tag:econsultancy.com,2008:/topics/financing Latest Financing content from Econsultancy 2016-11-16T12:42:00+00:00 tag:econsultancy.com,2008:BlogPost/68533 2016-11-16T12:42:00+00:00 2016-11-16T12:42:00+00:00 Low growth predicted for digital agency revenues in 2017: Report Nikki Gilliland <p>The research also found that on average agencies predict their daily rates will grow by only 2% in 2017.</p> <p><img src="https://assets.econsultancy.com/images/0008/1513/Predicted_growth.JPG" alt="" width="600" height="572"></p> <p>This news comes from the <a href="https://www.econsultancy.com/reports/digital-agency-rate-card-survey-2016/">Digital Agency Rate Card Report</a>, which is based on an online survey of 398 UK digital agencies.</p> <h3>Predicted growth is down but positivity is up</h3> <p>So what’s behind the downturn?</p> <p>Many respondents cited uncertainty over Brexit as the biggest obstacle in the near future, and more specifically, its impact on clients' budgets and funding capabilities.</p> <p>A surprising number also mentioned resourcing, with difficulty managing freelancers and finding the right people in a competitive market appearing troublesome.</p> <p>Despite this level of uncertainty, many agencies reported having a high level of confidence in their business for the next 12 months.</p> <p><img src="https://assets.econsultancy.com/images/0008/1514/Optimism.JPG" alt="" width="628" height="465"></p> <p>Though it might sound contradictory in relation to the previous finding, this positivity stems from the weaker pound and the opportunities it presents on an international level.</p> <h3>Offline networking growing in importance</h3> <p>Finally, when it comes to attracting new clients, the majority of agencies said recommendations and referrals are the most effective tool.</p> <p>Though this method is seen as marginally less effective than it was in 2014, other practices like offline networking and email marketing have seen a spike in perceived importance.</p> <p><em><strong>What are the most effective business development methods or ways of getting new clients? (2014 vs. 2016)</strong></em></p> <p><img src="https://assets.econsultancy.com/images/0008/1537/Screen_Shot_2016-11-16_at_12.45.51.png" alt="" width="774" height="891"></p> <p><strong>For lots more on this topic, you can download the full <a href="https://www.econsultancy.com/reports/digital-agency-rate-card-survey-2016/">Digital Agency Rate Card Report</a>.  </strong></p> tag:econsultancy.com,2008:BlogPost/68089 2016-07-28T15:21:00+01:00 2016-07-28T15:21:00+01:00 10 things I learned raising £1m VC for my martech startup Parry Malm <p>This article is not about “why we fundraised”. If you want to understand more about what led us to raise the funds, you can read about <a href="https://phrasee.co/why-we-took-on-1m-in-phrasee-funding/">Phrasee’s funding</a> here.</p> <p>Instead, this article will offer you some free advice and tips. If I was cool, we’d call them “hacks”, but I’m not cool. So let’s go with “advice and tips”.</p> <p>By no means am I a fundraising expert – in fact, quite the opposite. But for anyone else who’s trying to raise funds – or anyone who’s curious what startups go through to drive investment – then read on.  </p> <h3>1. Learn how to say what your business does in one sentence.</h3> <p>The tech we’ve built is awesome… and by virtue of being awesome, it’s mega complicated. We could spend hours explaining how everything works.</p> <p>But – and here’s the thing – most people don’t want to hear about all the intricacies. And me, I’m a wordy guy (probably fitting for a guy who runs an AI-powered language company). So to whittle down everything I want to say to a sentence is, for all intents and purposes… hard.</p> <p>So when we started, and someone asked me, “So what is it your company does?” my answer would range anywhere from one to five minutes. And the lucky person listening would stare at me blankly.</p> <p>This was a problem.</p> <p>See, investors get pitched on ideas a lot. And they don’t have time to listen to longwinded descriptions of stuff. So, after a while, I came up with this little chestnut: “Phrasee uses artificial intelligence to generate better <a href="https://econsultancy.com/blog/66328-211-awesome-phrases-for-email-subject-lines-that-sell/">subject lines</a> than humans.”</p> <p>BOOM.</p> <p>By focusing on a simple talking point, further conversations were much more focused.  </p> <h3>2. Bootstrapping is awesome, so don’t rush raising.</h3> <p>We launched Phrasee in February, 2015, and closed our seed round about 18 months after launch. For many tech firms, this is an eternity. And it wasn’t easy. But here’s why we did it.</p> <p>First, earlier on, we didn’t have enough market traction to raise at a level that would mitigate founder dilution. Surely this doesn’t require explanation – less dilution is better than more.</p> <p>Second, not having huge cash reserves, while at times stressful, forces you to be pragmatic AF. And this is huge. We were forced to be nimble, responsive to customer requirements, and ultimately focused on core product development.</p> <p>Third, while bootstrapping, you have to be laser-focused on immediate success. Whilst it’s great to have a bunch of money so you can do a bunch of stuff, most stuff has a 50% failure rate. Whilst bootstrapping, we couldn’t afford failures.</p> <p>I’ve seen many companies raise too much, too soon, and it results in either targets not being hit, over-dilution, or down rounds. These are three things we intend to avoid – and had we not delayed our seed round as long as was reasonable, we’d have become too unfocused, too quickly… and likely not be where we are today.  </p> <h3>3. Get your business model sorted, and everything else will work out.</h3> <p>Sounds obvious, right? Well, it’s not. And here’s why.</p> <p>Your business model (that is, how you charge, and how it translates into cost base) is hugely important. Obvious, right?</p> <p>But, until you have actual experience in running your business, you’re only guessing what your business model is. And, it can change, dependent on market requirements.</p> <p>Anytime you look at ProductHunt or some site like that, a normal strapline/business model is something like “Uber for X”, or “Tinder for X”, or “Snapchat for X”. But that’s not a business model. That’s a reference point.</p> <p>A business model is not one sentence. It’s a fully reasoned revenue and cost plan based upon actual market feedback – and preferably actual revenue and cost.</p> <p>It took us a while to figure out our business model, which is why we weren’t raise-ready until now.</p> <p>Our first model, well, if we knew then what we knew now, was never going to work. But how were we supposed to know that?</p> <p>The first model went into Beta in Feb 2015, and we were sure we were going to be INSTANT BILLIONAIRES.</p> <p>NOPE.</p> <p>We tried a bunch of stuff, and failed hard numerous times, before figuring out what worked. And now that it works, the sky is the limit.  </p> <h3>4. Your pitch deck matters. A lot. So make it look dope as $%!&amp;.</h3> <p>“What’s a pitch deck,” you ask? It’s 10-15 slides that you present to investors. It’s key, because it’s the information upon which they’ll decide whether or not to speak to you.</p> <p>Here’s something I learned – make your pitch deck awesome. Spend time on it. Spend money on it. Make it memorable. Because it’s the most important presentation you’ll make for your business.</p> <p>So, how do you make a pitch deck awesome? There’s no hard-and-fast rule to it. There’s many formats you can follow. I know what worked for us, but that doesn’t mean it will work for you.</p> <p>Get all of your key information in one place – ie product description, core intellectual property, customer traction, business model, financials, exit strategy, etc. etc. – and put it in a sensible order. And – bear this in mind – expect to iterate it about a million and one times.</p> <p>Next, find someone who is AWESOME at design. If you don’t have someone on your team, then outsource it. But, there’s nothing worse than a deck on powerpoint that looks like Fisher Price My First Pitch Deck. It doesn’t show how awesome your company is.</p> <p>We’re fortunate, as we have an in-house designer who specialises in making things look dope AF.</p> <p>*SIDE NOTE* His job title is “Junior Vice President of Product”. We don’t have a President, or a Vice President for that matter. But, he thought “Junior Vice President” sounded more senior than Vice President. I agree. <a href="https://www.youtube.com/watch?v=9STeegpxSb0">Here’s why</a>. *END SIDE NOTE*</p> <p>Your pitch deck is what investors will first see about you, and it’ll get passed around. So don’t skimp on it, and don’t be lazy.</p> <p>Make sure it tells your company’s story – and outlines very simply why your business is a can’t-miss investment opportunity.  </p> <h3>5. Finding “smart money” takes longer, but is worth the wait.</h3> <p>OK, so here’s a phrase that I learned recently – “Smart Money”. It refers to investors who are expert in the industry in which you operate.</p> <p>Why is this important? For some businesses, it’s not. They simply need money to cover their burn, and want to go it alone.</p> <p>But for some businesses, smart money is critical – because what you’re getting is not just money, but also expertise, advice, and connections. Our investors – <a href="https://www.next15.com/">Next15</a> and <a href="http://www.galvanisecapital.com/">Galvanise</a> – are smart money, and this is one of the big reasons we chose to work with them.</p> <p>*SIDE NOTE* Remember, you don’t have to work with a particular investor, so it’s not just them choosing you. It’s also about you choosing them. Their personalities, cultures, and business model matter just as much as yours do! *END SIDE NOTE*</p> <p>It’s ultimately a choice you have to make for your business. Do you just want money to scale, or do you want money to scale alongside people who are digital industry experts? We chose the latter.</p> <h3>6. Honesty actually is the best policy.</h3> <p>Go give your mum a hug, because she was right all along – honesty really is the best policy, and I’m not just saying that.</p> <p>See, every company, large or small, has warts. No business is perfect – and if they were, then striving to maintain perfection would render them imperfect.</p> <p>Early on in your conversations, be up front about your uncertainties, risk points, and future challenges. Because chances are your prospective investors will ask about them anyway… so beat them to it.</p> <p>Now, with that said, also be honest about the awesome points! If you get a meeting with an investor, there’s a reason for it. So don’t be afraid to shout about what you’re doing well… just remember, whilst they’re investing in your awesomeness, they’re also investing in your shortcomings. So it’s best to be honest and avoid surprises in the future.</p> <h3>7. Find awesome advisors, lawyers and accountants.</h3> <p>Here’s the glamourous part of seeking investment that no one tells you – you’ll be spending more time than ever with your advisors, lawyers and accountants.</p> <p>And I mean loads of time. It’s unavoidable – because we’re talking about a substantial chunk of change involved in your transaction… so all parties need to protect their interests.</p> <p>And, if you’re like my co-founders and me, you’ll be doing a lot of things for the first time. There’s going to be a lot of things you don’t know about. For example: I didn’t know what a “disclosure letter” was. Now I do. But, when asked if we had started preparing ours, I was like, “Erm… gimme 5 minutes.” I called up one of our advisors… and got my answer straight away.</p> <p>For each of the three categories of people mentioned in the point, here’s a few specific pointers:</p> <p><strong>i) Advisors</strong></p> <p>Make sure your advisors have actually done the nitty gritty details of a fundraise before, and not from the investor side. This way, they’ll have been in the trenches – and will also understand the pressure you, as a founder, face.</p> <p>And make sure they speak to you in plain English, not investment jargon. I can’t stress this point enough. Our panel of advisors were awesome, and saved us so much pain and stress.</p> <p><strong>ii) Lawyers</strong></p> <p>Everyone loves lawyers right? The thing is, they are so important. From negotiating your term sheet, through to wording your investors agreement, right through to executing the documents upon signing, having awesome legal representation is critical. There is a lot of legal lingo that lingers in a deal.</p> <p>Schedule regular calls/meets with your lawyers and make sure they’re actual humans, not just paper pushers. Fortunately, ours were!</p> <p><strong>iii) Accountants</strong></p> <p>Ultimately, an investment is a commercial play, so it always comes down to the numbers. Whether it’s on your forecasts, your cap table, or your asset structure, get ready to deep dive into a million and one spreadsheets.</p> <p>Having a solid bean-counter on your side is critical. They’ll tell you if you’re over-spending in one area, under-spending in another, and will give solid guidance on boring things like tax liabilities and depreciation.    </p> <h3>8. Due diligence isn’t always fun… but it’s important.</h3> <p>For those who haven’t heard the term before, “due diligence” is the period between signing terms (an agreement in principle) and the final close (when you get the money).</p> <p>Think about it like an MOT for your business. Your investors look under the bonnet of your car, and highlight anything that is either broken, or could break.</p> <p>It’s a lot of detail. A lot. It’s basically everything you’ve done up until now, in all it’s gory detail. From your revenue model and forecast, to your cost projections, right through to your employment contracts, insurance levels, and IP protection strategy. It’s a lot of work, and will take you a long time.</p> <p>It’s frustrating. It’s arduous. It’s going to keep you up at night. And it’s worth every second.</p> <p>Why? A rigorous DD will highlight elements of your business model that need attention. We learned so much through it.</p> <p>Some of it was negative (i.e. you need to do this, have this, and get that). But the vast majority of it was positive. Things like, “Have you thought about this market?”, or “What if you need to scale faster than planned?”, or “Are you spending enough on Prosecco?” (Note: that last one didn’t come up. But it could have).</p> <p>Your DD process will consume your life, so make sure you have people in place who can manage “business as usual”. However, your business will come out of DD stronger than before… Like they say, there is no pleasure without pain.  </p> <h3>9. Never mind the Brexit, here’s Phrasee.</h3> <p>Our deal closed on July 1<sup>st</sup>, so about a week after the Brexit.</p> <p>We were acutely aware of the potential risk the Brexit could pose for Phrasee’s investment round.</p> <p>Four days before we closed, I was invited onto CBC TV, Canada’s BBC, to discuss <a href="https://econsultancy.com/blog/68003-ecommerce-in-the-uk-post-brexit-positives-negatives-opportunities">the effect the Brexit could have</a> (you can <a href="https://www.facebook.com/phraseeapp/videos/579318905569710/">watch it here</a> if you’re interested). Inside, with the studio's lights shining in my face, my emotions were churning – “a deal ain’t done until it’s done,” my internal monologue was depressingly repeating.</p> <p>But, here’s the thing. Upon reflection – a business with a majority cost base in (currently cheap) pounds, with substantial foreign (and currently stable) currency revenue streams – is actually not a bad model. So, for Phrasee's investment at least, it was a storm in a teacup.</p> <p>Post-Brexit, there was mass hysteria. People, especially in the week directly after Brexit, were noticeably concerned. The markets dropped, the Sterling devalued, and there was an atmosphere of uncertainty, at least in London.</p> <p>And still, a week later… we closed our deal.</p> <p>According to my research on CrunchBase (which wasn’t exhaustive), Phrasee’s Seed round was the first major post-Brexit investment in the UK’s MarTech sector.</p> <p>Why am I humble-bragging? During your funding round, the world isn’t static. Things will change around you. You have to ensure your business is resilient and can withstand uncontrollable shocks, like the Brexit.</p> <p>Listen, you can control a lot of things – the hiring of employees, the deployment of product updates, and things like that. But there’s WAY more things you can’t control – the weather, your customers, and largely the world around you.</p> <p>So don’t stress about what you can’t control, and focus on what you do best – running, and growing, your business.</p> <h3>10.  The day we closed is a day I’ll never forget.</h3> <p>The day we closed, we had a deadline, at which time all the parties were meeting up to sign all the requisite paperwork. And there’s a LOT of paper in these deals, wowza!</p> <p>The meeting was set at 4:30pm.</p> <p>As of 1:30pm, we were finalising a few details.</p> <p>After 6 weeks of back-and-forth, DD, and countless phone calls, everyone was on the same page, all in agreement.</p> <p>I hung the phone up. The flurry of emails stopped. No one was calling me. And it was the most excruciating few hours of my life.</p> <p>I went to a roof terrace in Soho, and had a cup of tea. I aimlessly scrolled through Instagram, the images not registering in my head. I sat there for an hour, unable to form a cognizant thought.</p> <p>I checked my watch. There was still two hours to go.</p> <p>No emails through. “What were they all doing?” I wondered. “Have they changed their minds?”</p> <p>I called one of my co-founders and asked her what the deal was. “They’re doing their jobs Parry, what did you expect?”</p> <p>I left the terrace, and left onto Shaftsbury Avenue. I had two hours to get to Liverpool Street.</p> <p>So I started walking.</p> <p>I walked up to Holborn, then down to Aldwych. I walked across the bridge, then down Southbank, then back over. I wove through the alleys of the City. I aimlessly crossed one street, than back over.</p> <p>And I have no memory of any of it.</p> <p>Then, somewhere between Soho and Liverpool Street, I had a cathartic moment. A moment of clarity, if you will.</p> <p>It was this – the business my co-founders and employees have built is inherently valuable. And industry experts - our investors - agree, and were backing what we built with cold, hard cash.</p> <p>At about 4:20pm, 10 minutes before our meeting, all alone, sweating in the sun, sore feet from walking aimlessly, I stopped and looked around.</p> <p>Surrounded by 8 million people, all doing their business, hustling from one place to another, rushing by me, not knowing what was happening inside my head.</p> <p>At that moment, I felt paradoxically huge... and simultaneously tiny.</p> <p>It was a moment I will never forget.</p> <p>I went to meet my awesome co-founder Victoria at the station.</p> <p>We gave each other a fistpump, a hug, and said, “Let’s do this.” And we set off to sign on the dotted line.</p> <p>It’s been a wild ride this far. I’ve never had so little sleep. Or been so excited. Or been so uncertain.</p> <p>And would I change a thing?</p> <p>NOPE.  </p> <h3>And here’s one bonus point, probably the most important one of all.</h3> <h3>11. Don’t forget to celebrate!</h3> <p>When you start a business, you do it for a number of reasons. But, anyone who’s done something new, something innovative, something exciting, will understand this.</p> <p>Your milestones, be they large or small, need to be celebrated. Because you’ll never do something for the first time again.</p> <p>Let me reiterate the point: <strong>it’s so important to celebrate.</strong> With your co-founders. With your investors. With your team.</p> <p>Because if you aren't enjoying the ride, what’s the point?</p> <p>When we started Phrasee, we had no idea what was in store for us. We still don't know what tomorrow will bring. But no one can take away the 18 months of laughter, tears, sweating and celebrating that Phrasee has brought to our lives.</p> <h3><strong>If you have any other sage advice for anyone looking to fundraise, stick them in the comments below.</strong></h3> <p>The points above are some of the things I’ve learned along the way. Maybe not all of them are in a textbook, but they’re all things that I’ve picked up taking Phrasee from being a fledging startup to an actual company.</p> <p>For all the entrepreneurs out there, no matter what stage you’re at, good luck.</p> <p>And for those who have a job, but have always wanted to live the dream – do it. You’ve nothing to lose – except your life savings, and a whole lot of sleep.</p> <p>No big deal, right?</p> tag:econsultancy.com,2008:BlogPost/66258 2015-04-03T14:30:00+01:00 2015-04-03T14:30:00+01:00 Equity crowdfunding comes to the US, sort of Patricio Robles <p>It's not <a href="https://econsultancy.com/blog/9548-the-crowdfund-act-everything-you-need-to-know/">the CROWDFUND Act</a> that everybody has been talking about for years and which may never be put into place, but it does pave the way for businesses to raise up to $50 million in offerings that aren't open only to wealthy investors. </p> <p>The new Regulation A+ rules give companies the ability to sell equity in two tiers. Under a Tier 1 offering, companies can offer up to $20m in equity to the public over a 12 month period.</p> <p>Companies will need to have their financials reviewed and an offering circular approved by the SEC. Under a Tier 2 offering, companies will be able to offer up to $50m in equity to the public over a 12 month period.</p> <p>In addition to the Tier 1 requirements, audited financials must be provided, and ongoing disclosures similar in nature to those publicly-traded companies are required.</p> <p>The buzz around Regulation A+ is due to the fact that under both Tier 1 and Tier 2 offerings, companies can sell equity to non-accredited investors (individuals who don't have more than $200,000 a year in income or a net worth of at least $1m).</p> <p>In Tier 2 offerings, non-accredited investors will be limited to investing 10% of their net worth or net income, whichever is greater, in an effort to prevent individuals from betting more than the SEC believes they can afford to lose.</p> <p>Importantly, non-accredited investors will be able to self-report their net worths and incomes, so companies will not have the burden of verifying this information.</p> <p>Combined with the fact that companies using Regulation A+ can freely advertise their offerings to the public, Regulation A+ is being hailed by many as a groundbreaking development that will usher in a new wave of equity crowdfunding in the United States. But will it really?</p> <p>A Regulation A+ offering isn't going to be cheap to prepare and according to some observers, the total cost could run companies upwards of $100,000.</p> <p>Additionally, the offering circular that the SEC must approve is expected to receive the same level of scrutiny as an SEC Form S-1, the document companies must prepare for a traditional IPO.</p> <p>Fortunately, Regulation A+ does allow companies to test the waters before they prepare their circulars, so in theory some of the costs could be delayed until companies have confidence their offerings will be successful.</p> <p>Despite this, given the minimum costs, disclosures required and reviews that companies will be subjected to, it might be appropriate to think of Regulation A+ offerings as mini IPOs rather than the true crowdfunding campaigns proponents have been seeking.</p> <p>Certainly, there are reasons to believe there won't be a flood of new companies raising money using Regulation A+, but that doesn't mean that the SEC's new rules aren't a step in the right direction.</p> <p>Giving young companies more ways to raise capital is almost certainly a good thing and it would be surprising if, at a minimum, Regulation A+ doesn't result in at least a few interesting, innovating businesses getting capital they might otherwise not have.</p> tag:econsultancy.com,2008:BlogPost/66154 2015-03-04T10:16:21+00:00 2015-03-04T10:16:21+00:00 63% of businesses plan to increase their marketing budgets in 2015: report Jim Clark <p>The results of the survey could be seen as a further sign that marketers are getting better at securing buy-in and financial support from the C-suite.</p> <p><em><strong>What best describes your plans for your overall marketing budget in 2015?</strong></em></p> <p><img style="vertical-align: text-bottom;" src="https://assets.econsultancy.com/images/resized/0006/0408/increase-blog-flyer.png" alt="" width="470" height="307"></p> <h3>Factors driving this trend</h3> <p>Increased connectivity means that consumers are more empowered with information than ever – from researching a product on their desktop at home to using a mobile device in-store as a virtual sales assistant.</p> <p>For example, a recent <a href="http://www2.deloitte.com/uk/en/pages/consumer-business/articles/digital-influence-in-uk-retail.html">Deloitte report</a> found that digital devices are influencing 33% of in-store retail sales, equivalent to almost £100bn.</p> <p><img style="vertical-align: text-bottom;" src="https://assets.econsultancy.com/images/0006/0405/wifi-at-the-grocery-store.jpg" alt="" width="424" height="283"></p> <p>This has raised the profile of marketing departments, which are increasingly orchestrating consumer relationships - and CEOs are now looking to CMOs and marketing departments as a key growth drivers.</p> <p>A good example of this is British Airways, which <a href="http://www.marketingmagazine.co.uk/article/1330124/british-airways-splits-marketing-department-major-reshuffle">announced</a> in January that it was splitting its marketing department to bring it closer to the airline’s commercial operations.</p> <h3>Marketers are investing in ways to cut through the clutter</h3> <p>At the same time, keeping customers switched on to brand messages remains a challenge. Connected consumers are dealing with more “clutter” than ever - and there are some fairly frightening statistics floating out on the web, ranging from 500 to 5,000 advertising messages a day. </p> <p>This has led marketers to rethink their digital strategy, replacing tried and trusted methods with more precise data and analytical insights on customer behaviour.</p> <p><img style="vertical-align: text-bottom;" src="https://assets.econsultancy.com/images/resized/0006/0407/spam-blog-flyer-blog-flyer.jpg" alt="" width="470" height="178"></p> <h3>Increased importance of digital marketing technology</h3> <p>For example, according to the Marketing Budgets Report, 79% of companies are planning to increase their spending on digital marketing technology – an increase of 13% since 2014.</p> <p>Technologies that marketers are particular focused on include A/B and multivariate testing (50% are planning to spend more in this area) as well as CRM (48%) and marketing analytics (42%).  </p> <p>This is clearly an exciting time to work in marketing, where boardroom support and budgets are rising, and the increased ability to attract and retain customers means the influence of the marketer within businesses will only increase this year.</p> <p><strong><em>The <a href="https://econsultancy.com/reports/marketing-budgets/">Marketing Budgets 2015 Report</a> looks at the extent to which companies are increasing their budgets across a range of channels and technologies, comparing online and offline budgets while also looking at the balance between acquisition and retention marketing. </em></strong></p> <p><strong><em>Almost 600 companies participated in this research, which took the form of an online survey between December 2014 and January 2015.</em></strong></p> tag:econsultancy.com,2008:BlogPost/65805 2014-12-01T11:21:00+00:00 2014-12-01T11:21:00+00:00 Successful corporate-startup ventures. Pt 2: Doing the deal Frank Lampen <p>Although various intermediaries are springing up with experience in this area, some of these lack the statutory regulation necessary for arranging these deals.</p> <p>As more corporates look to deals with startups, in some cases we’re finding that initiatives are being created without full internal alignment around whether the objective is short term innovation or long term financial return.</p> <p>This in turn creates issues around whether the money is coming from operating expenditure or capital expenditure. <strong>The route chosen has big implications on who the right internal stakeholders are.</strong></p> <p><img src="https://assets.econsultancy.com/images/0005/6380/IU_Corporate_Venturing_2.jpg" alt="choose the right path for your corporate startup venture strategy" width="615" height="435"></p> <p>If you are intending to take an equity stake in a startup, it’s helpful to understand how different the world of VC and angel finance (where startups tend to raise most of their money) is from the realm large listed companies.</p> <p>The two worlds have such fundamentally different attitudes to risk and control that corporates can quickly find themselves facing challenges in either getting the startup to agree terms, or in getting internal approvals within their own organisation.</p> <p>Before you start on the deal, <strong>you need to look at your organisation and honestly assess whether key stakeholders have a true picture of the length of time before they can expect a return, the risks, the likely additional capital needs the business will have, and who in the business will take the P&amp;L hit from any writedowns</strong> (and inevitably there will be some writedowns).</p> <p>Once you’ve got that alignment internally, framing the deal well requires you to adopt a win-win style of integrative negotiation rather than the hard-bargaining negotiation that might be more prevalent in your organisation.</p> <p>Even if long-term equity gain is not your principal reason for forming the partnership, we’ve seen many times how putting some money on the table to become a shareholder can lead to better outcomes than simply paying for services or only trying to use non-monetary value added.</p> <p>Once you’re a shareholder, you’re much less likely to bargain hard for a deal which might satisfy your short term interests at the expense of the startup’s long term future.</p> <p>There isn’t really a shortage of investment capital right now, and for the good companies it is certainly an investee’s market not an investor’s; so <strong>if you want to work with the best, you want your deal to be smartest, best-value one on the table</strong>.</p> <p>If you can’t, or won’t, compete on deal terms to work with the best startups, it’s worth questioning whether you should really be doing this in the first place.</p> <p>In summary, doing the deal in the right way requires you to consider:</p> <ul> <li>What the real value exchange is.</li> <li>The time horizon in which your organisation needs to see a return.</li> <li>Whether you’re funding from capex or operating expenditure.</li> <li>Having the right internal stakeholders aligned.</li> <li>Covering off the likely future capital needs and taking account of the possibility of writedowns.</li> <li>Adopting win-win negotiating strategies.</li> <li>Having deal terms that are at least competitive and ideally the best in the market.</li> </ul> <p>In the final post we’ll look forward to how you keep your organisation engaged, and how you can be a great partner to the startups you work with.</p> tag:econsultancy.com,2008:BlogPost/65744 2014-11-12T09:15:00+00:00 2014-11-12T09:15:00+00:00 Four key trends from our Value of Marketing research David Moth <h3>1. A joint failure to understand marketing ROI</h3> <p>A common criticism of marketing is that it fails to deliver a tangible ROI – and it seems digital technology has failed to render those arguments obsolete.</p> <p>Only around a quarter of finance directors (24%) knew the return on investment from marketing – even approximately. </p> <p>Interestingly, the percentage for marketers was even lower at just 17%.</p> <p><em><strong>Do you know what your return on investment from your company’s marketing is?</strong></em></p> <p><img src="https://assets.econsultancy.com/images/resized/0005/5942/screen_shot_2014-11-11_at_15.30.16-blog-full.png" alt="" width="615" height="488"></p> <p>This is a worrying development for those who believe the rise in digital technology and data-driven marketing will give us a more accurate measure of ROI.</p> <h3>2. Differences in measurement cause a disconnect between marketing and finance</h3> <p>The research also reveals that marketers and finance professionals don’t see eye-to-eye when it comes to what share of revenue and sales are directly driven by marketing activity.</p> <p>Around six out of ten (59%) marketers believe that marketing directly drives more than 20% of their company’s revenue. </p> <p>Perhaps unsurprisingly, only four out of ten finance directors (38%) share that opinion. </p> <p>According to Kristof Fahy, CMO of William Hill:</p> <blockquote> <p>There is still a disconnect where an organisation can have several versions of the truth. I’ll be given different sets of figures from different teams that all paint different pictures. </p> <p>But at the end of the day we are a FTSE company where the MD has to be able to stand up and justify it. A single version of the truth is what we need and where we struggle.</p> </blockquote> <h3>3. Marketing and finance differ in both language and personality</h3> <p>An inability to speak the same language is one of the main reasons for the various conflicts that arise between finance and marketing teams.</p> <p>For marketers, speaking the language of finance is seen as being very important when it comes to building credibility at the highest levels of the organisation.</p> <p>Similarly, marketers need to be careful of using their own vernacular with senior management. </p> <p>Joby Russell, marketing director at Confused.com, described how this leads to difficulties:</p> <blockquote> <p>A part of the tension is language problems. Often people working in a given channel in a deep way use language that isn’t consistent with how senior management talk to each other. </p> <p>The higher up you go, the less technical language is used. FDs don’t have time to learn marketing language. A big part of my job is decoding.</p> </blockquote> <h3>4. Marketers see themselves as more important than finance realises</h3> <p>There was a significant difference in opinion between finance and marketing when it came to the importance of the latter for the business.</p> <p>While 77% of marketers agree that ‘marketing is a critical function within our business’, just 62% of finance directors feel the same way.</p> <p>Similarly, only 43% of finance directors believe that ‘the head of marketing has significant strategic influence on the business’, compared to 62% of marketers.</p> <p><em><strong>For the full results of this research, download the <a href="https://econsultancy.com/reports/the-value-of-marketing">Value of Marketing Report</a>.</strong></em></p> tag:econsultancy.com,2008:BlogPost/64819 2014-05-12T11:08:10+01:00 2014-05-12T11:08:10+01:00 Digital agencies' daily rates increased by 6% since 2012: report David Moth <p>Just under half of respondents (47%) said that their average charge-out rates have increased in the last two years, with only one in 10 having decreased rates. </p> <p><em><strong>In the last two years, what percentage change has there been to your average charge-out rate?</strong></em> </p> <p><img src="https://assets.econsultancy.com/images/resized/0004/7877/changes_to_rate_card-blog-full.jpg" alt="" width="615" height="439"></p> <p>The <a href="https://econsultancy.com/reports/digital-agency-rate-card-survey">Digital Agency Rate Card Survey</a> is based on a survey of more than 320 UK digital agencies carried out in 2014. </p> <p>The principal objective of this Econsultancy research is to show what UK digital agencies charge for different types of skills and levels of seniority, and to understand how and why rates may vary, for example by size of company. </p> <p>The survey will help you benchmark day rates for more than 50 individual job roles including positions such as creative director, digital content strategist and social media consultant.</p> <h2>Expected change in rate card</h2> <p>The survey also asked respondents how they expect their daily rates to increase in 12 months’ time.</p> <p>Overall the average rate of increase is predicted to be 7%, though the largest agencies (turnover of £5m+) project a rise of 5% compared to 8% for small and mid-size agencies (turnover &gt;£5m).</p> <p>The increase in digital rates is coupled with a rise in the amount of advertisers who are introducing performance-based elements into their contracts with agencies.   </p> <p>A separate survey by the World Federation of Advertisers found that 11% of respondents already feature incentives in their contracts (up from 7% in 2011).</p> <p>A further 37% of those surveyed say they planned to implement performance incentives, 36% said they wanted to explore value-based compensation and 66% said they wanted to link agency income more closely to their own performance.</p> <p>However it should be noted that the WFA only surveyed 43 member companies, though they did represent more than $100bn in annual ad spend.</p> tag:econsultancy.com,2008:BlogPost/64248 2014-02-03T10:54:00+00:00 2014-02-03T10:54:00+00:00 71% of businesses plan to increase digital marketing budgets this year: report David Moth <p>Looking specifically at digital budgets, the proportion of companies increasing their spending has been remarkably consistent since 2009. This year the figure was 71% which is the same percentage as last year.</p> <p><em><strong>What best describes your plans for your overall marketing budget in 2014?</strong></em></p> <p><img src="http://assets.econsultancy.com/images/resized/0004/2527/chart_1-blog-full.jpg" alt="" width="615" height="491"></p> <p>The Marketing Budgets report is a bellwether for the health of the marketing industry. It looks at the extent to which companies are increasing their budgets across a range of channels and technologies, comparing online and offline budgets while also looking at the balance between acquisition and retention marketing.</p> <h2>Level of increase</h2> <p>The survey also asked respondents by how much they would be increasing their marketing budgets this year.</p> <p>According to the data, companies will be increasing their overall marketing budgets by an average 26%. However around three in every four companies (73%) stated they will be increasing their budget by up to 30%.</p> <p>Looking specifically at digital marketing budgets, only 12% of companies who are increasing their budgets are planning to do so by more than 50%.</p> <p>The average budgetary increase this year is 27%; this is similar to last year’s figure of 28%.</p> <p><em><strong>By how much are you going to increase your digital marketing budget in 2014?</strong></em></p> <p><img src="http://assets.econsultancy.com/images/0004/2529/chart_2.jpg" alt="" width="615"></p> <p><em><strong>Click <a href="http://econsultancy.com/reports/marketing-budgets">here</a> to download the new Marketing Budgets Report 2014.</strong></em></p>