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Houston expert weighs in on marketing from an investor’s perspective

What should Houston startups know about marketing? Photo via Getty Images

Just what do investors want to see from a startup with regards to the company’s marketing? I recently spoke on this topic to a cohort of early-stage technology startup entrepreneurs at Softeq Venture Studio, an accelerator program that helps founders build investable technologies and businesses.

Here are some of the highlights of our discussion.

Building the base for marketing efforts

It’s important for company founders to think about the bigger picture. When we’re talking to clients at Craig Group, we talk about market growth and revenue growth, not just marketing. Because that’s what the investors are thinking about.

Things like the EBITDA margin and recurring revenue are important to investors. They prefer predictable revenue growth rather than uneven or project based fluctuations . Investors also expect the founders to have a plan for the scalability of their business.

Entrepreneurs need to consider how they are going to scale and where they are going to scale. What markets are they going to address and what’s the plan for that — what’s the timeframe?

An exit plan is also a must because even if the founder is planning on staying in the business, investors are seeking a return on investment with another transaction after the successful growth, and profitability, of a company. Founders have to begin with the end in mind.

A marketing strategy that appeals to investors

There are hundreds of private equity firms interested in lower middle-market companies, defined by having between $2 million and $20 million in EBITDA, or earnings before interest, taxes, depreciation, and amortization. It’s competitive but there’s a lot of money to be put to work.

Startup founders need to focus on the basics first when setting the expectations for marketing investment. And they need to know who their customers are and where their ideal target audience is.

Considerations include the serviceable obtainable market (SOM) which is what the company thinks that they can logically support today. That is separate from the serviceable addressable market (SAM) and the total addressable market, which is what a company will work towards penetrating.

You want to know how many of these potential customers exist, and to do that, you need data. If you don’t have it, you can look at adjacent markets. Build the customer acquisition cost that you can afford. It’s not as important what the number starts out with but how it trends, as it should become more efficient over time.

The marketing investment will grow top-line revenue, target the most profitable customers, be able to reach potential customers in more scale and more quickly than sales efforts alone, and elevate the perception of the company prior to the investor’s exit.

Key parts of a strategic marketing plan

The most expensive customer is a new customer.

In the marketing cycle, "pre-awareness" requires the biggest marketing investment. If potential customers don’t understand what a product or service is, it is going to cost the company a lot to educate them on a new category, so that is best left to those with more resources than a middle-market startup.

A more cost-effective way to reach customers is during the research or comparison part of the marketing cycle. You can demonstrate what differentiates you from your competitors. Are you selling on price? Are you selling on service? Think about a side by side comparison.

Once the buyer has reached the decision and loyalty part of the sales funnel and purchased from the company, then the marketing has been effective, and customer retention becomes a key focus.

In complicated business to business sales cycles, there might be a number of people involved in making the decision to buy your product or service. What is important to the IT decision maker might not be important to the potential customer in finance or purchasing. You need to have compelling messaging for all of them, which means you need your marketing to be like your customer, and meet their needs directly.

Sales and marketing 101

Many middle market companies don’t pay enough attention to their front door, which is a company’s website.

Your potential customer is going to be on your website often but certainly 20 to 30 minutes before a sales meeting. And if they don’t find something compelling, they probably won’t be inclined to move forward with your product or service.

Digital strategy and content geared toward both awareness and lead generation can help with the ultimate goal of profitability.

Entrepreneurs shouldn’t spend on marketing tactics until they have a solid strategy, but once they do start investing in advertising or other marketing tactics, they should be able to get metrics and ROI on their campaigns from their marketing partners.

It is important to focus on efficient top line revenue growth as a business grows and scales. Digital marketing is an important part of the overall growth plan, and should not be overlooked. The clock starts ticking on profitability growth once a business owner partners with investors. Make sure your business has an effective plan to meet the goals set out.

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Libby Covington is partner at Houston-based The Craig Group, a strategic digital marketing solutions consulting firm. Her specialty is in understanding how sales and marketing work together effectively.

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Building Houston

 
 

You can now hop online and invest in this promising cell therapy startup. Photo via Getty Images

A clinical-stage company headquartered in Houston has opened an online funding campaign.

FibroBiologics, which is developing fibroblast cell-based therapeutics for chronic diseases, launched a campaign with equity crowdfunding platform StartEngine. The platform lets anyone — regardless of their net worth or income level — to invest in securities issued by startups.

The funding, according to a press release, will be used to support ongoing operations of Fibrobiologics and advance its clinical programs in multiple sclerosis, degenerative disc disease, wound care, extension of life, and cancer.

"We're excited to partner with StartEngine on this campaign. StartEngine has over 600,000 investors as part of their community and has raised over half a billion dollars for its clients," says FibroBiologics' Founder and CEO Pete O'Heeron, in the release.

"This is an exciting time at FibroBiologics as we continue progressing our clinical pipeline and developing innovative therapies to treat chronic diseases," he continues. "This new funding will fuel our growth in the lab and bring us one step closer to commercialization."

The campaign, launched this week, already has over 100 investors, at the time of publication, and has raised nearly $2 million, according to the page. The minimum investment is set at around $500, and the company's indicated valuation is $252.57 million.

In 2021, FibroBiologics announced its intention of going public. Last year, O'Heeron told InnovationMap on the Houston Innovators Podcast of the company's growth plans as well as the specifics of the technology.

Only two types of cells — stem cells and fibroblasts — can be used in cell therapy for a regenerative treatment, which is when specialists take healthy cells from a patient and inject them into a part of the body that needs it the most. As O'Heeron explains in the podcast, fibroblasts can do it more effectively and cheaper than stem cells.

"(Fibroblasts) can essentially do everything a stem cell can do, only they can do it better," says O'Heeron. "We've done tests in the lab and we've seen them outperform stem cells by a low of 50 percent to a high of about 220 percent on different disease paths."


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