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Dear
reader,
This interview, 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 hand, start-ups with great marketing, for example through
media attention, will grow big. Look at any successful start-up, and you will see that they have received a lot of awareness
in their initial stages.
”Some
have received free media attention,
and some have hired skillful and expensive PR-companies
and some just bought a lot of advertising.”
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 all of them lacked the
most important component – marketing. 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 ten and now, 38 years later, I still code
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 three hundred 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 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.”
Many brilliant start-ups fail because they do not have the
funds to do enough targeted marketing.
I
have met and analyzed over three hundred 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, 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 them 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 needs 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 people 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 businesspeople 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 people 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
salespeople.
”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?”
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 three hundred 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.
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 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
people who can really do it.
The
second challenge is an unrealistic sales plan and marketing
campaign. The sales conversion is usually much lower 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 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. 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.