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When to Make a Lot of Noise

Teddy Roosevelt famously said, regarding diplomacy, that he preferred to “speak softly, and carry a big stick.”  I have always liked this approach to pretty much everything.  At NAV, we are not loud and hyped, we let our companies and our returns to our LPs speak for us.  We do things to raise our profile, such as write this blog, and maintain an unusually useful website, but we have never been accused of marketing ourselves out of proportion to our accomplishments.

Recently I have noticed start-ups adopting this same approach, and I like the trend.  It seemed in the past that grabbing maximum investor mind share early was the best and only strategy.  Maximize hype and valuation at every round of investment?  Bad idea.  It attracts imitators, creates tension between investors and management, and can be the undoing of a promising young company.  Two particularly good examples of the “speak softly” approach are Gilt and Groupon.  They quietly built revenues, margins, real market traction, and let those results do the talking for them when they eventually made their industry leadership more visible.  Everyone knew they were doing well, but not until their revenues got leaked out did anyone realize how well.  I tip my hat to them.  On the other hand, notice how quickly Foursquare has been copied.  They chose to pump up the brand very early, and it may pay off, but time will tell if they took on the big boys and attracted copy-cats before they were carrying a big enough “stick.”

Now, Groupon and Gilt have recently raised money at what can only be described as hyped-up prices.  But this is exactly my point!  They played the game perfectly.  They didn’t attract imitators as they grew, are the clear leaders now in large new categories, and are riding a nice wave of well-earned hype that gives them access to capital markets their would-be competitors can’t touch.  Brilliant.

Build awareness with potential customers, partners and acquirers.  You need to be on their radar.  Then, execute relentlessly.  But resist getting too big for your britches – it can be your undoing!