Broken media equals funding doldrums

About three years ago I attended a financial conference where a big VC stated, categorically, that the reason they were not investing in semiconductor or EDA startups was because there was a lack of informational coverage to validate research.  In other words, because media coverage of the industries had significantly degraded, they couldn't afford to pull the trigger on investment.

This same VC firm has invested heavily in Web 2.0 and green technology over the past three years and you can see why.  There is lots of coverage on those areas.  There is pretty much nothing but coverage on those areas.  The only coverage on semi and EDA is negative.

You might say that that is the media's fault because, after all, the semiconductor coverage is all about the economics of the industry, not the technology so it's naturally going to be bad.  But I would like to point out that the the green Web 2.0 industries has yet to turn a profit, yet the media continues to go bonkers over the technology.  What's the big difference?  Which industries invest more in getting their story out?

I know, I'm a broken record.  But this time I have a case study.

I've been working with a start-up in the semi arena for a few months now helping them craft their message and get a communications program going for them as soon as they get funding.  I've also been introducing them to VCs to get that funding.  We had a lead investor all ready to go.  They got great feedback from current customers.  Dataquest and IC Insights show real growth potential for this particular technology over the next 18 months and beyond  ... but the rest of the players in the market haven't put out anything innovative in five years and they look like they are cutting back even further.  There is no media outreach in the sector so, as a result, the only buzz is negative.  Even with all the numbers lining up for success, negative buzz made the VCs back off.  They still want to invest, but they don't want to take the lead.

There are many similar stories out there.  Investors are lined up and ready to invest in technology outside of Web 2.0 and green, but not as a lead investors.  All because of a a lack of media.

What about all the bloggers covering the semi sector?  Well, here's the thing: the VCs haven't yet come over to the blogosphere, even when they invest in it.  That's going to take some education still.  And education requires some investment in media.  Funny how that works, isn't it?

They don't know what they don't know...

A big problem the VC community has right now is that they don't know what they don't know.  The VComm Venture Faire was developed, using a large dose of social media, to give them a little bit more information they didn't have.  Like what?

Conventional wisdom:  With the media dying, the best way for them to find potential companies is to go to the venture meat-market events with dozens of companies presenting information that the VCs know is useless and presented poorly.  Why do they believe that?  Because everyone believes that.  It's not the greatest process, but it's the only one we got.  Right?

What they don't know:  There is always another way to get the job done.  Someone just has to do it.  Doing the job like everyone else doesn't make it any better.  Going another way may not make it better, but there's a chance it might.

VComm didn't bring a ton of companies in front of the VCs.  The presenters were given strict guideline regarding what to say.  Time was given for quality discussion between VCs and companies.  It wasn't a free-for-all.  It was a lucid discussion.  Life in the Internet age is like putting your mouth on a fire hose of information, someone has to create a faucet.  That's what we did.

Conventional wisdom: You can't invest in European companies because they won't relocate or set up an office in the US.

What they don't know: You can ask.  We considered 30 companies to invite to VComm looking for 10,  We found 9 that fit our guidelines, one being a willingness to set up a US corporation.  It's not in most peoples' agenda to ask about something they just "know" won't happen.  You have to think outside the box.  Sometimes it helps to have someone thinking outside the box for you, rather than agreeing with your position.  That's what an independent consultant is supposed to do.

Conventional wisdom:  There's not very much innovation to fund.

What they don't know: There is plenty of innovation.  There's just not much innovation on display at investment meat markets. 

VComm went first to the VCs for a year and a half and asked, "What are you looking for?"  Most investment events are designed to get revenue from the companies and the VCs are what they pay for.  In VComms case, the companies were the product for the VCs and all we asked of them was their time.  Sometimes you have to reverse the equation to get the answer.

What we learned in the VComm experience is that there is something to be hopeful for.  We learned that social media is an incredible too for dissemination of information.  We learned that conventional wisdom is for the herd.  It's better to be the predator.

BTW, VComm is now on iTunes.

Tell them what they want to hear and they will listen to what you have to say

The cornerstone of the VComm program was the understanding
that most companies looking for VC financing really have no idea what a VC
wants to hear.  Two years ago I sat
with a group of investors at a major conference and listened to them complain
about the quality of the material and, in the end, how useless it was.

Understand this: 
There are, at any given time according to Dow Jones, 5000 tech startups
in the US alone that are seeking funding. 
But less than half of those companies have any credible research into
their technology market.  The press
covering those markets has shrunk almost to the point of non-existence.  The VC's are flying blind nowadays,
which explains why so many are having poor returns.  What they need is real information about market potential.

But most companies pitching VC's spend 90 percent of their
time in front of them explaining how great their technology is.  Get a clue!  They know you are doing something interesting or you
wouldn't be doing it.  What they
want to know is, if they invest in you, how are they going to make a return on
their investment.  Drew Lanza at
Morgenthaler puts it specifically: "How am I gonna make a bunch of money
for retired school teachers?" 
(Think about it.  Most large
investment firms are responsible for investing the retirement funds for common
people.  They have an enormous
responsibility.)

So the purpose of VComm, at the core, is to prepare
companies to present the information that the VCs NEED to hear.  Once you have told them that, then they
will be willing to listen about your technology.  Based on the comments we got back from the investors at
VComm, that's exactly what we accomplished.  Lanza even said the presenters were ready to make an initial
presentation before the assembled partners of Morgenthaler.  That doesn’t mean they are going to get
that chance, but how they get to that point is the subject of another post.

What I want to leave you with is another point that I have
been hammering for a decade is: KNOW YOUR AUDIENCE.  If you really have that knowledge you will make progress in
your communications, if you don't you are dead in the water.

And now for something completely different

I got a little flack for the past month about all the bad news coming through this blog about media and the tech industry.  But here's some good news.  A major player in real estate development has thrown financial support to a small investment event called VComm Venture Faire for the simple reason that promoting the investment in technology is just good for everyone.  The interview can be seen at New Tech Press.

So there you go.  Happy new year.