Yesterday was an interesting day. I started off by tasting different blends of single shot coffee made by a start-up that we have been eyeing for a while now. They have been some gaining significant traction and the tasting culminated in the issuance of a term-sheet. In my next appointment, I visited several branches of a food aggregator that provides home cooked meals in an IoT enabled device. The heavy dose of caffeine from the morning helped me stay awake after an extraordinarily heavy lunch, but I really liked what the company was doing, and so we issued them a term-sheet too. In the last meeting of the day, I was with two entrepreneurs who are looking to fill the niche left open by Bira in the beer industry, and so I ended up tasting their different beers. Their product, taste, packaging and brand positioning are all unique and I’ll be honest, we are contemplating issuing them a term-sheet too. But no, this blog isn’t about tasting and issuing term-sheets, it’s about the commonality I observed in all three funding outlays, which I asked the founders to rectify i.e. instead of outsourcing it to an external agency, build an in-house marketing team to manage social media channels, PR and internal-external communication.

I used to erroneously advocate outsourcing PR and media management, but that viewpoint was permanently altered. I conducted a yearlong experiment in which I discontinued the services of our external PR agency and brought those functions in-house. Not only did I gain more control on what Artha (and I) wanted to communicate, but we also got more media mentions, got covered by the top journalists and were invited to renowned events around the globe. We also started publishing separate monthly and quarterly newsletters for our LPs and well-wishers.  All this effort has paid off through a marked increase in business for all the Artha entities, but most importantly, we achieved all these objective at 60% off our previous costs.

All of our PR (yes, all of it) was organic and genuine i.e. unpaid for. We did not sponsor events, pay for advertising in publications or authored articles. Things are moving so well that this year we are expanding the internal team by bringing in a Social Media Head that can move us from prose to video. Since we understand that the entire process isn’t a one-man job, we are allocating him/her a budget to recruit a team to facilitate this transition.

This massive cost saving got me questioning the PR/Media management agency model and whether it really works for an early-stage startup. I am afraid it does not. It takes many months and a lot of effort to get a brand new startup relevant and unpaid media attention. Unfortunately, early stage start-ups do not have the budget to compensate top-level agencies for their effort or even tier 2 or tier 3 players (unless they can secure a strong referral). Therefore, start-ups end up working with PR firms that themselves are starting up.  These PR firms overload their staff with multiple projects, to make ends meet, distributing the employee cost over the projects to make operations profitable. However, that divided cost also means divided time and focus on each project – a situation that does not bode well for start-ups trying to make a dollar for every penny invested in marketing. In fact, I have seen PR agents pitch 4-5 ideas to the same journalist in a single bid hoping to get any of them published. Is that really how you want your start-up to be pitched?

Another issue that works against the interest of the start-up is when a PR agency works hard to meet the KPIs they have promised and manages to do so in the first 15 days of the month. Having met their KPIs, they go radio silent for the rest of the month. This essentially means that their promised KPIs are the limit and not the base on which the agency works – completely opposite to how founders set KPIs for their internal team. After all, you can only create value for your company when you get more value than you pay for, isn’t it?

Therefore, I have come to a conclusion that PR agencies are useful for short sprints or Big Bang announcements, but the marathon work of building an image and brand for your startup should be done by an in-house team. In fact, even the 22 Immutable Laws of Marketing recommends the same!

37/2019