If You Look Good on Twitter, VCs May Take Notice

Recently met Fred Wilson, the venture capitalist legend that invested in Twitter and Tumbler before most, during a panel-talk he gave about 3-D printing at Fordham last week, and it got me thinking about the impact of social media on venture capitalism. The following is a recent article about the rise in importance of a startups’ social media presence in comparison to traditional metrics for investors.

http://online.wsj.com/news/articles/SB10001424127887324659404578499702279196058

“Ten years from now, social media will be the starting point of any investment,” says Ted Leonsis, a partner at venture-capital firm Revolution LLC and chairman of the board at daily-deals site Groupon Inc. “I have found it to be very helpful and meaningful.”

When Mr. Leonsis prepares for meetings with new entrepreneurs, he goes through what he calls a “digital-footprint audit.” After an in-depth Google search, he evaluates the company’s Twitter and Facebook accounts, then sees if the company has a scrapbook on Pinterest or a blog on Tumblr.

The article quotes other VC moguls on the effects of social media in their decisions to invest:

  • That startups had a “real-time pulse of what was happening around their products.”
  • That startups used social media “that will allow us investors to quickly figure out who they are and how they talk to customers.”
  • Through social media “that customers were engaged with the brand, because many were sharing photos of the [product] and asking other followers for advice about which one to buy.”

The article also lists a few tips to startups about their social media presence:

  1. Have a real conversation with users. If they criticize your product, respond and try to fix the problem.
  2. Use creative promotional campaigns that get people involved with the brand.
  3. Update your social media every day. It’s best to have one or two people in the company responsible for the job.
  4. Follow investors and venture capitalists on Twitter and Facebook to see what they’re buzzing about.
  5. Don’t just tweet, blog – it’s easier to show how much knowledge and insight you have.
  6. Show your brand’s personality by posting behind-the-scenes photos and videos of your daily operations.
  7. Keep up with the real-time happenings in your industry by sharing links to relevant news articles.
  8. It’s better to have a huge following on one platform than to have a mediocre one on several.

Questions to the class:

  1. What are your thoughts about Ted Leonsis prediction that “social media will be the starting point for investors” ahead of traditional metrics such as a competitive advantage, profitable business model, and high-quality entrepreneurs to attract funding?
  2. What do you think is the connection for the rise in social media in venture capitalism and crowd-funding? Can it simply be explained by how Generation X, Y, and the Millennials get/use/consume information or it something else?

David M. Chee

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