The Eighth Reason Why Startups Fail – Why Mark Cuban Is Wrong About PR Companies And Startups And Why Barbara Corcoran Is Right About PR

 

We see startups rise, crash, and burn on a regular basis. This begs the questions: do startups fully embrace the power of public relations (PR) and the value of a PR consultancy? Do they see working with a PR consultancy as a grudge purchase or an intangible luxury? Could poor understanding of the crucial role PR plays in building a thriving business contribute more to a startup’s failure than is generally assumed?

In “The Main Reason Why Startups Fail,” Gijs van Wulfen, an expert on innovation and design thinking, refers to research from CB Insights that lists 20 reasons startups fail. The top seven factors contributing to startup failure are market need, cash insufficiency, ineffective team, superior competition, pricing/cost issues, poor product, and need for/lack of business model.

The eighth factor? Poor marketing. Indeed, marketing strategy is much more important than many startups seem to realize–in particular a key aspect of marketing: PR. Van Wulfen goes on to explain how poor marketing contributes to the failure of a startup:

Knowing your target audience and knowing how to get their attention and convert them to leads and ultimately customers is one of the most important skills of a successful business. The inability to market was a function of founders who liked to code or build product but who didn’t relish the idea of promoting the product and came up in 14% of the startup post-mortems.

In contrast, Marc Cuban, Shark Tank investor, entrepreneur, philanthropist, and owner of the Dallas Mavericks, has a very different viewpoint. In Entrepreneur Magazine, Cuban lists “12 Rules for Startups.” Point 11 explains his take on the role of PR consultancies for startups:

Never hire a PR firm. A public relations firm will call or email people in the publications you already read, on the shows you already watch and at the websites you already surf. Those people publish their emails. Whenever you consume any information related to your field, get the email of the person publishing it and send them a message introducing yourself and the company. Their job is to find new stuff. They will welcome hearing from the founder instead of some PR flack. Once you establish communication with that person, make yourself available to answer their questions about the industry and be a source for them. If you are smart, they will use you.

Many may be tempted to take Cuban’s contentious advice at face value and say, “We will do it ourselves.” Big mistake! While grandiosity might make good reality TV, in the business world hubris invariably precedes a fall. Most new entrepreneurs do not have the skills to enact a full PR strategy, and the majority of PR firms go far beyond “phoning it in” in the way Cuban describes.

Startups can arguably realize a higher return on investment by outsourcing PR compared to winging it in-house. A PR consultancy brings critical value to the mix, especially in getting messaging to a target audience. Hiring a high-quality PR consultancy can free busy founders to focus on what they do best—research, product development, innovation, collaboration, sales, etc.—while resting assured that their products and solutions are gaining visibility day by day.

A venture capital (VC) company stands to win and lose on the backs of both the startup and the PR consultancy. If the startup brand takes off because it offers something of value that the market accepts, and the consultancy delivers excellent PR, then the VC company benefits from the profit derived from the company, and/or when they exit the investment.

Engaging a PR firm can benefit a startup as well as the VC company funding it in ten ways:

1. Give the startup owners more time

Startup owners and their management teams know that it takes a significant amount of time, energy and commitment to get a fledgling company on its feet and develop a viable sales funnel, products and services that work, a brand and reputation, and street credibility.

While some may want to be directly involved in public relations, startup owners and VCs would be wise to weigh the cost of the owner or executive team member’s time and expertise being spent on the PR function versus outsourcing the day-to-day PR function to a competent, experienced consultancy. Of course, ultimately someone on the executive team should be the key point of contact for the retained agencies and hold the overall responsibility for the complete marketing function including PR, advertising, marketing, etc.

It is not necessary to hire the biggest consultancy on the block, as biggest is not necessarily best. Rather, it is best to look for a good fit, and partner with a consultancy that understands the specific issues and pressures startups face. An effective PR company will understand and articulate the startup’s value proposition and the space in which it wants to operate, have the tactical capabilities to generate content and reach out to the appropriate media, and operate strategically. It is important to realize that not only would the startup be outsourcing their PR to a consultancy, but they would also be transferring the risk of not achieving PR objectives to a consultancy that will be held accountable.

2. Build the brand and reputation

A PR consultancy can help a startup build its brand step by step to create a solid future. A brand and reputation that resonates authentically with all stakeholders has a greater chance of success in the long term. Focused PR plays an important role in creating street credibility, ensuring the value proposition is understood, building the reputation and presence of the executive team, and establishing trust and market presence.

Brand and reputation building take time. This is often a challenge for startups that want to cross the finish line before they are out of the starting block. A good PR company will provide a sustained campaign based on collaboration, expectation management, and trust among all parties.

Building a brand and reputation also encompasses dealing with negative as well as positive events. The startup must have all relevant policies and procedures in place to tackle any eventuality, including a plan for an extreme crisis (see point 10 below). Attitudes such as “We’ll make it up as we go along” and “We’ll cross that bridge when we come to it” are a recipe for disaster. A PR company can provide insights and strategies for everything from dealing with negative reviews online and managing social media crises to communicating effectively during product recalls, which is particularly important if the startup is selling consumer items.

3. Manage the newsroom

Barbara Corcoran, entrepreneur and real estate mogul, and one of Cuban’s Shark Tank co-investors, makes a crucial point: “The most effective way to build a brand is not by spending millions in advertising, but by finding a clever way to keep your name in the press.”

News drives the media and makes a startup visible to prospective customers, partners, collaborators, investors, or even an acquiring company. In this arena, startups often exhibit two main deficiencies: not understanding what news really is and not realizing that they actually have news to disseminate.

Often a startup will achieve a milestone and assume it will be a “perfect” story for The Wall Street Journal, Fox Business, or even Bloomberg Business. Every PR consultancy has dealt with the same challenge with almost all of their clients: what the client thinks is news and what the media knows is news are often two very different things. In fact, even if an item is newsworthy, that does not mean that it will be published, as other news of the day may take precedence.

An astute PR consultancy can balance client expectations, advise which stories are newsworthy, and focus communication to yield positive, realistic results. A strategic PR consultancy can take a weak or insufficient news suggestion and make it work by rearticulating the story, identifying a potential news hook, and/or generating appropriate content and pitch.

PR consultancies are experienced in identifying news opportunities. During regularly scheduled status calls and meetings, they discuss business issues and developments within the startup. Through in-depth discussions and focused interviews, the PR consultancy identifies promising media opportunities. News does not necessarily have to appear in the form of a press release: it can be a case study or a bylined article with top-level analysis (see point 4 below). Contentious opinions always add value. An effective PR consultancy formulates a press office and news strategy that includes the print, broadcast, online, blogging, and social media universes.

Crucially linked to the newsroom and news cycle is the appropriate use of social media platforms. While some startups may be inclined to expand into as much social media real estate as possible, their PR consultancy would likely advise them to focus on and actively utilize a core cluster of appropriate, strategic platforms. The PR consultancy can provide social media content capable of either standing alone and offering news value, or create content directly linked to the company’s news that drives potential customers and investors to the company’s newsroom on their website.

Startups also need to communicate effectively with their employees. Many new businesses neglect to formally communicate with employees, which can lead to negative outcomes down the road. A PR consultancy can take on the internal communications function so that employees stay abreast of developments within their own company. An outside PR firm can generate accurate, consistent, and reliable updates to motivate and inspire employees, prevent or mitigate misunderstandings, and help employees better articulate the core vision and values of the business.

4. Reach prospective clients and secure current ones

Content marketing is just as important for a startup as is reaching the mainstream media. As mentioned above, not all news will be covered by the media, and not every event is really news to the media. Some items may, however, be news for the startup’s wider community of current and potential customers, partners and suppliers, as well as key influencers. The startup should ensure that its content marketing news is regularly relayed to its non-media audience.

Ultimately the objective and strategy of the startup in implementing a sustainable content marketing campaign is to deliver insightful and valuable news and content at regular intervals to engage clients, obtain sales, grow the customer base, and retain long-term satisfied customers. Every company will have its own unique objectives. The targeted audience should be external (current and prospective clients, investors, suppliers, and partners) as well as internal.

The often overlooked internal audience is crucial because employees must understand the intellectual content that the company is disseminating. For example, imagine the consequences if an uninformed employee attended a meeting with a prospective client who asked, “That article we received yesterday was great–what are your thoughts?”

Current clients who receive content of value are likely to read and retain the information sent to them. In addition, the brand name of the company disseminating the content will remain at the top of their mind and they will invariably follow and attend to future company activities. There is also a good chance that the sales process of new products and services to these clients would be shorter and smoother because the disseminated content helped lay the foundation of a good reputation.

Prospective clients receiving solid content will start to build an understanding of the startup, its products and services so that when a sales team member contacts them they already have some level of familiarity and are primed to engage more fully with the company.

5. Build media relations and a presence

A key aspect of building a reputation footprint is a media presence and great media relations. To the media, the startup is an unknown entity, and simply blasting off emails as Mark Cuban suggests will not necessarily garner their attention in the cluttered, information overloaded environment in which they operate. A PR consultancy can leverage their skills, experience, and connections to effectively introduce the startup to the media.

Once the introductory and briefing section of the campaign is over, the PR consultancy can focus its skills on identifying and creating news collateral specifically tailored to the targeted media. They can also build editorial calendars, pitch relevant angles, set up interviews and publishing house tours, and/or facilitate media visits to the startup’s facility.

The important step of introducing the startup to the media and following up with regular, credible and newsworthy collateral is crucial to initiate a news presence and build sustained media relations. The ultimate payback, among many, is that the company’s spokespeople are seen, over time, as subject matter experts the media can rely on for substantive opinion and comment.

6. Tell the market, “We can solve your problem”

Q: What could be worse than a startup burning through its money to launch a product or solution that no one wants?

A: Having a product or solution that fulfills a massive business or consumer need, but the market does not know about it.

A good PR campaign is not a “one hit wonder.” PR consultancies help startups inform the market that they offer solutions to their problems. As Barbara Corcoran observes, “The power of publicity is more important than advertising.” An astute consultancy generates a sustained campaign built on a strategic plan mapped to the startup’s business and marketing objectives. The PR plan serves the critical function of laying a cornerstone for all initial communications.

The launch of the startup entails several interlinked stages which should each communicate three basic points to the target market: We know you face this particular challenge or issue, we have a product/solution that addresses your problem, and here are the benefits of using our particular product/solution. Sometimes companies and consumers are not even aware that they are experiencing a challenge, problem or inconvenience. Implementing a well thought out PR campaign helps the target market realize that they do indeed have an issue that the startup can solve by defining the issue and detailing its costs in terms of lost time, money, energy, etc.

7. Enhance credibility

With the number of failed startups being quite high, establishing credibility with customers, the media, and potential investors is a crucial component of today’s business landscape.

When prospective clients or investors are interested in the services or solutions a startup offers, they go online and read the available content. They look for information to help them solidify their decision to engage with the company, or choose to move to a competitor. Similarly, when a startup’s sales team reaches out to a potential customer, the customer will no doubt seek additional information via trade media, general news, word of mouth, and websites.

In addition, journalists who receive press releases or tips may conduct background research on the startup to find their own news angles and points of interest, reading articles and reviewing the company’s online press office. The more clear, reasonable, ethical, and thought-leadership oriented the information and opinion are, the greater the credibility of the spokesperson, the startup and its services and solutions. Credibility deepens the interest and understanding of journalists and potential clients.

Investors also conduct online research to determine the viability of their investment. Some startups require more than one round of funding and often continue to source and speak to potential investors after initiating their business. An online media footprint with credible, up-to-date content created by a PR consultancy adds significant value to securing ongoing investment and funding.

8. Create news content as a sales tool

Startups need to look beyond simply generating general news in order to derive the full range of benefits of working with a PR consultancy. When potential customers, particularly in the business-to-business arena, conduct pre-purchase research, they look at potential suppliers’ websites as well as blogs, news articles, and customer reviews. A great deal of their research depends on how well the article is tagged and aligned with search engine optimization (SEO), another vital function of PR.

An effective PR company knows how to create a strategic pre-sales narrative that serves as a sales enabler. Clean, open and market/topic focused content that offers value to the potential client increases the chances of the client considering a solution or product. A breakthrough pre-sales team helps clients feel comfortable that they are making the right decision, and shows them how the product or solution will solve their challenge. Full awareness and ongoing monitoring of this pre-sales tool is vital, as competitors regularly trawl the internet for intelligence and exploit content gaps—and gaffes—to their advantage. Turning these crucial tasks over to an agency with PR experience and expertise prevents mishaps and frees up time and energy for building the business.

9. Build the profile of the CEO and the management team

CEOs need a media profile that bestows credibility, demonstrates leadership, and creates a sense of viability and seriousness around the startup. When customers and investors research a company, they need to see some form of activity that indicates sincerity and reliability. For example, building awareness of a management team, where each member has unique skills and experience as well as specific functions and responsibilities, creates a perception of management breadth and depth. A smart PR consultancy will craft relevant and topical narratives around each individual that add value to the company’s overall value proposition, and most importantly, foster understanding of and belief in the startup.

Engaging a PR company to build multi-layered awareness of the business can create a critical mass in the marketplace by strengthening a startup’s credibility, demonstrating that the startup is firmly rooted in reality, and building momentum.

10. Prepare for a crisis

It’s a given: most companies will face a crisis at some stage. Startups are no different, and in fact can be even more vulnerable to the impact of a crisis due to their size, market, and business inexperience. Responsible VC investors always ensure that a startup investment has a crisis communications and management plan in place. The plan should not be a simple template; rather, it should be based on a detailed risk analysis and vulnerability audit conducted by the PR consultancy. Once the company knows where it is vulnerable and what the business impacts of key crises are, it can then collaborate with its PR firm on its crisis communications and management plan. A social media component, internal communications and customer messaging and related strategies, are critical parts of a crisis plan.

Full crisis readiness integrates the crisis plan with the business continuity plan. If the startup experiences a crisis that drives an overwhelming number of people to its website and/or protesters to its front door, it needs well considered, preexisting strategies in place to ensure continuity of operations.

While there are certainly pros and cons to employing a PR consultancy to launch, grow and sustain a startup, if a startup carefully chooses their PR partner, the benefits definitely outweigh any drawbacks. There is one mutual caveat for both the startup and the PR consultancy: both have to deliver. The startup has to provide the information it needs to get the job done, the flexibility to work with a consultancy, access to senior executives, and realistic media coverage expectations over the short term. The PR consultancy needs to be equally flexible in its approach, be prepared to coach the startup in the basics of PR, provide the relevant strategic counsel, and manage expectations.

—ENDS—

Based in Syracuse, N.Y., Fortress Strategic Communications (FSC) provides specialized strategic public relations and crisis communications consulting to startup, medium and large companies that offer products, services, and solutions designed to manage and mitigate all types of risk. FSC is able to draw on a combined 20 years of global experience from its executives in a wide array of vertical markets. For more information please visit: www.fortresscomms.com