The marketing dilemma in todays start-up world can be defined by the need for capital to increase marketing, but also the need for marketing to gain capital.
Strategic marketing can make or break a new business. One can have the best idea in the world, but, if nobody knows about it, the idea is worthless; at the same time, not all ideas are intellectual property or have the capability to become so.
In today’s world, there are marketing juggernauts with what seems like infinite marketing budgets. You could have the revolutionary new product and could be growing organically, but as soon as it gains substantial traction, one of the juggernauts can copy and scale a spin-off of your product much faster.
Luckily, angel investors can aid in this process by investing in your business and providing ample capital to match the big players and their marketing budgets. So, a company, in sense, must thread a needle of marketing enough to gain traction, but not too much because their budgets wont match the marketing needs. Here, the first signs of the marketing dilemma appear.
In-order to solve these first signs of the marketing dilemma, entrepreneurs seek investors. With a solid proof of concept, reasonable financials, and a great team; a VC will likely be inclined to allow to company to pitch to investors.
With the average angel round investment being $850k in 2015, one of the more prevalent struggles of a VC today is filling the company’s capital needs before the round closes. A company could have $500k committed with investors who have expertise in their industry, but be seeking $800k initially. How does a VC fill the needs of capital beyond its group of investors? More marketing! The VC must now spend time and money marketing the company to other VC’s, in hopes to syndicate and close a round. Thus, bringing the marketing dilemma back around and into play again.
AngelList is a unique solution to this dilemma. Rather than having the business spend more time marketing to gain more investors or having the VC spend time marketing the company to other VC’s, a VC can display a deal on AngeList and receive investments from outside investors in order to close the round. As Mark Suster from TechCrunch expressed in his AngelList review, AngeList should not be used as a substitute for a VC because the investors don’t always provide “smart money”; and they may not have the industry expertise that a company needs. But, when in a shortage of capital, this is a great way to for investors to build their portfolio with less risk in a VC backed company, and for a VC to close its round and fulfil capital needs.