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Thursday, 13 December 2018

Paying Startup Marketing with Sweat Equity – Interview with an Investor

Reading time: 8 min


Paying Startup Marketing with Sweat Equity  – Interview with an Investor


Dear reader,

This a couple of years old but still up-to-date interview contained so many important thoughts about start-up financing that I had to acquire permission to republish it for your benefit.

Please enjoy the article!

Christian Dillstrom

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ALMOST EVERY START-UP STRUGGLES WITH MARKETING COSTS.
Unfortunately, they have no other option than to find the money to do it, since without massive enough marketing potential investors and even customers will hardly know their name.

Just meeting, calling or emailing potentially important people for your start-up is just too slow a process – at least that is what all start-up owners I know have told me. The idea of a start-up may be excellent, but it is difficult to make it grow if only a few people know about it.

On the other side, start-ups with great marketing, for example through media attention, will grow big. Take a look at any very successful start-up, and you will see that they have received a lot of awareness in their early stages.

Some have received free media attention,
and some have hired skillful and expensive PR-companies
and some just bought a lot of advertising.”

Marketing will also help you find investors and convince them that your start-up can really grow big. ”Go Big or Go Home” seems to be the slogan of every investor and it is much easier to convince investors about a start-up they know and that already has paying customers.

Therefore, marketing is something start-ups need to do when they have the least amount of money to do so.”


Luckily, there is an alternative.

I heard that there is an alternative way to pay for marketing – sweat equity. The idea sounded interesting, so I did a bit of research about it.

LinkedIn had some sweat equity investors, but almost all of them lacked the most important component – marketing. I felt that a start-up really needs a lot of marketing at the start.

After some research, I was able to find a sweat equity marketing investor who also delivers quite a massive amount of marketing. He even agreed to do an interview with me.

Unfortunately, I am not a journalist by profession, so my questions are based on what interests me about a sweat equity investment. I have been thinking about founding a start-up myself, so I hope that my questions are relevant to other start-ups as well.

So, here we go:”


WHAT IS YOUR BACKGROUND?
I started coding at the age of 10 and now, 38 years later, I still code almost daily because I like to know what I am talking about.

I have founded and run four global start-ups as well as analyzed and consulted over 300 of them. I have also worked at an advertising agency for three years, and I won six national advertising awards in a single year while working there.

My first start-up was bought by a consortium of mobile-phone manufacturers just after 4 years. My second start-up was a boutique social media agency for global brands, and it has over 500 people working for it today.

My third start-up is a global growth hacking agency and its services are used in 130 countries. The fourth one brings growth hacking of global brands to SME’s and start-ups in 240 countries.

After my first start-up, I have not sold my start-ups as I much rather enjoy the annual dividends they produce than a lump sum payment.

Besides start-ups and advertising, I have been working with Fortune500s, the finance sector and game and gambling companies.


SO, WHAT DO YOU DO?
I invest in start-ups which have a great need for targeted marketing but are unable to pay for it.


WHY A SWEAT EQUITY INVESTMENT?
Simply because when the start-ups really need a massive amount of targeted marketing, they usually do not have the money to pay for it. A very classic egg-and-chicken problem.

Start-ups with a lot of awareness are most likely to be successful.”

I think that many brilliant start-ups fail because they do not have the funds to do enough targeted marketing.

I have met and analyzed over 300 start-ups globally since 1998, so I have a pretty good idea of what works, what doesn’t and what needs to be changed. Therefore, I dare to make sweat investments in start-ups.


WHY NOT JUST INVEST MONEY?
Simply because I invest in things that are crucial for the success of the start-up. I have never heard that office tables and chairs, a coffee maker or even an office space would have crucially affected the start-up's success.

Unfortunately, those are the things many early stage start-ups spend their funding on.”

I invest in start-ups in this way to boost the most crucial aspect of their success to truly help start-ups to grow.


WHAT KIND OF START-UPS DO YOU INVEST IN?
Those that sell to businesses or organizations or people that are in their 20's or older.

For ethical reasons I do not do marketing for those that are not old enough to form their own opinions about marketing messaging.

Of course, a start-up must sell legal products and market to buyers that can legally buy them.


WHAT DO YOU OFFER START-UPS?
My main offering is quite a massive amount of targeted marketing, since that is what makes any start-up grow fast and reach all the people they need to reach.

I will also give free analysis about business, marketing and sales. If required, I can also give on-site consulting.

I am also going to help with the board of the start-up as a board advisor for free of charge.

These are the crucial things that will make or break start-ups and therefore I am helping them with those bare necessities. To be honest, it is in my best interest to make a start-up successful, or I will lose my investment.


WHAT DO YOU DO IN MARKETING FOR THE START-UP?
What every start-up need is awareness of it among decisionmakers of potential customers, investors, journalists and bloggers.

Anyone can approach these people as their email addresses and telephone numbers are publicly available. So, what’s the problem? Why won’t every start-up just contact these people and grow into billion-dollar businesses?

It’s all about the credibility of the person who contacts these people on behalf of the start-up.”

If you possess the credibility required, your communication goes through and most of these targeted persons will take the action you ask them to take or at least seriously consider it.

Let me guess; you already have tried your credibility, and that’s why you are reading this interview.”

I have been growth hacking global brands for the last ten years. That makes me one of the most experienced growth hackers in the World. Also, I have written a blog about growth hacking over four years now.

My blog-texts are read by 15-31 million business people from 240 countries every month. Just in last two years I have had over 567 million business readers, and because of that my name recognition is quite good among decisionmakers around the World.

As a result, 52% of receivers of my emails open them and 54% of those people take the action I ask them to take in my email. Best of all, they do not mind receiving emails from me, so I can keep on emailing them month after month until I have received the outcome I desire.

It does not end there as I shall deliver on real-time measured interest of each targeted person to a mobile phone of each predefined person. Delivered notice will include name and contact details of the interested target person with an interest history.

Therefore, sales or any other wanted action can be completed at the most optimal moment.”

Therefore, I can make almost all of the needed persons aware of any start-up. The best thing about it is that I can do it very quickly and without restrictions in terms of volume or geography. I can also deliver the most optimal moment to complete the action wanted by you or your sales people.

The question is simple:
Which start-up shall I present to the decision-makers of potential customers, investors, journalists and bloggers
and thus make that start-up fly?”


WHAT DOES THE ANALYSIS INCLUDE?
As mentioned, I have founded and run four global start-ups of my own and analyzed and helped over 300 start-ups since 1998, so I have quite a clear vision of how to make a start-up successful.

My experience of business, growth hacking, marketing and IT is quite extensive, ranging from start-ups and advertising agencies to Fortune500 companies.

Analysis is always a part of the deal since I obviously want to do my best to make a start-up successful and secure my investment.


WILL YOU BE AN ADVISER OF THE START-UP'S BOARD?
Definitely. The board plans and decides on the strategy of the start-up, while the CEO and the other personnel will just execute that strategy.

Unless you get the strategy right, the rest seldom matters. Therefore, I am happy to help the board with my know-how.


HOW MUCH WILL YOUR INVESTMENT COST THE START-UP?
A minimum of 5% of equity and if there are different series of shares, I want my shares from the series with the most votes.

After all, I really want the start-up to grow big to return my investment.”

The amount of equity I want obviously depends on the amount of work I estimate I need to do to make the start-up successful.


WHERE CAN THE START-UP BE LOCATED?
Anywhere in the world, given that I have operated globally since 2001.

Most of the communication today happens online, and telephones still work OK. Of course, I have no problem being on-site when required.


HOW FAST CAN YOU MAKE INVESTMENT DECISIONS?
If a start-up has all the documentation ready, and they present their case clearly, I make decisions within 5 business days.

After all, it is my experience that start-ups who need my help, need it quickly. Unfortunately, often either the documentation or the case is not clear at the start of our discussions.


DO YOU OFTEN DECLINE TO INVEST AND WHY?
Unfortunately, yes.

I get a lot of proposals because my investment makes any start-up fly. I haven’t even heard of anyone else that offers such a huge amount of targeted marketing as sweat equity.

I really must believe that I can help a start-up become successful in the long term.”

The massive awareness marketing I offer makes pretty much any start-up fly, but unless business is done properly it will not run in the long-term.

The first challenge is the team. That is why friends as founders is not always a good idea, since a business needs to be handled by the persons who can really do it.

The second challenge is an unrealistic sales plan and marketing campaign. The sales conversion is usually much lower in reality than in dreams. Unfortunately, invoices and salaries need to be paid in the real world.

The third challenge is a lack of clarity and a strong focus. Although a start-up needs to have an extremely flexible thinking to get all the pieces of the puzzle in place, there has to be a point where there is a single clear goal and a plan to achieve it.


HOW QUICKLY CAN A START-UP EXPECT TARGETED MARKETING TO START?
Within one business day after we have a signed contract and the start-up has fulfilled its part of the contract.

Again, the start-up usually has an acute need for the service, and together we try to prepare for the start of the awareness campaign while we negotiate our contract.


ARE YOU AVAILABLE FOR DIRECTOR OR CEO POSITIONS?
If that is really needed for a start-up, then yes, but of course on an interim or temporary basis until a permanent person is found.

People in start-ups work under high pressure and sometimes that gives rise to personality clashes.”

Of course, I do what needs to be done to make a start-up successful and protect my investment; just like any good investor would.


ANY ADVICE FOR A START-UP APPLYING FOR SWEAT EQUITY?
Take it very seriously, prepare your documentation and get your story straight. After all, it doesn’t take much effort to send money to your account, but it demands a lot to commit to do the manual work needed to make your start-up a success.

Like the billionaire, a start-up investor and globally known business shark Mark Cuban says:

Sweat Equity is the most valuable equity there is.”

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Christian Dillstrom.

Please stay tuned for more interviews.