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