|Edward M. Yang|
Despite the uncertainty the pandemic has wreaked on the global economy, technological innovation marches on. It’s true that during sizable upheavals, there are always winners and losers. Certain industries have been devastated, such as airlines, hospitality, restaurants, gyms and a host of others. Other sectors have seen strong growth, such as software-as-a-service, anything cloud-enabled and other industries that encompass the work from home movement. As visionaries, venture capital firms are in a difficult position of trying to predict future trends and they’re backing those bets with funding.
According to the PwC and CB Insights’ Q2 2020 MoneyTree report, VC deals to U.S.-based companies saw a quarterly increase but were down 18 percent year over year. While significant, that means there’s still money to be had and deals to be made. The recent successful IPOs of Snowflake and Asana show that the appetite from investors remains strong. As an agency, we’ve also been fortunate to work with startups in various stages of fundraising.
The most notable one is Beyond Limits, an artificial intelligence startup commercializing technology that was used by NASA and Caltech’s Jet Propulsion Laboratory. When they hired us three years ago, they’d just closed their Series B for $20 million. Our mandate was to generate as much media coverage as possible to position them favorably for a Series C. Last month, the company announced a successful Series C for $133 million.
|This article is featured in O'Dwyer's Nov. '20 Technology PR Magazine
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Of course, it’s not reasonable to expect that media coverage was the entire reason for the new round. But it’s also similarly not reasonable to believe that the more than 150 media mentions we secured for them had no impact on their fundraising efforts. The truth, as usual, lies somewhere in between.
The traditional reluctance of VC-backed startups to invest in PR is primarily due to the greater difficulty in proving ROI. It also doesn’t help when high-profile investors such as Mark Cuban publicly declare that startups “should never hire a PR firm”. However, the main reason Cuban gives—that PR isn’t impossible for an entrepreneur to do themselves—is a bit weak. There are many activities that aren’t impossible for an entrepreneur to do themselves. That doesn’t mean that logically they should do them. Time is one of a founder’s most precious resources. Furthermore, most tech startup founders have technical backgrounds. They’re engineers, coders and designers. They may not be the best in communicating or storytelling.
If a founder has the time, inclination and ability to do PR on their own, by all means they should. But there are countless other startups who could benefit from hiring an agency to run their media relations, while saving themselves the heartache of making common rookie mistakes.
There are many other founders who aren’t sold on the value of PR as part of their marketing budget. But from our experience, the benefits of a well-thought out media relations campaign smartly integrated with other marketing activities can be a huge boon for future valuation.
Here are four ways how PR can help with fundraising:
PR increases social proof. There’s a reason companies will post logos on their homepages. It could be logos of their current client roster. It could be logos of awards they’ve won. It could be logos of media outlets that they’ve been in. All of this provides the necessary social proof that says, yes, we are winners. Other forms of social proof include inclusion in various authoritative communities or databases such as Crunchbase and Wikipedia.
Crunchbase is the trusted data source for all things related to investment. Having a current company profile with a long list of media coverage looks professional and amplifies social proof. Wikipedia is the de facto encyclopedia of our age. Although it’s an open source platform, don’t even try creating a company profile with less than six quality media mentions. It will simply be flagged for deletion. Once deleted, it’s very difficult to get a page back again. And no, press release wire service pickups don’t count.
That leads to the second way: VCs like to back winners. It might sound obvious, but when you realize that 75 percent of venture-backed firms fail, it becomes all the more critical. VCs are relying on the one or two homeruns to more than make up for the wide swath of startups who will fail. Being talked about regularly in the press gives the impression that a startup could be that winner that VCs desperately need.
Ample social proof from the first way ties directly into this. Nothing says potential winner more than an investor Googling a brand, and seeing a snippet from Wikipedia driving the Knowledge Graph, the infobox presented in the upper right.
PR also reduces perceived risk. “No one ever got fired for buying IBM,” is the traditional saying. Buyers and investors are risk-adverse by their nature. Or a better way of saying it is they’re looking to take calculated risk. The goal of a startup is to reduce how risky they look in the eyes of an investor. A startup creating the impression that they’re the industry standard through consistent media coverage can help reduce their perceived riskiness.
Building a strong brand through an online presence with the aforementioned Google Knowledge Graph further reduces perceived risk.
Finally, PR can also have a positive impact on other areas of marketing. The traditional silos of marketing are rapidly coming down. Boundaries are blurring. Getting consistent press can be an accelerant for other marketing efforts such as SEO, inbound lead generation and grassroots viral marketing. Brand mentions and backlinks from earned media have a direct positive effect on SEO. Thought leadership articles can be an evergreen source of inbound leads for years to come. Earned media can be the perfect complement to the paid media campaigns many startups rely on.
Getting press isn’t a magic bullet. But there’s little doubt that the benefits of committing to public relations can be a huge help to startups who are fundraising.
Edward M. Yang is Managing Partner at Firecracker PR, an agency that gets technology brands known.