What gap in the market does your business fill?
How well do you know your customers?
Have you got a solid plan for growth backed up with valid metrics?
These are the kinds of questions that investors will be asking when they’re considering whether or not to invest in a scale up. Marketing plays a vital role – not only in in showing how it will contribute to the success of the business, but also in communicating the overall story to investors.
Mike Fish has experienced both sides of scale up investing. He helped secure a $50 million investment, Europe’s largest tech investment at the time, in a start up software and services business. As a director of a Venture Capital firm, he has also invested in countless scale ups and holds a number of board and advisory roles. He was a member of Microsoft’s European ScaleUp coaching team and helped Grant Thornton set up its Growth 365 service, in both cases helping CEOs navigate the scaleup growth phase.
Today he advises and coaches Small and Medium businesses and their CEOs as accredited executive coach and board advisor, bringing lots of experience in Digital and AI through his other role as founder and director of an analytics consultancy called BigData4Analytics. For example, he is currently advisor to Consilience Ventures, an ambitious project to create an alternative start-up ecosystem that enables traditionally low-risk investors to invest in high growth tech businesses.
In short, he knows what investors look for and what they avoid.
For the second post in our Marketing for Scale Ups series, we caught up with him to find out the role marketing plays in investment decisions, and what scale up marketing teams should be doing to make their business more attractive to investors.
Have a clear and concise story
“You need to be able to answer the fundamental questions about your business and answer them in a clear way,” he explains. “In some ways this is more important than the marketing plan. As they say, most plans get discarded at first contact with the enemy, so articulating the team’s capacity to amend the plan is critical.”
Marketing can help scaleups get to the heart of the fundamental reasons the business exists and how it adds value. In fact, marketing may already have captured the answers to these questions in their value proposition.
These questions include who the customer is, what problem the business solves and how it does this. It may also include what makes the solution unique, whether there are others out there who provide a similar service, and why the business feels confident about growth.
Marketing plays a key role in answering these questions, but also in making sure that the answers are clear concise and actionable. Confusing or long-winded value propositions are often the result of a lack of clarity about who the business really helps and how it adds value.
Marketing can also help think of other ways to tell that story. For example, Mike says his analytics consultancy recently produced a short animated video to describe their service. “The process of articulating the service in just 90 seconds was a challenging but valuable lesson.”
The CMO’s priorities
Naturally, any investor will want to learn more about the marketing team and their priorities. Most importantly, the decision-maker.
“Often the marketing plan will come down to the profile of the person running that part of the business. So you’d want to ask how experienced is the CMO and where have they come from? And what kind of CMO are they?”
Mike says there are two kinds of CMO that he’s encountered - he describes them as ‘fluffy’ and ‘analytical’. You can probably guess which kind he prefers.
“Some marketers prefer writing nice press releases and drawing on flipcharts. I struggle to see the value of this. For me, marketing is more of a science than an art and I want to see projections based on fact and research rather than aspiration.”
On that note...
Evidence-based plans
“One of the advantages of scale ups is that there’s more data. The business already has revenues and customers. They have performance data.”
Every market and every business is different so every business case will need to be substantiated through different metrics. It’s up to the business to pick the right ones and explain why they’re the right fit, otherwise they will be leaving it to investors to choose their own.
“What is the objective measure of what the market looks like? Where are we right now in terms of market share or revenue? What is it that can drive those figures up and how will that affect these metrics? Investors need hard data to make decisions. Choosing the right metrics is a good indicator of knowing your market.”
Marketing teams should always have a good knowledge of the market and a plan for growth, making them ideal for providing these answers. But the growth plans provided need to be detailed and realistic, consisting of both long- and short-term goals and viable plans for how to achieve them.
“Investors have these people come through the door saying they’ve found a new market that’s growing fast. All they need is 0.1% market share. But there’s usually a big gap in the flow chart where some miracle happens. You need to show a measurable plan for achieving your goals, both short and long-term.”
Having a growth plan is one thing, but scale ups also need to be able to explain their plan for how they will spend investors’ money.
“If you’re asking for funding for your next stage of growth then the investor will want to know how much you’re raising and where their money will be spent.”
Understand your audience
Understanding your audience is a fundamental marketing skill. Marketing teams invest a lot of time in trying to understand people’s needs, challenges and pain points, and they can apply these skills to investors as well.
“Tech CEOs are often obsessed with features, whereas investors are just trying to figure out when they’ll be able to get their money back and how much they’ll get. So there’s often a mismatch in the dialogue between these two.
“Great salespeople figure out what the buyer’s preoccupations are and then talk about those. This is definitely something marketing can help with if they can anticipate what the investor’s priorities are.”
Investors will want to know that the product is viable, that there is an opportunity and that the team has a plan for growth. But scale ups shouldn’t go overboard with their pitch.
“The presenters shouldn’t share every feature of the product. Do the minimum that will get you to the next meeting. The purpose is to create an appetite, not a meal. Ensure you leave sufficient time for questions – this is where investors get access to information their rivals may not. Manage the time so you can covered everything within the allotted time – and also make yourself look more professional. And lastly, remember that you are embarking on a partnership, so don’t be afraid to ask the investors what they bring to the party other than money!”
Our next post in this series will look at how scaleups can build their brand and pick marketing tactics that are a good fit for the scale up phase. In the meantime, you can use our Marketing 360 to learn more about your own strategy and identify untapped opportunities.
