Last week the New York Times’ explored 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.”
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.