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members (including VCs) were trained 10+ years ago when life was very different and their advice often comes from an outdated lens.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.
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.
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.”
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?