Startups and smaller agencies: marriages made in VC heaven
I’ve been loitering in the VC galaxy lately, and it’s a funky neighborhood. Private equity firms and their representatives are very active, especially in the technology space, looking for the next this or that, and betting millions on “neato” ideas. And while figuring out which companies might get a shot at glory is a little bit like deconstructing Scientology, the real work begins after funding.
As it relates to marketing, startups (pre-money or post,) have challenges that established brands don’t. A startup brand has to do more explaining, more demonstrating, more proving their worth – they’re fighting for a reliable spot in the minds of consumers. And that’s in addition to duking it out and swiping some share from all the competitors out there, who are themselves both enjoying and defending their established positions.
So how does a startup go about the business of selecting an agency? Since it’s not a typical discovery process, and likely not a standard RFP protocol, it can get a little dicey. So let’s look at the basic DNA points of startup companies and their related marketing needs:
- They need to move fast
- They likely have a limited budget (being watched over like a hawk by the newly installed CFO or COO from the investment team)
- They need to differentiate
- They need to build credibility
- They need to generate transactions
- They need to build brand awareness
- From the investor’s point of view, they need to LAST
- They need good data, since they’re already working on version 2.0, (this is true whether the startup is a technology company, or a vacuum cleaner or a type of insurance.)
Small agencies are a fit for startups:
If you put your matchmaking hat on for just a moment, you see that these traits match up almost perfectly with a small (or smaller) agency. Generally speaking, smaller agencies can produce appreciable results, quickly, and for less initial investment. There are a number of reasons for this (and this is NOT a bash piece on larger agencies – they have their place, and we’ll get to that in a moment,) not the least of which is scale. With less overhead and heft, smaller agencies can generate results for startups for less overall dollars.
Smaller agencies have a gift for seeing numerous finish lines that are attainable and help to motivate the internal staff. For instance, a smaller agency might recommend a social media program for the startup. And then it becomes a race to 10,000 likes. Or 1,000 followers. Or whatever. These are simple, digestible goals for both the agency and the client…and it looks like progress. With larger agencies, success like this is just a daily occurrence, and it may have lost its luster.
Smaller agencies are also more likely to look for “under the radar” strategies. And as it relates to the need to last, smaller agencies will typically put more legwork in setting up strategic partnerships (like distribution or sell-in) with other entrepreneurs in their small agency network. In contrast, larger agencies see success in TRPs, and typically recommend advertising first, everything else after.
Smaller agencies are less of a risk:
Smaller agencies are also easier to fire, since the financial risk of their involvement is limited. And that’s actually an advantage to the startup. With less overall exposure, they’re not tied to overly long-term plans. So if things aren’t going well after year 1, they may consider a reboot, either with another small agency, or perhaps a slightly larger marketing enterprise, if things are beginning to move.
Choose wisely – based on objectives:
It all depends on the objectives for the startup and their investment team. If things are indeed progressing according to plan, a smaller agency may NOT be the partner to help that company expand globally, or to establish more high-profile partnerships. In that case, it may be time to pass the ball. And although smaller agencies match up with startup needs and their financial limitations, larger agencies do have more reach and more bodies to execute on multiple planes at once. For instance, if the play is to execute a truly integrated marketing outreach, a large agency can put experts on every channel in about a day and roll out the integrated plan next Tuesday across social, mobile, web, TV, radio, outdoor and even a cool experiential thing at a trade show next week. The little guys simply don’t have that kind of muscle.
In addition, larger agencies have advantages that smaller agencies cannot even comprehend. While a smaller agency might be able to do more with less, larger agencies have the ability to do EVEN more with more. Take media buying, for instance. If a small agency is buying spot cable for a limited budget, they’re going to get only so far. Mr. Big agency comes along and requests the same buy, and then smoothly reminds the station that they also buy tens of millions across the network, and they’re likely to get more points/exposure or better slots for the same outlay. It’s simply the law of scale and leverage.
Those advantages aside, however, small agencies and startups are clearly a match with big upside possibility – from the business side straight on through to intangibles, like personality, vibe, etc. But it’s mostly because, in the best cases, the two companies help each other grow into their fullest potential.
Great post. The reason why small agencies are right for startups is because the small agency needs to accomplish the same things that the startup does and can relate on that level. The DNA of the small agency is the same DNA as a startup.