Investing in branding can be expensive, but for those who get it right, it has the potential to be one of the smartest investments an entrepreneur can ever make. In the right hands, it can make your company instantly recognisable and maybe even loved… so why do many get it wrong and make costly mistakes?
One of the easiest ways to get it wrong is to underinvest, to ask a friend of a friend with some Creative Suite chops to help you out and do the basics for you, such as knock up a logo. The Nike Swoosh is cited as the perfect example of when this approach works—in this case paying a student $35 to produce one the world’s most recognisable logos. The fact that Carolyn Davidson was later gifted shares worth over $2m at today’s valuation is conveniently forgotten as it doesn’t play well in the narrative. Of course, much depends on the industry and the scale of the opportunity.
Then there is the question of when to invest in branding. Start-ups are strapped for cash and unlikely to be able to find the fees associated with a credible agency. So the obvious decision is to seek fundraising first and then invest in the brand, correct?
Wrong. Here’s why.
Firstly, VCs and investors are looking to mitigate risk, it’s in their DNA. They are seeking to invest in businesses that are primed for success—great product, dynamic team, clear route to market, etc. Add a well-considered brand into that mix and they’re even more likely to invest—and usually at a valuation much higher than the cost of branding.
Smart VCs know the value that great branding brings to your business—after all it’s the asset that multinationals apply the most value to…and struggle to replicate themselves.
Secondly, a VC might expect to scrutinise where and how their money is being spent. I’ve seen first-hand entrepreneurs securing the appropriate investment, only to feel their vision compromised by pandering to the views of their money masters. Or worse still, having the money to invest, but being backed by a team that has no real appetite to maximise the long-term value of branding.
Ask any founder who has been through a successful branding exercise and they’ll tell you the value it adds is immeasurable. We worked with one client to develop a fully realised brand before they sought investment. At one of their first funding meetings a VC laid a seven-figure sum on the table and offered not to invest, but to simply buy the company outright, before they’d even launched. At this point the client realised the value the brand brought to his business.
After all, investors are consumers, and a brand that resonates with them, will ultimately resonate with the wider public.
This obviously raises an important question — how can start-ups fund a brand before investment? I’ll be discussing this in upcoming posts.