September 21st, 2012
Here’s pithy news that didn’t shock me at all: About three-quarters of venture-backed firms in the US fail, according to findings of Shikhar Ghosh, a senior lecturer at Harvard Business School. This number is three times higher than what’s usually reported, a dismal track record no sports team would tolerate. Not only astounding, it’s avoidable.
With proper branding, startup CEOs would see their success rates skyrocket. Alas, venture capitalists (VCs), their backers, don’t require proper branding. Worse, they don’t even know why they should require it: VCs are blind to branding.
I’ve had countless discussions — almost all wastes of time — with VCs about sharpening the brands of their portfolio companies (aka startups). This action, I posit, will boost their IRRs — returns on their investments in said portfolio companies: If customers quickly grasp a company’s reason for being, its visibility rises while its cost of creating that visibility drops, thereby spiking its value.
Common freaking sense. One would think. Yet, VCs mostly ignore it. My colleagues around Silicon Valley share the same head-scratching experience. I offer three explanations:
Rx from the WhiteNoise Doctor™
Shikhar Ghosh from Harvard concluded that three of every four venture-backed companies fail. This is because VCs are failing to nurture and advise their portfolio companies correctly, wasting a lot of investor capital in the process. Limited partners, investors in venture funds, should be outraged.
VCs, it turns out, do need to sharpen the brands of their startups. Riding hyperbolized tech waves is not a substitute for branding. VCs must fund only those companies that solve real problems: Not knowing where my “friends” are or what they think about the minutiae of life is not a real problem.
CEOs can’t succeed by spewing jargon, looking and sounding like every other company, and riding tech waves. They must offer value and solutions, not technology, and communicate to customers with unique, memorable, repeatable messages. Finally, CEOs must invest in solid branding counsel at every stage of growth — counsel, so far, not forthcoming from VCs.
To cure branding blindness in venture capital, remove the hype-colored glasses. It’s not about the wave, the technology, or the jargon. It’s about the brand: value proposition. Are you listening, VCs?
About the Author
Marc Rudov is a branding advisor to CEOs,
producer of MarcRudovTV, and author of the book,
Be Unique or Be Ignored: The CEO’s Guide to Branding.
© 2012 Marc H. Rudov. All Rights Reserved.