The MoPR Blog

The subject matter: Venture Capital
The expert: Nathan Beckord

Nathan Beckord is a founder and partner with VentureArchetypes, LLC, a venture funding strategy and startup consultancy headquartered in San Francisco, with offices in New York and Denver. Nathan has been advising startups, writing business plans and providing strategic venture consulting services for over a decade. He has worked on numerous deals, ranging from $1-2 million seed rounds to a complex, $500 million debt-and-equity private placement. Before founding and managing VentureArchetypes, Nathan worked at the Equity Private Placement Group at JP Morgan in New York, the High Tech Valuation Services Group in San Francisco, and Access Venture Partners in Austin, Texas. His work at these firms included three technology IPOs and nearly 40 successful acquisitions. Nathan is a Chartered Financial Analyst (CFA) and a member of the Association for Investment Management Research.

Q & A

Where do VCs look for information about companies that could be possible investments?

VCs are typically focused on a particular sector—such as wireless, web 2.0, semiconductors, etc. They usually have a background in their sector, and tend to glean information by talking to other VCs or executives in the industry, and from the companies who come in and pitch. They also follow the blogs, trade press, and mainstream press, and to a lesser degree, they get information from conferences and trade shows. In general, they are a fairly “tuned in” group; part of their job is to make bets on market or technology trends, so they work to stay abreast of the competitive landscape and of the current funding and exit environments in their market.

VC firms, as you probably know, are typically structured along Partner, Principal, and Associate lines. Partners usually have more referred deals than they can process, but Principals—and in particular, Associates—often act as “scouts” and will actively reach out to companies they read about in the press and on blogs. We’ve had a number of clients get favorable blog or press coverage and then immediately get calls from Associates seeking more information. While this means entrepreneurs are starting at the bottom of the totem pole, it can be a good starting point for deeper discussions.

Does having a PR program in place help a company when they are looking for funding?

We like our startup clients to begin approaching investors when they are at a point in their lifecycle where there will be a steady stream of real news to report. This may be shortly after launch, or when major partnerships are being forged, or perhaps when the product has left beta trials and is beginning to gain customer traction. We time it like this because VCs rarely make a quick investment decision; instead, after an initial pitch meeting, they tend to monitor a company for awhile to see how (and if) the management team executes against its business plan. The metaphor is one of “watching a movie vs. seeing a snapshot” of a company.

Thus, I view a PR program as a way to “amplify” the news coming out of a company. It’s one thing to tell an VC about a new partnership, and quite another when the investor reads a favorable article about it in the Wall Street Journal. Done right, a PR campaign can keep the startup front and center in the VC’s mind, leading to (potentially) faster funding decisions.

What kind of information do VCs look for that would be important for companies to include in their PR activities?

VCs want to see evidence of true customer appetite for the product. They want to see that the company is pulling ahead of competitors, and that the team has the wherewithal to make big things happen. Thus, announcements of impressive customer additions or of major partnerships are always good. Truly innovative product announcements can be useful if they are revolutionary (vs. incremental improvements)—the iPhone is an example. A key hire—a name brand—can lend credibility as well.

My favorite type of announcement is one that shows external validation of your vision, and that moves the needle. A quick sanity check can be made by asking: “is your news likely to materially affect the top or bottom line of the company?” If not, then it may be better to stay silent, rather than fill the press pipeline with noise.

Are there any common PR mistakes young startups make that can hurt their chances to raise funds or meet with VCs?

I would say the most common mistake is making a big splash at launch, and then going silent, either because PR gets put on the back burner, or worse, because there is no “new news” to report. A significant portion of any funding decision is based on finding startups with momentum. Thus, the onus is on the startup to time the launch—and fundraising—and PR—with a period during which they’ll have news to report. Naturally, “fluff” PR or PR that doesn’t support a startup’s big-picture vision could be damaging as well.

Once a company receives financing, do VCs encourage adding PR or expanding PR program activities?

Good question. I think VCs are generally supportive of calculated PR spend. Their portfolio companies reflect on them as investors, so favorable press makes them look good, too. You’ll notice that a lot of press pieces refer to the VCs who invested, and will even pull quotes from the lead partner. VCs are particularly supportive if there is a brand-building component to the story, as with consumer products or software, or with Internet sites. Brands are valuable, so PR that effectively builds a brand (and helps to either drive paying customers or fend off would-be competitors) is valuable.

And can you name a resource where startups can get more information about preparing to raise funds?

Tough question. The key for a startup raising venture funding is to get inside the VC’s head, so you really understand what he or she is looking for. This is necessary to tailor your pitch, and to ensure your pitch doesn’t go off target (and it is often a very small, rapidly-moving target). The reason I say it’s a tough question, is because in the past 18 months the world has become filled with blogs written by VCs of every ilk and stripe. We’re suddenly in a glut of VC information, whereas only a few years ago it took a lot of networking and lunches to get the inside scoop. It’s hard to separate the good from the bad, and there is a fair amount of misinformation out there.

Anyway, cutting to the chase, VentureBlogs.com is a good starting point. The site contains a fairly long list of blogs written by VCs, each one trying to outdo the others with a catchy blog name. If you are looking to pitch a certain VC, check it out to see if they post. If podcasts are more your thing, then VentureVoice.com is a good start. To see what types of deals are getting funded, I subscribe to the free daily emails from VentureWire.com and PENews.com. As for books, a classic is High Tech Startup by John Nesheim, as well as New Venture Creation by Jeffrey Timmons. We’ve also compiled a list of startup and VC links on our website at www.venturearchetypes.com/Resources.html.

Reach Nathan Beckord by email at: nathan (at) venturearchetypes (dot) com

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