Should Startups Announce Their Funding?

Posted on Jan 26, 2013 | 25 comments


Understanding “The Funding Angle”

I sit at enough board meetings to hear conflicting advice given to entrepreneurs about how to handle PR and announcements at startups. I think many board members (including VCs) were trained 10+ years ago when life was very different and their advice often comes from an outdated lens.

One of the advantages of blogging, using social media, public speaking, etc as a VC is that you get a more nuanced view of these shifts by watching your own successes and failures.

Over the past couple of years I’ve written down some of my thoughts and it’s started to add up enough that I’ve now created a new tab on this blog with PR related articles on the topic. I will add to this as I write more in the coming weeks on the topic.

In stead of doing my typical big long post with 10 PR tips (like I did there), I’m going to break them up into individual (I hope more digestible) chunks.

Is Funding a Worthy Announcement?

The short answer is yes, absolutely. I don’t be swayed by those who tell you otherwise. There are reasons you may delay funding announcement but rarely reasons not to announce.

1. Benefits
If you’re a very early stage startup that just raised your first angel money it is very possible that the funding announcement will be your first big tech news. You may have gotten some articles that covered your product launch or may have gotten into industry rags but this might be your first time on TechCrunch, AllThingsD, PandoDaily, GigaOm, Business Insider or the equivalent.

There are many benefits to this PR and I’ll delve into this more deeply in a future post. But succinctly this press places a marker in the ground for your company. It makes it easier to persuade others to join you, it alerts other angels & VCs that you’re a company to be on their radar screen, it helps potential customers know that you may be worth doing business with and it builds you up to announce other milestones down the line.

It’s no different for A, B, C rounds where you might be announcing $3 million, $10 million or $25 million. These each represent important inflections in your business that cause others to take notice. They help create confidence amongst your staff in your future. Yes, you could tell them in a private internal meeting but nothing builds confidence more than their buddies all telling them, “wow, you work for a great company. Congrats! I saw your big announcement ” Psychological  I know. But trust me on this. They’ll get the recruiting calls from every other tech firm trying to find scarce talent so having them feel proud of their employment is an important defense.

The funding rounds will also build customer confidence and they’ll help journalists feel air cover in writing your more important pieces when you brag about customers, traction, revenue or whatever. They know that there some implicit legitimacy (rightly or wrongly) to your story since a VC just wrote you a $10 million check.

2. Timing
For me the question on announcing funding is now whether to do it but when. There are many legitimate reasons for delaying your announcement.

But first you need to know about Reg D filings. You are required to file a Form D filing within 15 days of selling a private security. The problem is that this is publicly available information that can and will be scanned by journalists and reported. So if you’re not prepared to announce your funding and you file your Form D then the news will be reported anyways, and usually not by the source you want to cover you and not with the positive positioning you’d like to have. When you file, you must be prepared.

I can tell you that many private firms delay their Reg D filing. I am not a lawyer nor am I advocating finding work-arounds to this legal requirement. I’m only reporting to you that many people do in fact delay their filing and I’ve spoken with lawyers about how to do this in a way that they feel is kosher. You need to consult your lawyer and decide for yourself. This might be a good time to remind you of my disclaimer.

With that out of the way and assuming you’ve gotten legal advice that you can delay your filing, there are a plethora of reasons to delay announcing your funding.

For starters, once you announce your competitors instantly will start tracking you. So while you get the benefits of recruiting, being on VC radars and customer legitimacy there are also downsides. If you believe you have a market-leading position in your product space I would worry a bit less about it. But if you’re in a competitive space where you want to get a little more engineering done before the world is ready to start researching you then you may choose to delay.

I’m ok with announcing straight away or waiting until you have product or team confidence to release the news. But I wouldn’t delay too long or unnecessarily. The benefits usually far outweigh the costs.

3. Should I Bundle it With More Juicy News?
I think the biggest mistake that most advisors to startups make is telling people to bundle their funding news with other “important” news like customer wins, product announcements, key hires, etc.

That used to be the standard. When many of us advisors / investors did our first startups there were very few purely tech media outlets. Almost all of the major ones have been formed in the past 6-7 years.

So in a world where you were trying to get the NY Times, the Wall Street Journal, the FT or whoever to pick up your story they were unlikely to run a story based purely on “Company X raised $2.2 million.” So people bundled customer news or senior industry hires as a way to create more interest in the story.

When thinking about how to get press coverage you have to realize that any quality journalist looking to write a story has to have an “angle” to write something. Journalists don’t often write stories that talk about, “This cool new company I met at a conference.”

An angle can be,

  • Starbucks is piloting this product in 500 stores; or
  • Young kids are starting to use this product in a way older people never did; or
  • Head of AMEX’s credit card division leaves high-profile position to join a startup

But in 2013 it can also simply be, “Company X raises $2.2 million.”

Why?

Because there is now an entire industry devoted to “the funding angle.” Funding IS the story. This is true on all of the major tech blogs. Funding is news. And if you report it they will likely write it if you approach them properly, are professional and you have raised money from credible sources for a tech or related project.

The problem with “bundling” other news stories is that you then lose the ability to market those the press outlets in their own right. So you’ve taken two stories and collapsed them into one.

Why does that matter?

In today’s world of real-time, fast-moving news stories are much more ephemeral than they ever were. People are just going to be busy and miss your story. In the old days of print everybody read the newspaper in the morning and there were few news sources. So if you were in the NY Times they likely saw it. It’s sort of like when we had three networks and they controlled the TV news. But with fragmentation of the press people just miss stuff. So your goal should be a steady stream of news across many different news outlets and your own blog.

If the media changes such that angel, seed or VC funding is no longer considered an angle then of course this advice would change. But in the current state of the market and for the foreseeable future I don’t see that changing.

4. Should I Offer an Exclusive?
In the old days when Michael Arrington founded and ran TechCrunch and Om Malik was launching GigaOM there was sort of a battle by multiple news sources of who could “scoop” your stories. And funding was one of the juiciest scoops. The pressure to announce funding first was great and often if your competitor scooped you on a funding announcement you wouldn’t run it.

But that’s not the world we live in today. People scoop company layoffs, mergers, key people leaving a company or being fired and the like. They seldom scoop fundings. So in my opinion you should design your funding story to get wide distribution.

You should know that if you DO run in TechCrunch it is unlikely that PandoDaily will run the story 2 days later. So you have to go out to all outlets simultaneous.

That said … I do believe in offering journalists exclusives. I often counsel startups to develop their press calendar – all of the announcements that they foresee over the near-term (say 6 month) future.  I think it’s a great strategy to target different journalists for exclusives on each piece of news. Not only will this help you with broadening the reach of your news over time to reach different audiences, but importantly it will help you develop a personal relationship with many different journalists (which doesn’t happen as well when you’re not offering an exclusive).

Having strong relationships with journalists will pay you huge dividends over the long haul and benefit your company and your career. I talked about strategies for developing  relationships with journalists in this blog post.

*******

What have been your experiences with fund raising announcements in terms of benefits, timing, bundling with other news and offering exclusives? Any topics I missed?

Image courtesy of NS Newsflash on Flickr.

  • Nikos Moraitakis

    Mark, I’d be curious what you would think about trying to target the announcement on your customers’ industry first, rather than the tech outlets. If you make enterprise software (e.g. we make software that HR departments or SME managers would use) would it make sense to run a story on sectorial news outlets to introduce yourself as a promising new tool for their business? Or is the funding event not a good way to do that?

  • http://www.repeatablesale.com/ Scott Barnett

    Great comments. Your discussion of perception brought me back to my very early days in tech, right out of college. I was being driven to a sales call with our top sales rep, who drove a Lexus (which at the time was a pretty new brand). It was HUGE and had every option imaginable. I asked him why he had such a huge car and he said “because people will think I’m very successful because I drive a huge car, whether I am or not”. I can’t tell you the number of times our customers told me how successful they thought this guy was simply because he drove a big car. PR on your funding is like driving a big Lexus.

    My only comment on bundling of announcements – I totally agree that you should not bundle, but on the other hand, you should plan your strategy for how and when you are going to make all of these announcements. You want to maximize the “tail” from each announcement and not have them overlap one another. Do the announcements go out once a week for 3-4 weeks? Once a month? I’ve seen unbundled PR go out to quickly after one another and each one doesn’t get its own natural life… on the other hand, I’ve seen too long a delay and you lose the steam you were trying to build up. Does that make sense?

  • http://influitive.com/ Abdallah Al-Hakim

    Excellent points! Reporting funding is great for creating buzz but it is usually the more technical type of articles that will lead to visitors signing up or trying the product.

  • http://www.facebook.com/profile.php?id=2419735 Paul Knegten

    Long time reader, first time commenter. Totally agree here- though I would add one point which is trade press vs. tech press when considering exclusives. Where do your customers hang out? If you’re an ad tech firm, getting written up in TC/PandoDaily/AllThingsD is really helpful, but you’ll eventually want to cross over to Ad Age / Ad Week etc. to build credibility with your target customers. Thus, sometimes, it makes sense to give an exclusive to a trade pub to ensure it gets read by the right audience. And, you’re right on in saying that’s a great way to build a relationship with a reporter. That’s the most important thing: you want to be a trusted source not only for your own news, but for anything happening in your industry that he/she might want you to comment on. Finally, a great PR firm/strategist is worth their weight in gold. Bad ones are really bad. The good ones will know when an exclusive is necessary, etc. Thanks for writing, Mark!

  • http://bothsidesofthetable.com msuster

    super funny but that’s EXACTLY the topic of one of my next few posts. Short answer – you still do the tech announcement. But you’ll have to turn up to find out why ;-)

  • http://bothsidesofthetable.com msuster

    Yes, it does. It’s what I meant in the post about creating a “PR calendar”

  • http://bothsidesofthetable.com msuster

    They serve different purposes and should both be done. They target different audiences

  • http://bothsidesofthetable.com msuster

    Thanks for adding this, Paul. I agree entirely. Specifically in this post I was dealing with the tech press. In later posts I’m going to cover tech vs. trade. re: using PR firms, yeah, covered that once before. agree. here’s the post: http://www.bothsidesofthetable.com/2011/01/23/how-to-use-pr-firms-at-startups/

  • Antonio de las Nieves

    Nice post Mark. What if funding round is done abroad but your company has offices in SV. Would the press still be interested in the story? Sure trying wouldn’t hurt..

  • Tim Fouracre

    My UK startup, Clear Books, announced a funding round on our corporate blog http://www.clearbooksltd.com/2012/10/04/london-accountant-starts-6m-software-empire-from-his-lounge/ and Steve O’Hear at Techcrunch was happy to write about us http://techcrunch.com/2012/10/04/get-off-of-my-cloud-accounting-software-clearbooks-raises-300k-to-battle-it-out-with-sage/.

    As you say, the story is the funding.

  • http://fount.io/ Teemu Kurppa

    Mark, great post. What’s your take on the order of the product launch and the funding announcement. Let’s say a startup gets funding from respected angels or seed stage VCs and it takes a few months from that to the first product launch.

    Is it generally better to tell about the funding before the product launch or some time after it? I’ve seen one case where announcing a funding before the launch backfired. It was an interesting and innovative MMO game but which had a few rough edges at the time of the launch. It was dissed quite heavily by an important game review site because reviewers knew about their $2M funding.

  • http://mattr.co/ Jack Holt

    Thank you, Mark. Timely bit of info for me. I especially liked the “spread out the exclusives”. So the journalists who had gotten an exclusive from you doesn’t feel
    jaded when you don’t give it to her the next time?

  • Glenn Smith

    Completely agree. The parallel I often think of is marriage. So when you announce it, plan to throw a bit of a party too for family (both sides of staff, board) and friends (mentors, suppliers, partners….) It’s important to celebrate and it also builds in further accountability.

  • http://www.facebook.com/musicalmissionary Dawood MC

    Patent troll bait

  • http://bothsidesofthetable.com msuster

    Possibly but I’ll bet you need to add a new “angle” – after all, the first stop to check if news has been reported is … Google

  • http://bothsidesofthetable.com msuster

    That’s good to hear. Not always the case, but I guess funding is funding. Normally I recommend that people post on blog AFTER the TC coverage.

  • http://bothsidesofthetable.com msuster

    In general I prefer that the product be complete and either ready-to-ship or shipped before the funding announcement

  • Dan O’Prey

    Mark, great article as always. One thing I’m curious about is why announce the exact amount of funding? Inside the US it seems to be the done thing, but elsewhere it’s often considered giving away too much private information. Is it purely to make the story a little more interesting, show off, or anything more important?

  • http://www.pawel.ch/ Pawel Chudzinski

    Nice post, it is a very frequent discussions at startups post funding. One negative to add would be that some overseas copycat masters can start paying attention :)

  • http://www.facebook.com/bonnie.ravina Bonnie Ravina

    Terrific information, Mark, as always! Your point about the six-month calendar is critical. Too often, the funding announcement is viewed in a vacuum, when it should really be considered in the overall context of the company’s momentum. Knowing where it fits alongside upcoming product, pilot/customer and other news helps companies focus their outreach strategy – and the exercise itself can serve as a reality check for readiness. If funding is the only news on that near-term horizon, you’ve got some work to do!

    Question related another commenter’s question on the amount of funding: How much does size matter, in your view? How do you “compete” for attention with $1M in funding against news of $20M+? And is there any concern for a perceived correlation between amount and market “confidence” or impact? Working with early stagers, this comes up a lot.

  • http://twitter.com/DeannaJour231 Deanna Pogorelc

    Mark – Great post. I’m a writer for a niche B2B news blog, so I’m the one trying to call these companies and get them to talk when I see their Form D’s. Would love to talk more on this topic, and I’m especially interested in your thoughts on stealth mode – when/if it’s appropriate, and for how long.

  • melindabyerley

    Mark, many thanks for this series. A fantastic resource for us Startup Marketers. Quick Question, what is the best way to approach a journalist one wants to make a relationship with, without sounding too “pitchy” or “bs-y”?

  • Ian Kaplan

    Great article, although I’d like to point out 1 down-side to announcing funding. From my experience, as soon as a round is closed EVERY service provider out there starts sending emails and calls to see how they can get a piece of the action, i.e. the funding. This often takes up valuable time and effort that I’d sooner be spending on the company rather than these unsolicited calls and mails.

  • http://www.fundingcommunity.com/ Alex Binkley

    Agree this can be a huge distraction (and comes even if you just file a form D and don’t reach out to the press). When I was practicing we would often suggest that clients set up a dedicated googlevoice number for the Form D so you wouldn’t be distracted by a zillion calls throughout the day (especially given that many startups don’t actually have a phone number these days…)

  • Brandon Ballinger

    I’m loving this series on PR! Some topic suggestions:
    1) How to run an embargo. Hard for first-timers!
    2) Mainstream press vs. trade press for b2b startups.
    3) After you’ve announced funding and your product, how can you stay in the news?