Recent economic headwinds have caused the venture capital landscape to change dramatically. While it’s tempting for leaders to think of economic downturns as the time to play defense, West Manager Partner, Joanna Rees, shares why it’s actually time for some calculated brand offense.
Every decade or so, we enter an economic slowdown, and I have experienced a few in my 30+ years as a brand builder, investment banker, and venture capital investor. In downturns, the money dries up, or those providing the funding pull back on new commitments. Then investors warn you to reduce costs to extend the runway. Customers may make decisions that might leave your product or service on the chopping block. While it is tempting to think of downturns as the time to play defense, experience says it is actually time for some calculated brand offense.
Correctly, these cycles are times to evaluate where your resources are focused and where you might be able to trim. And your clients are considering the same. Perhaps counterintuitively, statistics show that customers value and spend on the brands they trust during recessions. Before you slow all investment efforts down, consider how building brand trust and loyalty requires many small, consistent acts carried out over time. So in times of economic uncertainty, any leader’s job is to become trusted and indispensable. And I have learned over decades that means one thing – Brand.
Regardless of how quickly we exit this current cycle, these are the steps every venture-backed company should take to build a trusted and recession-proofed brand. It’s time for a fitness test.
No matter your customer, market, or industry, you must have a compelling brand to be a market-leading company. “Brand” is often dismissed as a “nice to have” or relegated to the consumer companies of the world. But this is not a B2C-only dynamic. Just because you don’t identify as “B2C” doesn’t mean you don’t need a clear brand. There is a human at the center of every purchase decision. Having a compelling value proposition supported by trust every step of the way is key to building a brand and beating the competition.
Investing in your “brand” starts at the beginning of your startup journey and does not require an expensive creative spend. You certainly don’t have to buy a billboard on the 101 or splatter the NYC subway with advertising. The most important piece of advice I can share is to make sure your brand stands for something unique and defensible.
Having a well-defined brand platform sounds simple, but it is the critical first step for any company. At West, we define this as your business’s who, what, why, and how. What do you offer that is clearly differentiated from the competition for the price? Who are your customers, and why do they care about your offer to the market?
Every category––from software to security to e-commerce––is noisy and crowded. A clear and defensible value proposition is not something you put on the back burner. It is imperative. Why do you exist as a company? What is the north star that motivates your team to show up every day? The ‘How’ is the character or tone of your brand. Clearly defining these parameters upfront enables your company to consistently connect with all constituents over the life of the business.
You might have a solid foundation, but you should always revisit it, especially in light of challenging economic conditions to stay on top of your customer’s evolving needs, opportunities and constraints.
This isn’t rocket science
At West, we employ a simple and straightforward exercise called a Pub Quiz to cut to the chase immediately. Make a list of your competitors and their descriptors or value propositions, and add your company to the group. Block out all names, even your company’s, and try to match the descriptor to the right company. A lot of the time, we find that it’s hard for employees to pick out their own company. Everyone thinks they are doing something differentiated, but the lines of clarity get blurred when you see it all together. What you may think is a “stand apart” value proposition can sound like noise in your customer’s ears.
Your customers must decipher between all this noise and parse out who really serves their needs. Your job is to make that decision easy for them, so you should always look for ways to differentiate. That starts with clearly and concisely articulating your brand platform––and your truly differentiated value proposition––and ends with defining your enemy. Defining the enemy is figuring out what market forces and competition you are up against. Having your entire team understand this aligns everyone’s efforts in the same direction.
Don’t leave your customers in the dark
Especially during a recession, the needs and wants of your buyers are changing. Maybe even more rapidly as they respond to external factors. While you shouldn’t pivot your business with every twist and turn, you should––like any strong brand––continue listening to your customers, iterating on your product, and communicating those updates and changes. Pulling back on marketing outreach spend, or top of the funnel, could be prudent, but don’t take your ear out of the market of customer listening. In times of economic uncertainty, leaning in on customer engagement and feedback is key to winning through the trough and into the future.
Investors are humans too
Brand equates to every customer interaction with your company. The brand you want to create informs every decision you make as a leader. And your ability to pitch investors, win new talent, and determine which products and features to pursue stems from how quickly and clearly you can answer the above questions––aka your brand in its most crystallized, pure form.
While it might not always seem like it. Investors are humans too. They are emotional, visionary, and, yes, optimistic. It is their job to dig into your vision and wholeheartedly back it. While not a replacement for strong business metrics, having a powerful brand with clear, concise positioning is a significant differentiator that can help you raise capital even when times are tough. A recession looks like a pullback from the venture community for most companies when it is, in fact, more like a great sorting. This is when investors consolidate and double down on their winners. To make sure you’re in that group, there’s a lot to do, but don’t underestimate the importance of signaling to the market that you should be.
A recession is not the time to rest on your laurels. The brand you’ve built thus far–– and the customer relationships you’ve prioritized––are your most valued assets. Pulling the rug out from under your customers is a surefire way to lose credibility, trust, and, importantly, revenue. Instead, make moves that reinforce who you are, where you are going, and how you resolve to meet your customer in ways they expect and need in such uncertain times.