4 Ways Digital-First Marketing Drives Capital Investment for Startups
The startup landscape here in New Mexico is a bit of a microcosm of what you would see outside of the high-octane communities like Silicon Valley, Austin, or New York. We have B2B businesses, B2C businesses, and quite a few startups in sectors that have some intellectual strength in the region like biotech, space tech, energy, and health.
Not all early-stage startups need strong marketing capability and accomplishments. We tend to focus on those B2C businesses that will need a scalable way to attract and retain customers. But marketing matters to more than this slice of the startup world. As all startups move from bootstrapped early-stage to Angel and Seed-round funding and on to later funding gates, there are 4 use-cases for strong, digital-first marketing.
Demonstrate you know how to acquire customers digitally
Any eCommerce business or one that sells directly to its customers will need to master how they can attract, acquire and retain those customers. “Mastery” means marketing that is efficient and can scale. I would argue that startups that can spend less on customer acquisition than they make from those customers are infinitely more valuable than those that “buy” their customers with no end in sight. Still, there are many examples of unprofitable businesses that attract investor attention. Just look at the story behind Unilever’s acquisition of Dollar Shave Club. One reason that acquisition didn’t perform is that DSC used a 5-year “lifetime customer value” vs. a 1-year thus justifying unsustainable marketing spend.
Businesses that sell direct must show mastery of how to acquire customers via performance marketing methods like paid social media, search marketing, influencer marketing, affiliate programs, and customer referral amongst others. This goes far beyond getting your nephew to buy a few Facebook ads. There is an art and science to data-driven digital marketing.
Every business should consider what capabilities they need in-house and what they can leverage via partners. Everyone knows startups have lean staff and limited resources. Don’t skimp on the right resources. Now, there are a few more choices for startups to fund and scale digital marketing. Services like ClearCo and DRVE offer capital investments specifically to fund smart, scalable marketing to grow a business and demonstrate a profitable marketing approach.
Show you can acquire distribution in today’s crowded landscape
I am working on a few plant-based food launches. They all need retail distribution – both food distributors and retailers like Spinneys or Whole Foods. Historically, grocery stores held all the leverage. They get paid for shelf placements and more.
Today, a brand that plans to sell through a mature channel can take back some leverage by demonstrating its digital marketing strength to drive awareness and demand for its products. An established retailer will offer more support for a brand that has some smart marketing gaining reach and engagement via Facebook and Instagram, for example. They may even forgo the usual fees for optimal shelf space.
Inspire investors with the brand
VCs and investors like to think of themselves as ‘rational actors.’ They are savvy analysts who can see the numbers and the facts of a business pitch. They can still be inspired by a great brand story. Many know that can convert into monetary value. Humans – and that includes VCs – make many decisions for emotional reasons. Stories engage us on that emotional level, and, yes, the business case still needs to add up. Perhaps that’s one reason many investors invest in the founder vs. the business plan. The founder is a great storyteller.
Startups who understand their own brand – their promise to their customers, what makes them different, why people will care – will earn more investment given sound fundamentals.
Build an addressable audience
Whether a B2C or a B2B business, startups need to be able to communicate directly with prospects, customers, influencers, and stakeholders. Marketing has changed considerably over the past two years and will continue to do so. In marketing circles, you hear about the importance of first-party data. That means email addresses and other key information about your customers and/or stakeholders. This will only become more and more critical and represents an essential value for any company. It might even factor into valuation in exit strategies.
Businesses must master increasingly personalized email marketing programs to drive upsell, cross-sell, and referrals from existing customers. For acquisition, the most efficient audience type in Facebook paid marketing is the lookalike audience generated from your existing email lists or Website visitors.
B2B startups who benefitted from regular earned media coverage – free PR – know that well will dry up at some point. To take control, they need their own way to reach the right people through their LinkedIn connections or their email distribution.
It’s all about building and leveraging relevant addressable audiences.
Early, early-stage startups may just be proving they can make the product or service they aim to. It may be tough to justify marketing resources at this early stage. Still, it’s never too soon to inspire people (and investors) with the brand story.
Once you move on to Angel rounds or Series A, your ability to acquire customers or drive distribution and sales via increasingly efficient digital-first strategies will make a difference in when and how you land funding.