Venture Capitalists Face the Reputation Economy

Last week the New York Timesexplored the recent public relations and marketing boom among venture capital firms. In the past top firms have “operated under levels of secrecy typically reserved for Swiss banks,” Nicole Perlroth writes, but with fewer active firms, meager investor returns and increased accessibility the tables have turned in the world of venture capitalism. “Ten years ago, entrepreneurs needed some kind of insider advantage to get a meeting with a firm,” Perlroth explains. “Now the most promising entrepreneurs do careful due diligence — on Twitter, in blogs and in the media — before agreeing to take coffee with a V.C. The best entrepreneurs are courted by the venture capitalists, not the other way around.”

Successful Self-Promotion

The changes have caused an about face in venture capitalists’s attitude regarding PR and reputation management. Perlroth highlights Andreessen Horowitz, a firm whose ascent “has served as a case study in successful self-promotion.” Founded in 2009, the firm has quickly climbed the VC ranks with a bold strategy consisting not only of “aggressively marketing their expertise to the reporters and bloggers who follow start-ups,” but also “regular off-the-record dinners for reporters at the homes of Mr. Andreessen and Mr. Horowitz” and personal blogs maintained by its partners. That approach has resulted in enthusiastic coverage from the likes of Forbes, Vanity Fair, Wired and CNET, as well as a more direct reputational boon. Ben Horowitz’s blog has attracted 10 million followers, Perlroth notes, and many tech bloggers “have become protective of the firm, attacking any reports that cast Andreessen Horowitz in a negative light.”

Still a New Trend…But Growing

Other VC firms have been following suit—even stalwarts like Sequoia Capital, which Perlroth says, “sniffed at the notion when the trend began.” The firm “has a reputation for being tight-lipped about its investments,” according to the Wall Street Journal, but openly touted its role in three recent IPOs. Last year New Enterprise Associate, another veteran firm, launched a “new NEA Seed fund, aiming to boost the firm’s reputation among tech entrepreneurs,” and a trio of scholars debuted the Lee-Pollock-Jin VC Reputation Index. Many firms “are bringing on PR talent for the use of portfolio companies,” according to TechCrunch, but “others are trying to use PR to boost their own images, and promote their VCs to the press.”

A Double-Edged Sword

The increasing significance of reputation and PR is a double-edged sword for venture capitalists. In the past they have cast themselves as Wizard of Oz-like masterminds, but stepping out from behind the curtain, they are learning, has both its rewards and risks. Take Kleiner Perkins Caufield & Byers, a major firm whose reputation benefited from the addition of “Queen of the Internet” Mary Meeker, an analyst noted as one of Time’s Ten Most Influential Women in Technology. More recently, though, KPCB’s image has been damaged by a sexual discrimination lawsuit by junior partner Ellen Pao. CrunchFund, the VC firm founded by former TechCrunch editor Michael Arrington, also faced complex issues when it launched. Clearly aiming to harness the popular tech blog’s brand, the firm’s reputation was immediately threatened by questions about journalistic ethics and potential conflicts of interest.

Interestingly, the new landscape that VC firms find themselves navigating has been shaped largely by the very startups that they have helped nurture. In the future they may consider not just the potential return on their investments, but also how the technologies they have funded might help build and manage their reputations.

Building a Reputation- Volkswagen’s Long, Winding Road

With Volkswagen claiming the top auto industry spot in Fortune’s annual World’s Most Admired Companies list and The Economist highlighting the Germany automaker’s global ascent, it’s worth taking a look at the tremendous shifts in reputation the company has experienced over the course of its 75-year history.

An Unlikely Origin

It’s hard to imagine today, but VW began as a state-supported operation in Nazi Germany. While Hitler heralded the Beetle as an affordable “people’s car” (in German, volkswagen), VW’s early years did not live up to that reputation. “Only 630 Beetles were made there during World War II—and distributed to the privileged,” according to Der Spiegel. [Read more…]

Ralph Lauren’s Olympic Uniforms

Ralph Lauren is facing an uproar after it became publicly known that it outsourced the manufacture of the U.S. Olympic Team’s uniforms to China.

The U.S. uniforms in many prior Olympics had been manufactured overseas, as reported by the New York Times. But when the patriotism associated with that event meets a brand with such an all-American image, perceptions change. [Read more…]

A New Guiding Vision for Yahoo

Marissa Mayer

After Scott Thompson’s abrupt departure from Yahoo, ex-Google executive Marissa Mayer has been named the new CEO.  Mayer is now the company’s best chance to arrest its precipitous slide from dominance—she was in fact behind many of the changes at Google that has earned it its leadership position, including working for 11 years to perfect its search engine. [Read more…]

Anderson Cooper’s Deft Reputation Management

Anderson CooperEarlier this month CNN’s Anderson Cooper revealed that he is gay in a letter to The Daily Beast’s Andrew Sullivan. According to the Huffington Post, Cooper’s decision to officially come out followed “a long discussion with his team making sure he wasn’t committing career suicide.” With rumors that Cooper may soon marry, that letter could be part of a larger plan to open up about his personal life while closely managing the tone and context of that revelation.

A Good Choice

The decision to make the announcement was a good choice. “I’ve always believed that who a reporter votes for, what religion they are, who they love, should not be something they have to discuss publicly,” Cooper states in his letter to Sullivan. But he also acknowledges that keeping his sexual orientation private had the potential to harm his reputation for honest and accurate journalism. “It’s become clear to me that by remaining silent on certain aspects of my personal life for so long, I have given some the mistaken impression that I am trying to hide something –something that makes me uncomfortable, ashamed or even afraid. This is distressing because it is simply not true.”

Taking Control of His Message

By choosing to share the news in a thoughtful and eloquent letter to Sullivan, a friend and himself an openly gay journalist, Cooper took control of his message and preempted any threat to his reputation that his previous secrecy had posed. By doing so he was also able to frame the announcement in a way that underscores his values and reputation, both personally and professionally. “I have always been very open and honest about this part of my life with my friends, my family, and my colleagues,” Cooper wrote, adding that he has always tried to keep his private affairs and identity out of his journalism. “I’ve never wanted to be any kind of reporter other than a good one, and I do not desire to promote any cause other than the truth.”

Cooper also minimized the story’s ability to expand by making the announcement while he was in Botswana, out of the reach of the media.

The way Anderson Cooper has handled this is a model of how to get in front of potentially controversial personal issues.  On a broader level, Cooper has set an important example by treating sexual orientation as a subject that is not relevant to public or professional reputation.

Photograph: Tulane University

Dollars & Sense: The Shareholder Value of Reputation

Major companies currently owe an average of 26% of their market capitalization to their reputations, according to this new study from Echo Research. Looking at around 700 companies in the United States and United Kingdom, the study highlights the considerable impact that reputation can have on shareholder value. [Read more…]

Rachel Botsman’s Reputation Revolution: Trust Trumps All

Last week at the annual TEDGlobal conference in the Edinburgh, Scotland, social innovator and technology consultant Rachel Botsman posed this question: “If someone asked you for the three words that would sum up your reputation, what would you say?”

Botsman imagines a time where you won’t need to answer with a traditional “elevator pitch,” or even a list of references or credentials. Instead, she sees “a future in which resumes and even credit scores are irrelevant, replaced by an aggregated digital reputation based on our interactions in the collaborative economy,” according to Mashable.

[Read more…]

Barclay’s Crisis

With News Corp’s hacking scandal still percolating through the news and legal system, another totemic British company is facing a reputational crisis—though the response from the two companies could not have been more different.

At the end of last week Barclays was hit with a fine for fixing the LIBOR rate. Rupert Murdoch’s counterpart at the bank, Chairman [Read more…]