The Missing Ingredient: Strategic Marketing to the “Money Guys”
August 15, 2011
Most expansion stage companies execute marketing strategies for their target prospects who help them build their customer base over the long term, but they lack marketing strategies directed towards the “money guys” who might invest in or acquire their company in the future. In this post I try to demonstrate how investors/acquirers have a similar buying process to your product buyers and why it is important to put a long-term effort against future investors and acquirers.
How You Market and Sell Your Product(s)
Most expansion stage companies focus tremendous efforts on building and expanding their customer base. The more sophisticated marketers realize that it is a long-term effort to align with and stimulate their target prospect’s buying cycle, which is something like:
- Problem recognition– helping their target prospects perceive a need
- Information search– helping their target prospects understand the approaches to addressing the problem
- Evaluation of Alternatives– Helping the prospects understand their unique value and advantages over the other options available to the prospects
- Purchase decision– helping their prospects to make the decision to purchase their product
- Post-purchase activities– helping their prospects realize their products’ value
Building Your Company Creates Value
The more focused the effort and the better the unique understanding a company has on its target market participants, the better the company can craft, test, and iterate on sales and marketing tactics that create more growth with less effort. The best companies also iterate on their products to provide more unique value to their target prospects.
At OpenView Venture Partners, we have a strong belief that if companies continuously iterate on approaches like these to their target market segments, they will build large, profitable companies which will put them in a position to be highly valued by the “money guys” (the people who might invest in or acquire your company).
Creating The Value is Not Enough, You Must Market/Sell The Value!
Simply having a company that you perceive as valuable is not enough, since value is in the “eyes of the beholder”, in this case the “eyes of the money guys”.
If you are valuable without your prospects perceiving your value, then you won’t realize the value!
You need an approach to marketing your company to the “money guys” that is similar to the approach that you have to marketing your products to your target prospects. The more the right “money guys” perceive you as valuable, the more valuable you will be.
The best CEOs and CFOs (and Investor Relations staff for the public companies) realize that this effort is not short term and tactical when they want to gain investors or sell their company. They understand that the buying process of investors and acquirers is similar to the buying process of their products, where the company securities are the “product” being sold rather than the actual products they create and sell to their customers.
The “money guy” buying process goes something like:
- Opportunity recognition– the “money guys” realize that there may be an opportunity to invest or buy a company in a certain product-market sector.
- Information search– They explore the landscape and better understand the nature of the opportunity (for example, large new market sector, attractive economic models, opportunity to participate in great growth, alignment with their interests and their current strategy and operations)
- Evaluation of Alternatives– Identifying and exploring the potential investment/acquisition opportunities in the market
- Purchase decision– Choosing the best-fit company valuations/terms that fit their needs
- Post-purchase activities– Helping to grow the value of the company in which they invest or acquire
“Money guy” buying processes can be really long. For investors, they may last a few months at a minimum and for corporations they could last 2-3 years or more (most organized corporate development programs are on an annual cycle and your specific product market could go through 2-3 cycles before it becomes a priority to the buyers, assuming that it does become a priority with or without your help).
The process is also complex, as both professional investors and corporations have committees and processes for making investments and acquisitions. These acquisitions can involve numerous people and constituencies.
If you have a tactical corporate marketing effort directed toward the money guys, you might get lucky and catch them when they are at stage three of the list above and create a quick process. However, their full buying cycle takes time and you need a more strategic approach if you are going to maximize the probability of success.
The best CEOs/CFOs are constantly marketing their organizations, making connections and trying to build relationships to better understand their potential future investors and acquirers and they are constantly giving their corporate pitch to anyone who will listen. Some of the best are using the insights they gain from the “money guys” to help them adjust and create strategies so that they are even more valuable to their targets.
I recognize that your company is short on resources. It is true of all growing companies. You may not have the organizational bandwidth to execute marketing strategies to the “money guys” while trying to get your company started or while building your company. If this is your situation, you can lean on your investors, board members, and/or outside advisers (such as bankers) in the short term to help you. In the medium term, however, there is no better “Money Guy” marketing than the CEO developing direct relationships with a targeted list of investors, potential acquirers, and the people who influence them. You need to figure out how to set up your team and carve out the time to do these activities.
You may also decide that now is not the time to prioritize strategic marketing efforts to the “money guys.” You know what you need to get done from a company perspective for the next couple of years, and funding or acquisitions is not in your plans. If this is the case, then I would still recommend that you get a strategic marketing effort going at least 12-18 months before you expect a transaction, as the marketing effort does take real time to have a meaningful effect.
In my next post, I will lay out the activities you should consider as you build out your long-term strategy for attacking your “money guy” targets.