Tag Archive for: IPO PR

I have a friend who once described PR as the “dark arts,” and while I completely disagree with that assessment, what he was getting at is he really didn’t understand how PR works. Reputable PR firms are the opposite of “dark arts”; they’re very transparent. There are some tools of the trade that PR agencies keep close to themselves, but really, there isn’t anything magical about HOW PR works; it’s just a specific combination of relationships, hard work, strategy, and culture. And that specific combination takes a long time to acquire, requiring commitment to the craft. But why PR is expensive isn’t because of human hours worked. Ultimately, there is a price to the human capital, but that’s not really why PR is expensive.

So, Why Is PR Expensive?

PR is expensive because the outcomes are so important and relevant. PR’s lasting value is in improving a brand’s reputation like no other marketing lever can. For companies wanting to be acquired or IPO, your PR investment ROI could be hundreds of millions of dollars.  PR outcomes range from high valuations at IPO or during capital raises to making advertising more efficient and reducing time to sale for both B2B and B2C customers. In short, it’s not unusual for PR outcomes to be more than 10X the investment. To 10X investment, the most impactful PR aligns with trust and loyalty, which requires consistency.

For many ambitious companies, the long-term benefits of PR are sometimes forgotten, and yet that can be considerable. Due in part to high marketing budgets during the pandemic, brand valuations increased dramatically in 2023 – from 6.3% growth to 9.7% growth.

Your reputation is your most valuable asset.

Why is PR so expensive research

Data from USC Anneberg Communications Report 2023

What is a Good PR Budget?

When considering your PR agency budget, your budget should match your goals. If you’re trying to grow your business, your overall marketing budget and PR should increase.

As of the fall of 2023, according to The CMO Survey, the average marketing budget was 10.6% of budget and 9.2% of revenues. For companies with $10-$25 million in revenue, the average spend was 15.5% of revenues. So, if you’re looking to be above average, your overall marketing budget should be higher than that. For companies under $10 million in revenue, the number was 19% of revenue. And consumer packaged goods reported spending 25% of their budget on marketing and PR.

If you’re an ambitious brand or fast-growing company, your budget could be 25% of revenue – is that aggressive? Yes. It is. Again, that’s a budget to grow considerably. A good rule of thumb for your budget might break down like this: 20% content, 20% advertising, 20% PR, 20% SEO, 20% activations.

While your distribution might vary depending on your goals – for example, if you’re raising money or looking for a M/A event, you might skip advertising all altogether and move that to PR and content. Alternatively, if you’re a consumer brand,  you might increase the content and advertising portions and focus your PR budget on certain campaigns. Emerging industries may need larger PR budgets because they need to create public and investor trust.

Based on the rates of PR agencies your budget may be higher or lower based on the experience level of your agency team. Naturally, less seasoned agency teams will be less expensive. But it’s probably more important for you to budget based on your goals.

If you’re ambitious or seeking investment or pre-IPO, your marketing budget should match those very important objectives and allocate 12%-17% of revenues or target valuations to marketing, with a third of that, at least, going to PR. Depending on whether you’re a B2B or B2C company.

How Does PR Make a Company More Competitive?

68% of CMOs reported expecting more intense customer rivalry in the coming year. In B2B segments, that number increased to 73%, with 61% expecting more innovation. By themselves, even new products don’t excite people without a story. If your company is new, you need to define a compelling story, and you need to tell it over and over. Whether you’re a tech company, or a consumer product company, PR is a key part of how people discover new products.

According to Nielson, global CMOs said brand recall was the #1 most important goal in media. Advertising is ubiquitous, and advertising is an important part of any marketing budget. After a while, ads blend in a social feed or even on TV. But if your product or CEO is in a magazine, people remember that. They might not even remember WHAT was said, they’ll remember that they saw it there. Brand recall is critical to the sales funnel. If people can’t remember your company, how will they purchase from it?

PR’s lasting impact is its value, including the fact that earned media lives forever. Less than 1% of companies ever get PR for their company, so by being in that top 1%, you’ve already differentiated yourself. Can you start a company without PR? Absolutely. Can your company thrive without PR? No. There are no household names without PR at the table, period. There are no industry leaders without PR.

While the wild days of 2021 are firmly behind us, investors are starting to get back in the saddle, and there are positive signals for 2024, including fintech and other emerging tech like AI. Because there isn’t as much money in the pool, attracting investors is more competitive for any B2B company. It’s more important than ever that companies raising money stand out from the pack. At the risk of oversimplifying raising capital, one of the easiest things you can do to attract investors is to invest in confidence. Confidence assumes you have already done the hard work behind the scenes – you have a viable product, you’ve shown market interest, and you have a solid team or at least solid advisors. But those things are the baseline accomplishments for raising capital. The reality is, that thousands of legitimately great ideas never receive funding. The way to raise more money faster is by going above and beyond and creating trust and enthusiasm for the company, the product, and its leaders. Capital and trust are the two most important assets to fast-growing companies, but without trust, it’s incredibly hard to secure capital. Our PR experts call this securing capital through investor confidence, and it’s critical for startups raising venture capital or series A+ rounds.

  1. Compelling Value Proposition:Of course, first, you need a value proposition, and then you need to articulate your company’s value proposition clearly. Investors want to understand why your solution is unique, how it solves a problem in the market, and what sets it apart from competitors, and this needs to be elegantly and enthusiastically defined. Words matter. How you articulate your vision externally to investors will almost certainly be different from the way it was articulated to the product builders. It’s really common for brilliant product and tech founders to struggle with this reality. While founders are often brilliant specialists in their own right, sometimes communicating differentiators or positioning for investment requires some shifting of external communication. This is often the stage where a startup would hire a branding or PR firm specializing in tech.
  2. Demonstrate Traction:Showcase evidence of market traction, such as customer testimonials, case studies, or successful pilot programs. It’s surprising how many fantastic startups have traction, but you wouldn’t know it based on their website. Creating owned content is the foundation of earning trust for those new to your company, even (maybe especially) if it is in a fast-growing tech segment like healthtech, greentech or femtech. This helps build confidence in your company’s ability to generate demand and satisfy customer needs. If you aren’t demonstrating traction and customer confidence, it’s hard to secure capital.
  3. Financial Transparency:Provide transparent and well-organized financial information. Investors want to see realistic financial projections, a clear understanding of your revenue model, and a breakdown of how you plan to use the funds. Be prepared to talk about financials in a transparent, but appropriate way outside investor conversations. While conservative advice typically does not discuss finances, you must find a way to inspire confidence about your finances.
  4. Strong Leadership Team:Highlight the experience and expertise of your leadership team. This is one of the key reasons ambitious companies frequently engage in thought leadership for CEOs. Investors often invest in the people behind the business, so emphasize the skills and track record of your team in driving successful ventures. Having a strong point of view adds confidence and enthusiasm, and that’s important for investors who want a charismatic CEO who can take the company through IPO. Using thought leadership to paint a picture of the future is also a powerful way to underscore the importance of your product.
  5. Risk Mitigation Strategies:
    Identify and address potential risks associated with your business. Investors appreciate a well-thought-out risk mitigation strategy that demonstrates your awareness of challenges and your ability to navigate them effectively. Certainly there are a multitude of risks to consider, but one that’s frequently overlooked is a crisis communication plan clearly in place and articulated. What would happen if you were hacked and customer data was leaked? What would happen if one of your key executives was recorded off-mic with awkward or offensive statements? What happens if your product fails to work to the detriment of someone’s life or limb? Once your company has multiple stakeholders, there’s no going back – your company has inherent value and risks that you need to protect.
  6. Engage in Networking:
    Attend industry conferences, networking events, and pitch competitions to connect with potential investors. Building relationships within the investment community can lead to introductions and opportunities. Have clearly outlined goals in mind for conferences – who will you connect with and where? What media will be present, and will you be meeting with them? An experienced PR firm can help you create a strategic plan for your time at industry conferences.
  7. Update and Communicate Regularly:
    Keep existing and potential investors informed about your company’s progress. Regular updates, newsletters, and periodic meetings help maintain investor confidence and interest in your business. This is one of those things that seems to get lost in the extreme conditions of a fast-moving and ambitious company, but it does matter, and it’s an easy way to stand out from the crowd.
  8. Social Proof:
    • Leverage social proof, such as partnerships with reputable companies, endorsements from industry experts, or recognition from relevant awards and media coverage.  Few things are more lackluster than looking up a company on Crunchbase and seeing activity. Third-party validations are essential for ambitious B2B companies because they’re a visible and lasting way to create trust. Awards are not something that can ever be taken away from you.
  9. Pitch Effectively:
    • Develop a compelling and concise pitch that highlights key aspects of your business. Practice delivering it confidently, emphasizing how your B2B company addresses market needs and creates value. As CEO, it’s important for you to articulate your message with enthusiasm and confidence. Find a PR firm who can help you develop messaging for investors.

 

Securing capital through investor confidence and trust is the best way to grow a company. Trust is like a bank account. You want to contribute it to regularly and let it grow until you need to make a withdrawal. Pitching investors isn’t a withdrawal, it’s more like showing your statement and that in turn creates more confidence. Capital and trust are the two most important assets to fast-growing companies, but without trust, securing capital is harder than it has to be. Invest in trust, and let capital invest in you. No matter what stage of pre-IPO you’re in, trust is your most important asset, and PR is the way companies earn trust with the marketplace and investors.