technology and marketing

Why venture capitalists should ask web startups about brand strategy

Photo by Jus' fi on Flickr

Should startups worry about brands?

This is the question that a venture capitalist from Silicon Valley, Larry Kubal, asks in his thought-provoking article. ((The article was published by The Venture Capital Journal in November 2005. You can download the full text from this page , scroll down to “November 2005”, it’s there!))

Kubal’s short answer is YES. According to him, venture capitalists should make sure that brand is taken care of by web startups before any investments are made, “For VCs currently paying far more attention to consumer facing Internet businesses than they have in quite some time, ‘word of mouth’ has taken on a whole new meaning.”

ELEMENTS OF BRANDING

The elements of branding that Kubal gives as important to consider by startups (and venture capitalists who assess them) boil down to:

  • viral marketing
  • intuitive messaging
  • word of mouth branding

But are these the only elements of brand that startups should worry about? In my experience of working with companies seeking market entry, the notion of brand goes much deeper than this.

DIG DEEPER!

Venture capitalists should dig much deeper into brand strategy when they do their due diligence on startups.

Especially when it comes to web startups, my experience is that techies may well think about going "viral", but what they are often not well equipped to think about is the consumer, as well as product design suited for the consumer! They often assume that consumers are as "geeky" as they are themselves!

So, it is not only a detailed plan of how a startup plans to be viral that venture capitalists should look for when they do their due diligence about brand.

They should dig much deeper than that. Good branding is not only about promotions and word of mouth. The key is to assess whether a startup thinks in terms of brand strategy or not.

WHAT IS BRAND STRATEGY?

A brand strategy begins with product design and consumer intelligence, and continues through the design and delivery of promotional materials, promotional strategy, customer dialogue, distribution…. All of which is important if you want to build a funky brand.

Importantly, a good brand strategy should be embedded within the company’s DNA. If you don’t get the DNA right from the start, it will be very hard to fix later - you simply can’t afford your company DNA, and with this, your brand strategy to be an afterthought!

WHY STARTUPS RARELY THINK ABOUT BRAND STRATEGY

Unfortunately, thinking in terms of brand strategy is very rare among web startups, for various reasons. I’ve touched upon some of them on several occasions. For instance, see SCHMOOZY FOX’s thoughts about web and mobile startups here or check our tips on how to craft a smart marketing strategy if you are a web startup.

Of course, VCs might themselves be more attentive to these aspects than the average techie. One would certainly hope so. Nonetheless, the fact remains that huge amounts of time and money – including VC money – are poured into web enterprises that have no chance of taking off because they have not thought through consumer needs, product design and communication.

SCHMOOZY FOX works with web startups to help them incorporate brand strategy early on into their recipe for future success.

Smart marketing is key to success on the web

Photo by Jus' fi on Flickr

Let me ask you this question: how many successful web start-ups do you know? In the sense of actually known by sizeable audiences. Selling useful products and services. Providing great user interface. Encouraging people to come back to their sites time and again. And check this one out: p-r-o-f-i-t-a-b-l-e.

Yes, there are a few. But the truth is, thousands of software developers, engineers, web designers and other technically gifted folk spend lots of time and money every year to launch new businesses but are unable to connect with their target audience – or launched a service for which there is no real demand.

Many of these start-ups end up being simply web sites, with no valid business idea associated with them. And even if some do have a sound business model, they still don't make it because they don't have any skills in customer-oriented marketing.

Why does this happen?

Dave McClure, author of the blog "Master of 500 Hats", argues that the main reason for this is this: most web start-ups are designed, implemented and managed by techies and lack marketing talent.

The main arguments he puts forward here are:

-Addictive User Experience (aka Design) & Scalable Distribution Methods (aka Marketing) are the most critical for success in consumer internet startups, not pure Engineering talent

-If investors don't have operational backgrounds in design, development, or marketing from proven consumer internet companies, you probably don't want their money

Photo by jeffwilcox

I fully agree and this is in fact one of the reasons I decided to focus part of my brand strategy business precisely on web startups. Have a look at SCHMOOZY FOX'S thoughts about web and mobile start-ups .

It must be said that interface design and useability do sometimes get attention, as at least "enlightened" techies are aware of their importance. In my experience, though, product design and positioning, brand strategy and promotion are frequently an afterthought, implemented ineptly or forgotten about entirely.

However, it's an area where investments can pay huge dividends.

In fact, given the economics of the Internet, it can make all the difference between an out-and-out success story and complete failure. Some online businesses are figuring this one. But for now it's still very much the exception to the rule.

Technical skills and talent are very important in building an online business, but they are only one element. It takes two to tango: only a combination of technology and marketing can make all the difference and propel your online brand to success!

Photo by Kjunstorm