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Why Venture Capitalists Need Marketing

Finance

Why Venture Capitalists Need Marketing image venture capital shirt 370x229Image from Investment Europe

Outside of Silicon Valley, they’re typically low-profile and intentionally discreet, so you might not realize that venture capitalists now have a significant impact on the US economy. In fact, the 2011 Venture Impact study, produced by IHS Global Insight, found that originally venture-backed companies accounted for 21 percent of GDP and 11 percent of private sector employment in 2010. More recently, venture capitalists invested an astounding $7.0 billion in 898 deals in the second quarter of 2012 alone, according to the MoneyTree™ Report. *

Given all this activity –and all these resources –you’d think that venture capital firms would pursue aggressive marketing campaigns designed to communicate their brand promise and attract both investors and the most promising entrepreneurs. However, that just isn’t the case. Venture capital is not an industry known for its marketing. Instead, VC firms have traditionally been tight-knit, operating largely without self-promotion.

Does that mean VC firms are missing out on valuable opportunities to connect with their target markets and grow their brand?

I think so . . . and apparently, a growing number of venture capitalists would now agree. According to The New York Times, a handful of VC firms are starting to embrace marketing. As I see it, this is an important step in the right direction for any company that wants to:

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  • Retain competitive advantage. VC firms need to appeal to both investors and promising start-ups –and the competition for each is fierce. The business environment has changed from a decade ago, when entrepreneurs struggled to get noticed by venture capitalists flush with funds. These days, the tables have turned, and as The New York Times describes it, “the best entrepreneurs are courted by the venture capitalists.”
  • Present a consistent message/image. In order to develop a comprehensive marketing strategy, a company must identify precisely how it intends to attract and retain customers. This process is particularly important for VC firms that, by their very nature, thrive on the cutting edge. Today’s digital landscape is constantly evolving, and that means hi-tech VC companies run the risk of spreading themselves too thinly across “hot” digital channels. Identify where your prospects and customers are and what information is most relevant to them. Then, deliver. Inconsistent engagement and/or variability in your message erodes trust, so make sure your approach is thoughtful, manageable and integrated across channels.
  • Gain data-driven insights. Marketing technology can empower companies with valuable insights about customers’ wants and needs, buying behaviors, etc. In turn, these insights can impact business objectives, product development and subsequent marketing efforts. When companies couple marketing technology with big data analytics, they get the actionable insights needed to better engage with their target audience(s), improve efficiencies and increase market share.

It will be interesting to see how VC firms leverage their newfound penchant for marketing –particularly now that a few have sprinted to the front of the pack. As TechCrunch neatly summed it up, “The entrepreneurial “Change or Die” becomes “Innovate or Die” which becomes “Differentiate or Die” as competitors crop up. Investors know this and the fact that they’re branching out and hiring marketing/PR staff means that they see the need to stand apart in the saturated market.”

*From PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters.

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