Learning a lesson from venture capital

Venture capital is going through a marketing renaissance that other financial asset classes could benefit from.

Venture capital is going through a marketing renaissance that other financial asset classes could benefit from.

As Walter Frick noted in his Harvard Business Review article this week, VC firms produce outsized returns relative to the investments they make and create more jobs per dollar along with each one.

“Though venture capital funds account for only about 0.2% of US GDP, according to Harvard Business School professor Josh Lerner, venture-backed companies made up more than 11% of public firms as of 2011, with a total market value of $25.9 trillion…and [they] employed 6% of the public-company workforce,” he pointed out.

Marketing plays an important role, so why can't other asset classes emulate the VC model? Private equity is a great example. Private equity firms enjoyed brisk deal flow in 2013, spending trillions to acquire companies. Similar to the Walmart.com example I referred to earlier this week, there's a substantial opportunity for them to take an active role in marketing their new investments. Every acquisition creates an inflection point in a company's lifecycle and can be leveraged to re-engage customers, reinvigorate the critical conversations a brand should own, and reassess its position in the marketplace. Institutional investors can and should demand a more active role in marketing new portfolio companies to refresh their portfolio company brands, repackage their assets, and communicate the innovation story to shareholders and consumers alike.

One private equity firm focused on creating tangible value is our client, Centerview Capital, which calls out marketing as a powerful indicator of a company's future success. As Centerview partner Sandhya Venkatachalam noted in a blog post, two of the predictors for a company's long-term success involve a brand's ability to market itself effectively. By building brand loyalty, customers willingly recommend your product and services and virally spread your marketing messages. Another predictor for long-term success is longevity – the endurance of a brand, even after it changes ownership or undergoes a new corporate structure. That may seem obvious, but as we know, it's easier said than done.

I'd love to predict that we'll see a noticeable shift in the marketplace in 2014, but I'd be getting ahead of myself. Best wishes to everyone for a terrific holiday season and a prosperous and meaningful 2014.

Donna Sokolsky Burke is cofounder and managing partner of Sparkpr.

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