How to Talk to Investors about Marketing and Growth

This post is part of the ongoing Distribution Tuesday series. Every week the 500 Distribution Team highlights actionable resources for marketing your startup. Get even more tips by following @500Distribution on Twitter and subscribing to our email newsletter.

In the ultra-competitive world of startups, having engineering power and a great design is merely the price of admission. Marketing is the element that will actually grow your business enough to get it funded, or better yet, make it sustainable. So, do you know how to speak about marketing in your pitch meetings? Here are a few examples of what not to say and what to say that will help score you points with investors.

Things to never say:

quote1Stop saying this, and especially stop saying it with a huge smile on your face. This is not something to be proud of, and any investor of note will think this sounds really stupid. You might as well save your breath and hand the investors a piece of paper with the following image:


quote2WRONG. Investors are looking for big businesses so if your business is never going to need actual marketing, then it must be operating on a pretty small scale. Every business, especially the biggest ones, must aggressively market their products or services. The bigger your business becomes, the truer this is. Having a product or service go viral is nice, and important, but only the outliers can build an entire business on virality alone.


quote3Great! But remember: press hits are just that, hits. And trust me, the hits rarely keep coming. If you’re riding the ups and downs of press hits, you’re about to find out that hits are almost never sustainable. At the same time, if you’re leaning heavily on technology press, you’re barely scratching the surface in terms reaching your audience at scale. Your company needs press but press coverage should be supplemental to your larger marketing plans.

 

Things you should say:

qoute4Regardless of scale or budget you should always be testing many different marketing channels.  In this example, notice that the number of marketing channels mentioned is in double digits, implying that you have tried more than 10. Also, this statement should end with some form of brilliant marketing insight you’ve managed to pull out of these tests. This could be a data point about your demographic or a marketing technique that worked extremely well.

It’s incredibly important that an investor feels you’re not going to be “learning on the job” with their money. So you want to show them you already know where you’re going to be spending the money effectively. That scores you a lot of points and, in the end, likely saves everyone involved a lot of money.


quote5That’s a bold statement and it’s critical to nail it early on for some businesses. The ability to put a hard number down for your acquisition costs is no easy feat, I get that. However, those who can do it gain a huge advantage with investors. It helps investors understand whether your business is scalable or some kind of fluke. It shows them you understand how this number works and shapes your business. Most of all, it shows you know your shit.

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One note: It’s important that this number be both accurate and exact. So don’t use ranges when referring to acquisition costs. Let the investor know you’ve figured this out literally down to the penny.


quote6A common question asked during a pitch is “Where/how are you going to scale this business?” Here’s your chance once again to show off anything you’ve learned during your initial tests. Bonus points if you can add any additional flavor in terms of why that channel is such a strong (and scalable) source of marketing for your business.

Over time your best channel for user acquisition may change. In those early days it’s more important to identify the first major veins you’ll be mining against. In many cases your best marketing channel will prove to be a total surprise.


 

Every business has different marketing needs. But in almost every case, having a deeper understanding of marketing during the early stages will only benefit your company in the long run. Instead of throwing up your hands with regard to growth, stand confident. Show investors you’re well equipped to produce measurable results they can get excited about. Show them that even if you’re an underdog, you’re ready for the challenges that lie ahead.

Are you a 500 company who needs help with distribution? Let’s talk.

Sean Percival

Sean is a versatile online marketer with extensive experience in user acquisition, SEO and social virality. Previously he was the founder of Wittlebee and VP of Online Marketing at Myspace. Sean is part of the 500 Distribution Team.

Never miss a beat

  • http://christinetsai.tumblr.com/ Christine Tsai

    Pet peeve of mine: “Google and LinkedIn and YouTube didn’t do any marketing and they were fine.”

    NEWSFLASH: YOU ARE NOT GOOGLE OR LINKEDIN OR YOUTUBE. Those are outliers. The vast majority aren’t that lucky.

    • Fon

      Alright. it’s a lose/lose situation for me to comment (i mean who TF is this dude trying to be a smart*ss). Sorry and I have great respect for what you guys are and do but seing this just reminds me of Dave McClure comment on wanting to be a Michael Jordan: “You ain’t one so just pass the ball”. Although I agree with the motivation, I disagree with the example you use on both count.

      It isn’t really about trying to be someone you aren’t (like Google or M Jordan) but it’s actually simpler than that in my not so humble opinion. Are we running a business or not. If we are, it doesn’t really matter if it’s online or not. There are stuff u must do as a business owner and that’s all. Doing PR/Marketing is just basic must have items even in my grand father era or before. I think when we run an internet startup, people (including myself i confess) put too much bias on the Online World. but at the end of the day It has nothing to do with it. It’s not about criticising people comparing with Google or Tony Shark that will help, I think, but to lay out what it’s important in running a successful business in a simple form. And there are tones of samples (Steve Blank online video being one). We, as first time entrepreneur, just need to learn, especially the founders, we got more than products and how to learn these skills in a efficient way. And that’s where giants like yourself can so much contribute to not only your invested company but the whole entire ecosystem worldwide. You are 500 and with your power, you can do so much more than just investing.

      That, will be fucking awesome.

  • Moby Duncan

    Nice post Mr. Percival

  • Fon

    Honestly, Marketing is like Dracula It sucks all the blood out of you and you have no fucking control of it AND it makes you feel you are still alive when you got nothing left. It’s shit. but you can’t live without it. PR/Marketing is great from a creative perspective but it’s pain when you are a tiny business trying to survive and you just don’t have so much $. A Hate / Love relationship.

    • http://www.seanpercival.com Sean Percival

      There’s lots of free marketing a tiny business can do. If anything being tiny and broke makes your scrappier which always helps.

      At the same time, even allocating a tiny amount of money to a few tests is recommended. You’re likely to learn a few things.

      • Fon

        Thanks Sean. Trying few of that. Free or small amount. Also thinking of doing some video promotion that links back to our app. being small force you to be creative I guess. So far, however, few of the things I did and paid hasn’t proven to be too effective. Like Fb/YouTube adds or interest forum/Group etc. Any successful experience you had and can be shared?

  • Kiran Bellubbi

    Sean, Christine, DMC and others @ 500S,

    This is a very timely post and got me thinking about the some of the generalities mentioned here and some specifics.

    There’s some truth to what you have pointed out in your post, although like most good discussions it needs to be placed in context. The “context” I am referring to in this case is the stage in which your product is at.

    I was definitely the village idiot you referred to when it came to marketing and customer acquisition with respect to one of our products: Band of the Day (2 time App of the Week, Apple Hall of Fame app, iPhone App of the Year Runner Up) and we *never* spent any money on customer acquisition. Our 4.9M downloads are all organic to this very day. And yes, I generally have a smile on my face when I say this.

    This does not mean that I think people who spend money on customer acquisition are fools, I tend to believe every product has its own lifecycle and evolution curve. Spending money upfront to force the curve in an unnatural way just results (IMHO) in a skewed sense of reality.

    Fred Wilson at USV wrote this piece on marketing which is very interesting since he basically refutes your entire argument (read: I don’t, he does). http://www.avc.com/a_vc/2011/02/marketing.html

    You are both at opposite ends of the spectrum and an intellectually honest assessment would lead one to infer that most* products are not ready for any sort of customer acquisition budget unless the unit economics of the business have been clearly and coherently identified. This requires time – ie. if you are measuring ROI for your business, it is but natural to assume you have months of data before you can make an honest assessment of true Cost Per Install, Cost Per Acquisition (of paying customers) and LTV of paying customers.

    The industry/vertical/type of business also matters a ton – but, assuming you and Fred are talking about software businesses at scale, this product evolution curve / product adoption curve is real across the board and requires the product to be both: i. viable to build/scale & ii. useful to the customers. Most initial versions of software products are one of the two – which is why I believe, scaling customer acquisition early and spending real dollars on it is the wrong strategy.

    (*not all)

    • http://www.seanpercival.com Sean Percival

      Thanks for the great comment Kiran. With regard to the point of prematurely scaling customer acquisition I totally agree. I have personally scaled businesses too quickly resulting in an inevitable crash. The point I was trying to focus on was having some data around ACQ costs is better than nothing. Still seeing a lot of companies who are 1 year down the road without it. So even with small budgets it’s good to start somewhere. Just like it’s good to start building you company instead of just talk about.

      I normally disagree with most things Fred writes so I don’t think we’re in sync on much. :) I do however appreciate that he’s one of the few investors talking about it.

  • Kemar Hinds

    I have a question how do i email 500 startups?

  • Mark Sallows

    Hello Shaun/everyone..

    I think this is very thought provoking post and clearly people have strong views about marketing. Truth be told.. any saas entrepreneur has to think about where the customers are going to come from, its the key question whether you are looking for investment or not.

    Personally I agree with your approach and if I understand your drift you are not trying to suggest that non-paid or paid marketing is the right way to go. What I take from it is that you should explore all of the options and assess each objectively in terms of the ROI or cost per customer acquired.

    Your message is important because as any good entrepreneur knows, sometimes by spending money you can save time and money in other areas. For example, the pre-profit wage bill and overheads that keep rolling whilst you wait for the non-paid marketing plan to bear fruit.

    Yes, not everyone can afford to budget for paid advertising from the start, but not to do the thinking and find out what the most efficient and effective method of building customer traction would be seems a bit lame to me.

    As an entrepreneur i focus on marketing (or revenue generation) the majority of my time. For me its the key difference between being an employee and your own boss i.e. you have to work out how to hunt for your own food. When I make modest investments, its into businesses that understand and respect the importance of the marketing skill set.

    If you do not have smart and effective marketing, soon thereafter most businesses fold. As you say there are some exceptional outliers and hats off Kiran for being one of them – congratulations!

    It would be great to have access to a saas marketing campaign analytics from other businesses so that we could learn from others experiences. Networking with non-competitive saas businesses can help with this as can someone like 500 given the spread of their investment and the privileged insight this provides.

    • http://www.seanpercival.com Sean Percival

      Thanks for the comment I agree, SaaS and B2B marketing is never covered very well online. We talk about this on the team and hope to start demystifying it soon.

      • Mark Sallows

        Hi Sean – sounds good and I think you’d be well be placed to do this. I think a lot of people would be really interested; I for one certainly would.

  • Guest

    Hi Sean,

    Interesting points there. But do early stage startups have the resources to have define a CPA ? I am currently part of 2 Start up projects. Now the first one got funded at the idea stage, so we had the funds to try different acquisition channels , come up with insights about our target demography and establish a CPA range (yes range, cos our numbers corrected as we increased the spend) – But all this was largely because our promotion happened online, so everything was measurable. Now the other start-up I am working on is sales intensive, so to measure the CPA , I need to work with a sales team and again this number would correct itself as I scale up.

    I believe investors would be more impressed if startups are clear on the “What” than the “How”. For our second startup project, we are currently with a startup accelerator and they are making sure that we are clear on what need we are solving (validating with customer) , what are our assumptions for different phases and so on.

    Rest, I believe start-ups are largely about learning on the job – going out there and doing it , discovering a new business model , cracking a new problem , experimenting with different channels.. and that’s the risk investors should be willing to take if they want to join an entrepreneurs.

  • vaishali

    Hi Sean,

    Interesting points there. But do early stage startups have the resources to define a CPA ? I am currently part of 2 Start up projects. Now the first one got funded at the idea stage, so we had the funds to try different acquisition channels , come up with insights about our target demography and establish a CPA range (yes range, cos our numbers corrected as we increased the spend) – But all this was largely because our promotion happened online, so everything was measurable. Now the other start-up I am working on is sales intensive and also needs offline promotions. To measure the CPA , I need to work with a sales team and again this number would correct itself as I scale up.

    I believe investors would be more impressed if start-ups are clear on the “What” than the “How”. For our second start-up project, a start-up accelerator is helping us refine the basics – what need we are solving (validating with customer), what is our target segment & positioning, what are our assumptions for different phases and so on.

    Rest, I believe start-ups are largely about learning on the job – going out there and doing it , discovering a new business model , cracking a new problem , experimenting with different channels.. and that’s the risk investors should be willing to take if they want to join entrepreneurs.

  • Fon