Many a times, startups get funded but aren’t really ready to announce the funding part. And that’s perfectly fine. But here is what you stand to lose if you do not announce funding (the post is a result of a discussion with a funded startup founder who has been advised by investors to keep the funding news secret).
First things first – funding brings a lot of excitement among peers/friends than any other milestone (next level is acquisition or IPO). I tend to call this excitement a bit of ‘echo-chamber signs’, but the reality is that somebody else trusts you with their (or LP’s) money, which in itself is a reason to celebrate.
So why do you not announce the funding news to the world?
There are umpteen reasons for not announcing funding, but the most significant one is to NOT wake up competition.
Sometimes, you want to be seen as a ‘small’ guy (and an underdog in making) and you do not want the world to know what you are really up to. Announcing the funding suddenly brings a lot of (unnecessary) attention from competition/media and your entire plan will be exposed to others, much before they are brought to action.
While each startup/investor has his/her own reasons to not announce funding, here is what you (might) lose by not announcing the same:
1. Free PR/Marketing
Once you get funded, people start talking about your company. Apart from bloggers, mainstream media too covers your funding milestone. This brings attention from investors (missed opportunity?) as well as potential customers. Suddenly, you are seen as a much more serious player! (and will get calls from media pertaining to issues around the industry you operate in).
Do one exercise – start counting the number of articles written on your company (on media/social media) and put a (virtual) money against it. Now imagine if you can time your funding news with a product/feature launch and count the amount of free coverage you get (vs. the effort spent in chasing bloggers/media for the same) – you will understand why announcing the funding news was so important.
A Bangalore based startup which recently got funded (and has been asked by investors to not announce funding) is facing hiring issues. While they have money to pay for salaries, they still need to announce that ‘we can pay you good salary’.
How do they do that? When they meet candidates? Sounds logical, but a lot of smart hires do self-selection and they tend to go for companies which offers them a very good job profile plus a good salary (and there is nothing wrong in asking for both?).
That is, it’s not so easy (if you want to keep it secret and hope that candidates too keep it secret) as opposed to announcing that ‘we got funded and we are expanding the <engineering> team’.
Sometimes, funding is a sign of growth and sometimes, a sign of growing story – whichever way you look at it – funding is equated to success by the common mass. So hide it/keep it secret for the right reasons; but otherwise, learn to time it properly in order to maximize the returns.
Some of the startups I know have kept the funding news secretive for such a long time that everybody lost interest and now, when they want to get the word out (after 8 months or so), they are often asked ‘is this the new round?‘ when they approach bloggers/media.
What’s your opinion?
[Image credit: wikipedia]