PRWeek.com exclusive: VCs raising funds, awareness in better environment

On a soaring balloon of prosperity and innovation, the venture capitalists of the mid-'90s received accolades for pushing technology, their daringness, and the brio with which they funded deals. The media became suddenly enamored with them and the firms they represented.

On a soaring balloon of prosperity and innovation, the venture capitalists of the mid-'90s received accolades for pushing technology, their daringness, and the brio with which they funded deals. The media became suddenly enamored with them and the firms they represented.

Many now see that the balloon was shoddily constructed, however, and when it sank to the ground and the media wanted answers, the VCs scurried off to regroup.

During the past couple of years, VCs have gone "from gods to ghosts to somewhere in the middle," according to Sharon Wienbar, director of BA Venture Partners (BAVP), who joined the firm in 2001. "At the peak of the bubble, VCs confused luck and the 'up' market with insight."

During the boom, Wienbar says that many VCs marketed themselves heavily on personality. VCs were flush with cash, had large publicity budgets, and found themselves on the covers of magazines.

"During the height, everyone was happy and willing to talk to the press, but when [the bubble] burst, a lot of venture firms, partners, and buyout houses didn't want to be connected to the doom and gloom and retrenched because there was so much bad news," says Katja Gehrt, marketing executive for VC firm 3i.

Erica Lorraine Scheidt, partner at Alta PR, which is the AOR for BAVP's portfolio company, Sorrent, says a lot of VCs had "benchmark-envy" in the 90s. The Silicon Valley firm invested in 1-800-Flowers, eBay, Friendster, and Handspring, and its general partners invested in AOL, Palm Computing before founding the firm. "They were on all these covers and had just put out a book," Scheidt says, and this led to a bunch of VCs hiring agencies and thinking of their own media coverage.

"At the peak of the bubble, hi-tech entrepreneurs and VCs were the commodities," Wienbar says.

On the other hand, the hype was also media-driven, with magazines like Silicon Alley Reporter, Fast Company, The Industry Standard, Red Herring, Wired, and Business 2.0 lionizing the entrepreneurs, tech people, and VCs alike. Websites like VentureWire, TheDeal, VentureSource, and IPO.com focused on the deals.

Soon the market depressed, companies with millions of dollars invested in them didn't have a verifiable business plan or a viable product, and the spotlight became the last place VCs wanted to be in.

Some of the aforementioned magazines shut down, and others shifted priorities. Red Herring closed in 2003, though is back again. The Industry Standard closed its magazine down, but still exists at the thestandard.com. Silicon Alley Reporter rebranded as Venture Reporter, focusing on the VC deals, as well as mergers and acquisitions, switched to a website/database, and was bought by two different companies. Gehrt said that while the number of reporters covering the space has decreased, there's still a strong interest from the media in general.

During that time, Mary Shank Rockman, president of BAVP's agency of record, MSR, says a lot of the PR firms were price-gouging VCs. This led to "a lot of very disgruntled people" in the VC community. But everyone wanted their chance to be in the spotlight and they were willing to deliver the money to enable that. Shank Rockman says MSR profited in the long run from not falling into this habit. BAVP announced MSR Communications as its AOR in August.

After the bust, "VCs had to tend to their portfolio companies, so everyone retreated from marketing [and PR] because they didn't have much good to say," Wienbar says.

"When the reporters came calling to talk [during that period], Morgenthaler Ventures took their calls," comments Morgenthaler marketing partner Ching Wu in an e-mail interview. "We were told we were one of a few VCs who would talk at that time."

Wu says that Morgenthaler prided itself on being spokespeople for the industry and did not want to jeopardize it during a bad period for VCs.

BAVP, which Wienbar says had not done a lot of marketing and media outreach, saw the relative silence as a positive.

"We saw it as an opportunity to differentiate ourselves because not a lot of people were talking," Wienbar says.

Thus the firm started its marketing program in 2001 with a PR consultant. The goal was not to drive feature stories about the firm, but to attract the entrepreneur community and peer VCs to BAVP's focus on specific specialties.

Now, she says a lot of VCs are looking for outside help for their integrated marketing and PR campaigns.

"I do think a number of companies out there looking [for PR help] either with an independent consultant or agency," echoes Shank Rockman. "Most are working with the consultants, but it's a real value-add to have more than one brain. Agencies provide them with huge opportunities to meet as many markets as they possibly can."

However, Scheidt says the traditional model is using consultants or individuals. She cites New Enterprise Associates' relationship with consultant Ann Revell-Pechar.

"Freelance consultants have worked really well," Lorraine Scheidt says, while conceding, "venture firms hire PR people for different reasons, so it really depends on what they're looking to accomplish."

But Scheidt lauds BAVP's relationship with MSR. "It makes it easier when a VC works with a PR firm, [as] they're able to facilitate VC responding in a faster [manner]," Lorraine Scheidt says.

Morgenthaler had a minimal PR infrastructure for more than 20 years using PR consultant, Tom Gibson, who rendezvoused with Bob Pavey, one of the VC's general partners, according to Wu.

When Wu joined Morgenthaler in 2001, the company also hired InterprosePR for two years before retaining BitePR as agency of record about six months ago. Its PR team now includes Gibson, two Bite PR professionals and Wu.

3i worked with a global PR agency a couple of years ago, but Gehrt says that it was too difficult because of the agency's broad-focus and presence in 16 countries.

"They were good in some countries, less in others," Gehrt says, adding that 3i is an unusual VC firm because it's a public company in Britain and also works in the private equity space.

"All have different PR and marketing needs." Gehrt says.

Now 3i employs PR firms and freelancers in different countries, all of which report, in some frequency, to its London headquarters and Patrick Dunn, the agency's communications director.

In the US, where Gehrt heads up communications, she chooses outside agencies and consultants based upon their work in a respective industry.

"I focus on their experience in that industry and who and how good their media and analyst contacts are."

Media Outreach

Lorraine Scheidt says VCs are really good knowledge bases for the media, but while they're very responsive to media requests, they don't proactively go after the media.

"Hiring a PR firm extends their reach," Lorraine Scheidt says.

It is this non-traditional VC media outreach that will be the important grounds for the next wave of media outreach.

"VCs live in our little bubble reading [things like] Venture Reporter, VentureWire, and Venture Capital Analyst, but the entrepreneurs are reading whatever is relevant to their sector," says Wienbar. "It's a lot more relevant to reach that audience then to just talk amongst ourselves. The venture capital publications are only episodically important to them."

Shank Rockman cites, as an example, BAVP managing director Lou Bock being responsible for the discovery of novel anticoagulant, GS-522. MSR used this expertise to get him in front of Genetic Engineering News.

"He can be looked at as an expert or resource by taking his expertise in biotech and combining it with the IT focus," Shank Rockman says. "He also understands what it takes to make a successful company."

Regarding media relations, Gehrt said that while VCs can't really compete with the industry knowledge base of specific analysts, they can provide resources from different angles like how to commercialize a business and carry out cost-benefit analysis.

"We want to make sure that our [VCs'] comments vary on different industries and on specific deals they're working on, Gehrt says. "We try to contribute additional viewpoints that reporters didn't think of."

Gehrt says that there are a lot of overlaps in the semiconductor, software and hardware industries, and that it's hard to be an expert in just one niche.

The outreach is important to inform entrepreneurs about the VCs investment categories.

"It's difficult for entrepreneurs to know what VCs are doing these days because different firms have changed their investment strategy," Wienbar says, attributing this to the explosion of funds that allowed VCs to invest in multiple categories that has now shrunk.

After the explosion of VC funds, there were some obviously retrenchments. But the move is back to raising funds and attracting media attention is critical to the VC community now, given that a lot of VCs are out trying to raise their own funds to attract more capital.

"We have a product to sell like anyone else," Wienbar says.

Even those without PR help are getting into the news.

Tim Draper, founder and managing director of Draper Fisher Jurvetson, launched a competition called, "Pitch Tim Draper on Your Billion Dollar Idea," which gave contestants the opportunity to show their inventions or company ideas to the Draper. The idea stemmed from a blog entry on social network site, Always On Network.

"After writing a few items and getting comments, I decided that what most people want from a venture capitalist is capital," Draper told PRWeek via e-mail.

The blog post attracted ideas as varied as flying cars, sex toys, and instant messenger software add-ons. When Draper decided to launch the second contest, he realized media attention could attract more pitches.

"Our first contest was pretty quiet, [but] then we recognized that the media would help make the contest more prevalent, so we would see more business plans, so we opened it up," Draper says. The New York Times followed the proceedings with a lengthy article.

Draper says that while DFJ has had been very successful in generating great deal flow, he would not say the media coverage was the primary source for these developments. But, he adds, "We see a lot through our coverage."

August Capital partner David Hornik contributes regularly to www.ventureblog.com, which also features contributions from VCs from other firms. A September 21 Mercury News article quoted Hornik saying he authored a blog to dispel the notion that "venture capital is a black box."

Draper's cohort at DFJ, Steve Jurvetson, runs his own at jurvetson.blogspot.com, and Fred Wilson, managing partner at Flatiron Partners, runs a very popular blog, avc.blogs.com.

Portfolio companies also need PR help

Navigating the relationship between VCs and their agencies can be tricky. Some agencies, like BAVP, invest in private companies in a range of stages. Some, like wireless game developer Sorrent, have their own PR and marketing teams. Others, like companies with only seed funding or one round of funding, have the CEO handling media requests.

This is an environment that, at its worst, can lead to VCs or AORs bullying the portfolio companies into paying for services or, at its best, a mutually symbiotic relationship where the PR firm helps out

Regarding this, Wienbar says, "We have to be very respectful to our portfolio companies."

Wienbar says the firm has some portfolio companies spun out from universities that have little idea about promotions. Shank Rockman and her team give some counsel to the firm, Wienbar says. Whether or not MSR takes an active, official role with the portfolio companies is their own decision.

Wienbar said that MSR's willingness and eagerness to work with the portfolio companies and push both BAVP's and their investments' agendas were one of the reasons why she liked the firm.

"We would be happy to work and assist any portfolio company of BAVP's if they are interested in pursuing a relationship with us," Shank Rockman says, but added that neither they, nor BAVP would force that relationship.

MSR and Alta worked together in a pitch to Billboard about Sorrent's technology. As a result, BAVP partner Kate Mitchell was interviewed for the piece.

"He got a terrific story because of the education that Kate provided him," Shank Rockman says.

Gehrt says that VC firms helping their portfolio companies find PR is emblematic of the current situation.

"It's all about value-add now, and that includes marketing and PR," Gehrt says. "Helping initially with strategy and marketing is on the shopping lists that US firms offer to their portfolio companies."

She adds that the portfolio companies "are looking for the help too."

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