News & Views

Opinion / An Idea Worth Investing In?

by Contagious Team

The worlds of marketing and venture capital continue to merge, says Meanwhile managing partner Gabbi Cahane

A couple of years back, having both exited our respective agency businesses, an associate of mine and I were regularly meeting over lunch to discuss life, the universe and what to do next.

One topic that regularly cropped up was the nature of agencies - PR, brand, ad, social - you get the picture. The subject of 'The Agency of the Future' has been debated by a variety of commentators in all kinds of forums, and this piece isn't about to go over old ground. What it will attempt to explore a little further is one of the answers to those questions, something that this associate and I described as 'Venture Marketing'. 

Venture Marketing, as we saw it, would combine the multidisciplinary skills of agencies with the investment expertise and business model of venture capital. 

In effect, Venture Marketing would provide not only the strategy, creativity and influence that builds awareness, engagement, interest and purchase, but the business acumen and capital investment that accelerates expansion, growth and and exit.

Our belief was that by aligning these two worlds, we could provide entrepreneurs with both the creative and financial muscle that would enable a clearer path to success for both parties.

So we decided to give it a shot. We built a team of partners from a range of agency and business backgrounds, all of them entrepreneurially-minded, and launched Meanwhile

Over the last couple of years we've invested time and money in a handful of startups, accelerators and incubators; partnered with some excellent growth brands and connected large corporates to disruptive ideas, technologies, platforms and models.
And we're not the only ones thinking in this way. 

1) Hybrid firms such as Consigliere and Zag have developed models that take a similarly investment-minded approach to building brands.

2) Independents United has invested its own money into the 'B2Brand' accelerator Collider12 as well as partnering with Diageo to launch Distill Ventures that will offer funding and support to new and growing premium spirits brands.

3) Joint ventures have been established between funds and agencies such as BBH and Spark's Black Sheep Fund.

4) Agencies such as Co: and Made by Many, and Anomaly have invented, incubated and invested in products, brands and technologies that all feed back into the 'innovation and IP equity' owned by the company. 

5) And the VCs have been evolving too, with Google Ventures500 StartupsFF Venture Capital and a handful of forward thinking firms offering in-house branding, design and marketing capability to their portfolio companies. 

Some early data about this approach is beginning to emerge. A recent study in the Journal Of Private Equity (the first-ever into how venture capitalists systematically help their portfolio companies grow) has found that certain VCs are aggressively building out a focused portfolio operations skillset and recruiting more people with operational backgrounds, including those all important marketing smarts. 

The study notes that those funds with a well-developed 'portfolio operator' model have top-quartile returns (above 20% internal rate of return in the relevant time periods). 

So, in effect, the agency can break its apron strings with the servant-master client relationship, take a seat at the table and perhaps even realise the full value of that insight and creativity they've been selling in hourly chunks (plus a mark-up) for what seems like forever.

Obviously, putting your money where its mouth is as an agency has its risks and opportunity costs, but then so does speculatively pitching for that new account you'd desperately love to land.

And the potential returns on a successful business that you have a piece of, could far outweigh any amount of hours (often hastily invented on a Friday afternoon) logged onto a timesheet.

Venture Marketing might just be worth a punt after all.

Gabbi Cahane is managing partner of venture marketing firm Meanwhile
 
He is also the founder of Cahane & Associates, a strategy and advisory firm that works with investors, corporates and growth companies to identify, develop, grow, acquire and sell. 
 
Cahane is also an investor, advisor and general agitator to early stage startups and acts as a mentor for Seedcamp and Collider12.