of opportunity for candidates
in a typical election year. Just as you need a plan to obtain business funding,
you also need a plan for your dot.com public relations to be successful.
Knowing where you want to be positioned when you go for venture capital,
who you want to be standing in front of, and the public relations program
results you want to be able to show them can go a long way to helping you
to beat the odds and be perceived as ‘electable' in that critical race for
entrepreneurial financing.
This article
appeared in the January 24-30, 2000 issue of Mass High Tech under the
title of
As Your Dot.com Evolves, Alter the Money Strategy
Copyright 1999, Jeffrey Geibel, All Rights Reserved
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