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Accidental VC: When Should Startups Announce Seed Funding?
Accidental VC is a series of short posts written by me, Jay Acunzo. Though I never planned it, I somehow wound up working in VC as NextView’s VP of platform. As an operator, not an investor, I’m amazed at how many casual, throwaway comments that happen inside a VC’s office would be genuinely useful to entrepreneurs building their businesses. So this series is my attempt to share that knowledge beyond our walls … one overheard lesson at a time.
It’s a common question that every VC fields from founders — and founders field from other founders, and marketers field from founders, and PR people field from founders. You get the idea. And given my marketing background (Google, Dailybreak Media, HubSpot), I often get this question directly: When should startups announce seed funding?
This recently came up for debate inside NextView HQ as we talked through the go-to-market plans of one of our unannounced seed investments. This particular company, as a B2B SaaS business, would definitely benefit from driving traffic to convert into subscribers or leads on their email list. But you want relevant traffic and an actual purpose for driving those leads — letting them sit around on a list, rarely if ever hearing from you as you build product, is not an effective demand-gen tactic.
So, when should they — or any seed-stage startup — think about drumming up some PR and making noise around funding?
A few things to know…
First, be aware that Form D filings can “out” you.
Because you must file, you could tip off press who often scan these announcements to scoop the story. Some lawyers have differing opinions and approaches on the timing of the filing as well, which should also factor into your plans. Be sure you have an honest and direct discussion with your lawyers, who should be viewed as true partners who understand these things.
In light of that partnership, founders should be proactive about asking them to delay — if that’s your desire. (More on use cases for delaying in a moment.)
Second, understand the different philosophies around announcing funding.
Some common approaches:
- Announce right away to help with recruiting, convey momentum, get on the radar of other VCs for future rounds, etc.
- Announce in connection with other news (e.g. a product launch, hiring a key executive, a rebrand, an expansion of market focus, etc.). The gravity of the funding announcement helps to shed light on the more important news. Product launches alone may not get picked up, for instance, but funding announcements often do.
- Depending on how stealthy you plan to be (and there are pros and cons for being in stealth mode), it’s good to have a public record of the company by generating some press. This could help that serendipitous partner find you or that prospect (either customer or talent) better understand what you’re doing and proceed with confidence. However, this is often not something you can control — stories abound in the startup world about a key partner finding Company X early and changing their trajectory forever, simply by happenstance.
Third, recognize that it’s almost always a bigger deal internally than externally (and, more importantly, what that means for your strategy).
Across the NextView portfolio and in discussing this topic more broadly, we’ve found that funding announcements are rarely good customer acquisition channels. And while mass media coverage can make other marketing channels work harder (as NatureBox’s co-founder explains in an interview embedded here), funding PR is typically lousy for direct response. Many startups will see other companies getting press and assume it’s more helpful, despite the reality.
It’s also critical to keep in mind that tech press covers tech startup funding. Why is that important to remember? Because in the case of many companies, your specific customers may not read the tech press!
If that seems obvious to you, trust me — you’re ahead of the curve. After working in digital marketing for the last seven years, I am continually amazed at how that one little fact goes seemingly unnoticed. (In Boston, for instance, local tech press loves to criticize startup marketers here for being “bad at marketing” — when, in reality, they’re just not focused on getting national tech press and are instead generating demand for the product through other, more viable channels.)
Fourth, keep investors in mind when you announce.
…and I don’t mean “be sure to mention them in the release.” My point is that these funding announcements are an early opportunity to show investors how you execute. These things are surprisingly indicative of how a founder operates. Some are methodical and thoughtful — or even overthink and agonize over it. Others are looser, opting to publish releases immediately. These are great data points for a VC to receive soon after partnering with an entrepreneur. If we see this at NextView, for instance, we can anticipate ways to provide better support, tailor our approach/relationship, and complement the founder’s tendencies to cover blind spots and accentuate strengths.
My goal in sharing all of this is not to entirely write off the use case for funding announcements. They create a public record of your company and investor syndicate (in some cases) for sites like Crunchbase. They instill a feeling pride in your business as a founder or employee, which should never be discounted. But as I listened in on the explanations above, I realized that approaching the funding announcement with right framework and expectations could help founders more appropriately allocate calories to the right things at the right time.
Well-executed funding press and startup success are indeed linked. But these press hits aren’t silver bullets for early traction. They aren’t great demand-gen channels. They won’t make or break your email list unless you’re smart about capturing emails and actually using an email list to your advantage. Nor will it make or break a company’s trajectory.
In the end, this is a lesson in correlation, not causation. Excellent founders do excellent things — even the small things.
Read more of the Accidental VC series here: