How Venture Capitalists are Using Social Media for Real Results
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VCs and angel investors might be last on your list of usual Twitter suspects. Sure, many of them have social media accounts and they certainly look at and test a lot of social media apps, but aren’t their super-stealthy, no-details-disclosed deals generally kept off the social media radar?
While it’s true that many minutiae (or dollar amounts) of startup investment deals are kept off the tubes, VCs and angels use social media extensively for research, promotion and other purposes.
We spoke with a number of investors and startup advisers to learn how venture capitalists are using social media for real results.
Finding Founders and Investments
Venture Hacks founder Babak Nivi told us that investors are â€œall over Twitter and blogsâ€¦ They use social media to source deals and to create a latent relationship with entrepreneurs so they can close the deals they want to.”
Lowercase Capital’s Chris Sacca said he often finds investment opportunities through Twitter. â€œFanbridge came to me after I wrote a tweet asking if there were any bootstrapped, profitable startups with founders working late on a Friday night,” he wrote to us. â€œThey replied that they totally fit that bill. It is now one of my favorite portfolio companies.”
He continued to note that a Twitter stream and search can also provide valuable insight into a company’s culture and viability. â€œA startup’s account gives me a very solid sense of their popularity and visibility with users. I also use Twitter search to see whether users are enjoying a product or service and to uncover whether it is solving a real-world problem. The tweets don’t lie.”
SproutBox, an early-stage accelerator/incubator, similarly uses social media as its â€œprimary source of deal flow,” said co-founder Mike Trotzke. â€œWe also use Facebook, Twitter and LinkedIn extensively for research. If we’re interested in an app, we immediately look up the entrepreneur’s profiles. If we know them, it reminds us how. If we don’t, we find common connections and get some context about what they do. I don’t think we could do what we do, at the scale that we do, if social media didn’t exist.”
Angel Dave McClure also stated, â€œI use LinkedIn for lookups on key founders/employees/advisors,” and Sacca noted, â€œLooking at a founder’s tweets can give me a strong sense of who they really are and what matters to them. I can gather a very intuitive sense of their personality as well as their skills.”
Building Reputations and Buzz
But it’s not just founders who need to have good online karma and well-rounded profiles. Investors need to build and manage their own online reputations as thought leaders with a keen eye for what models will make for good businesses. Don Dodge is a well-known blogger and has been eyeball-deep in the startup scene for ages, formerly at Microsoft and now at Google. He wrote to us saying, â€œBrad Feld, Fred Wilson, David Hornik, Mark Suster, Jeff Clavier, Josh Koppelman, and many other VCs write blogs and use Twitter to communicate to the startup world. They do it because they are building their reputation.
â€œEveryone has money to invest; there are hundreds of VCs. Entrepreneurs want investors who have a reputation and can add value.” Dodge added that many of the better-known angel investors, such as Dave McClure and Chris Sacca, use blogs and Twitter for the exact same reasons.
All that reputation has applications after the investment, as well. If there’s one thing the social web is great for, it’s word-of-mouth marketing. If a VC has taken the time to build a reputation online, he or she is probably an influencer in the tech startup sphere. A simple tweet or blog post can do wonders for a new app’s adoption rates and interest from mainstream media.
McClure told us he uses the social web to help generate buzz for good companies. â€œI regularly share and tweet articles about companies both pre- and post-investment to get (their) attention, and to demonstrate awareness and marketing support,” he said. Trotzke also shared, â€œIt just makes senseâ€¦ that we would tweet about apps opening and closing â€” and that people would retweet the opportunity.”
And Robert Scoble, another well-known figure in the startup scene, said, â€œI’d use social media to tell people what you’re passionate about.” Scoble frequently uses Twitter and other services such as FriendFeed for exactly that purpose, and his words help drive traffic and generate interest in newer services. Any investor who’s put in his time building an online reputation should be able to do the same.
Clearly, whether they’re finding founders, pumping up the buzz for apps or building reputations of their own, VCs are using social media in a multitude of investment aspects.