Brand evaluation for venture capitalists
What venture capitalists need to know
Venture capitalists are great at numbers. It’s their job. They look at all the data and make not only an assessment of the business health, but they also analyze and predict the investment potential.
If you think this is an easy task, then you have never labored over any equity purchases. It is the job of venture capitalists to get it right. For the rest of us, an underperforming stock added to our portfolio may translate into a waiting game. The VC has no such luxury.
Ninety-nine percent of the time, venture capitalists reject investing. What makes the other 1% so appealing? It depends.
So venture capitalists look at LTV (top line and lifetime revenue). They look at growth rate, engagement, churn and cash on hand.
So, how can all this data, including cost of acquisition and projections, go wrong? EBITA is enough for most others. Not the VC.
Venture capitalists don’t live in a vacuum
What is often missing is context. And context, as we all know, is the greatest reality check.
When it comes to predicting the Academy Awards winner, for example, it requires you seeing all the entrants. Seeing a few of the movies nominated but missing the others is a handicap to overcome. How do you assess the value without seeing the other films? Best is always a byproduct of context. It comes from comparison.
How do you assess brand value?
It requires a different skill set. We measure it in numbers— something all venture capitalists understand. But it requires that you have a means to quantify what appears on the surface as qualitative.
How does the brand stack up to competitors? How persuasive and important is the brand in relation to all the means of satisfying the need? Is there untapped market share with a rebrand? Does the current brand need repair (an expensive and frightening endeavor for every venture capital director)?
A Stealing Share brand audit
When we complete a brand audit, we provide concrete facts about the health and future of the possible VC investment.
Our brand audit, $60-80K depending on the category plus the cost of projectable market research, is part and parcel for every brand we reconstruct and fix. It’s what we do everyday for our global customers. Freightliner, Medtronic, State Bank of India, Biscuitville, Genesis, ProAssurance, Glen Raven— and too many others to list have all hired Stealing Share to assess, grade and fix their brands.
What we look at
Before we can fix the brand, we need to answer the right questions. Knowing the problem is how you fix it. To that end, we grade the brand in nine distinctive categories: Meaning, Direction and Visioning, Positioning, Differentiation, Relevance, Signals Consistency, Equity Markers, Brand-Product Relationships, Coherent Brand Management and how well the company is monitoring brand equity. This provides the snapshot of the brand as it exists today.
The brand’s potential
Then we look at the potential. Our experience has taught us hard lessons. The future of brand growth is in lock step with its ability to exercise strategic control.
The sources of strategic control, just like the means to increase market share, are more of a science than the average marketer realizes.
We examine and grade the strategic control of ASSETS (physical assets or tangible brand assets like oil rights or a powerful brand name like Apple), PRODUCT (product sales and associated services with superior benefits such as Walmart’s cost structure), PROSPECTS (meeting prospect needs or priorities in a superior way or with a segmented focus such as Snap-on Tools and Nordstrom), REACH (coverage that creates value for the prospect such as Visa), and KNOWLEDGE (timely application of knowledge or skills in a sustainable way like H&R Block)
As a result of this deep dive, our most successful work comes at the behest of the C-suite and not the marketing department.
The CEO is the Janis figure in business. Like venture capitalists, it is the role of CEOs to look both backward and forward. The future of the brand resides as firmly in operational issues as it does in marketing. But the most forward thinking of CEOs recognize that messaging is crucial.
The litmus test
Messaging is much more than marketing. It is more important than the mission statement. Why? Because it must be REAL and not some flowery biblical text. Write it in cliché form and it’s ignored by all. It should be the single point of focus that aligns all the moving parts of the organization behind a single purpose. Finding that single minded proposition eliminates waste. And, as every VC knows, wasted movement has costs.
St. Jude Medical
When we rebranded the global medical device manufacturer St Jude Medical (SJM), Dan Starks was the CEO at the time. (Abbott has purchased SJM since then.)
Our brand audit, projectable market research and evaluations of strategic control defined the highest emotional intensities in the target market (cardiac electrophysiologists). Quantifiable research projected that the mean score of two variables dictated the future of the brand.
Cardiac EPs coveted two things. Control and risk avoidance. Any brand that promised to focus on those two values would enter the considered set of medical devices.
At the time, SJM was in third place in their category behind Medtronic and Boston Scientific. Within three years of the rebrand, SJM was in solid second place. And threatening Medtronic’s historic position as market leader.
Dan Starks stood in front of SJM R&D and stated, “If anything you are currently working on does not put greater control in the hands of the cardiac specialist— stop doing it.” Such is the power of the CEO.
Our work was transformative in the category. Four years later, Medtronic hired us to fix their cardiac valve brand and business.
Can what we do improve the vision of venture capitalists to better than 20-20? Of course. Unless, that is, you are willing to risk brand blindness.