ENTREPRENEURIAL MANAGEMENT

Why Startups Shouldnt Chase Media Buzz

by Andrew Zacharakis and Alisa Jno-Charles
JUNE 05, 2017
In the fall of 2014, in the midst of controversy about Facebooks real-name policy and selling of user data, a new social media platform called Ello caught re. Ello vowed to forever be free of advertising,
and its company manifesto boldly concluded with a promise to would-be users that You are not a product. The timing couldnt have been more perfect. The media dubbed Ello the Anti-Facebook and,
at its peak, the social network was getting membership requests from more than 30,000 new users per hour.

This enviable opportunity quickly turned sour, however. Recently launched by a few designers and developers in Vermont, Ello was not equipped to handle such a high level of trac, resulting in a bad
experience for some users. Furthermore, the site was still bare bones and many users who came expecting similar features to Facebook were disappointed. Ultimately, Ellos success didnt last long.
Though the site lives on as a network for artists and creators, most of the users who came hoping for an alternative to Facebook quickly left.

Ellos story shows what can happen when a startup achieves media success that outpaces its progress in other areas. While some founders suer from a nave If you build it, they will come attitude,
many others swing to the opposite extreme. Tempted by the allure of media exposure, they seek it out before theyre ready. Case in point: Elizabeth Holmes at Theranos, who chased TED talks, New
Yorker proles, and Fortune covers before her companys core technology even worked (and then apparentlylied about it when the exaggerations caught up with her).

While Theranos may be an extreme example, most founders would give an arm for similar (and similarly fawning) media coverage. They know publicity can be an important early signal of a businesss
progress, helping attract the customers, partners, employees, and investors the company needs to take o.

Research backs this up: one study of technology startups found that more coverage in industry media early in a companys development was associated with receiving greater levels of venture capital
funding later.We studied 60 venture-capital-backed companies and found that those that eventually achieved successful outcomes for investors tended to attract more media coverage along the way.
Successful companies had more articles and headlines written about them, were covered by more publications, and put out more press releases than failing ventures.

While the research showing a connection between media coverage and startup success might send entrepreneurs scrambling to pour time and money into their communications strategy, the lesson is not
that simple. Communication is a critical part of building a business, but media attention must be driven by real growth and traction in core areas. That sounds obvious, but its something too many
founders overlook, both in their urgency to attract publicity too soon and in their anxiety for that coverage to be positive. When founders drive media coverage too early, they may not be able to deliver
on their promises to customers. Moreover, fretting about positive publicity may be wasted energy, according to our research.

In our study, a higher percentage of the media coverage garnered by successful companies was negative 4.5% compared to 2.6% for failed companies.This doesnt mean that All press is good press,
but that press is a good sign your company is successful enough to attract newsworthy, skeptical coverage that goes beyond PR pu pieces. For example, Ubers recent troubles around sexism and
treatment of drivers wouldnt be worth mentioning if it wasnt the leader in its industry.

One of the rst things new entrepreneurs do is craft a clear story about their company, why it was founded, and what its goals are. This lays the groundwork for attracting and motivating a team,
developing company strategy, and pitching to customers and investors. Its also the rst step in building your media approach, but its important not to get distracted by storytelling if you havent worked
out important operational, logistical, or business model issues.
The best time to seek publicity is when your company demonstrates traction or hits a key milestone, such as acquiring a new client or launching a product. Focus on reaching the companys goals, and
then promote these successes once you achieve them. When you do get media attention, share it widely and make sure key stakeholders (investors, partners, etc.) see it. Dont stress too much about
negative press coverage, since it shows that a company is newsworthy enough that its failures deserve attention.

Another important tip for early-stage startups: dont waste money on a public relations rm or staer. The ones who can really help you are too expensive, and those oering free or reduced-price PR
should be avoided. If, however, you have access to the communications oce at your university, accelerator program, or other institution, this can be a great way to get free publicity. But ultimately
nobody is better at telling your story in the early days than you are.

While every company needs a media strategy to create awareness and demonstrate traction, its only one piece of the puzzle. Media activity should complement and keep pace with the rest of a
companys growth, or it risks creating an image that reality cant live up to. Successful companies tell their story eectively, but they also have a substantive story to tell.

Andrew Zacharakis (Zach) is the John H. Muller, Jr. Endowed Professor in Entrepreneurship at Babson College and the Director of Babsons Entrepreneurship Research Conference. He previously served as Chair of the Entrepreneurship
Department and Director of the Arthur M. Blank Center for Entrepreneurship at Babson. Zach received a Ph.D. in Entrepreneurship & Strategic Management from the University of Colorado and an M.B.A. from Indiana University, Bloomington. He is the
co-author of ve books.

Alisa Jno-Charles is a Ph.D. Student at Indiana Universitys Kelley School of Business. Her research focuses on the relationship between startups, media, image, and identity. Alisa also has over a decade of private equity, public markets, and
real estate industry experience. She holds a Bachelors in Finance and an M.B.A. from Babson College.

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