JvM Start-up Report 2020

The Path of the Brave

Why start-ups and agencies have a difficult time coming together – and how they can successfully do so.

Themenexpertise:Manifesto, Start-ups

Jonas Bailly
Managing Director, Jung von Matt HAVEL GmbH

Agencies and start-ups are cut from the same cloth. The one has brave ideas. The other is a brave company. These match up, or so you would think. Why is their relationship so complicated? In its 2020 Start-Up Report, Jung von Matt (JvM) takes a deep look at the reasons for this and, in its “Manifesto of the Brave,” calls for both to finally come together and collaborate.

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It wasn’t so long ago that agencies were seen as learning organizations. They were agile, hungry, willing to learn. But then, sometime over the last two decades, they began to be sedate, complacent, and comfortable – just like the corporations they had been supporting for many years. Since then, they have continually moved further and further away from the new culture champions, the start-ups. Just how estranged these worlds are can be seen in the changes at the management and executive levels in business. In 1990, the ten most valuable companies in the world were 110 years old on average1 – half of today’s top ten companies were not even born yet.2 Many of the company founders back then have become the stars of the connected world today and knocked down the old giants – just like the founders of today are in the process of creating the blueprint for the future.

Unfortunately, however, agencies and start-ups seldom come together in this new world. Agencies avoid any collaborations because they require an intense amount of support and are not cost-effective.3 Start-ups see collaborations as being cumbersome4 and too expensive.5 This is why the majority of those questioned as part of the JvM survey rely on freelancers, in-house specialists, or performance experts.6 While at first glance the costs seem to be the reason for the breakdown in working together, the actual problems go much deeper. The JvM survey shows that a deeply rooted conflict between the cultures of agencies and start-ups is at the heart of the problem.

HOW IT CAME TO THIS.

Agency services play a significant role for nearly all start-ups in the early stages of their development. But, unfortunately, the collaboration frequently fails as a result of how the services are offered7 – tools and methods that work for corporations are only partly suitable for start-ups. The result: Many potential partners from the start-up and agency worlds unfortunately never start up a dialogue with one another.3 The consequences are grave: Agencies don’t know what is motivating and moving the start-up scene; start-ups, in contrast, don’t know how to value their own brand,8 and so they don’t pay much attention to agencies either. But it’s absolutely clear: They could be a match made in heaven if they talked with one another more often and, above all, seriously listened to one another.

WHAT EACH IS MISSING.

Agencies strive to achieve brave communication. They want to develop authentic brands. Start-ups would therefore be the perfect customers. But instead of proactively approaching them, agencies simply watch the pioneers of the world economy with mild interest. But that’s not enough. By the way, JvM is no exception. Start-ups, in contrast, do what agencies have only too often forgotten: They roll up their sleeves. Their credo: “Fail fast, fail often.” After all, it’s the mistakes you make that help you make progress – even if only a few are able to successfully manage this.9 The mistakes on both sides are systematic – and avoidable.

As different as the business ideas of many start-ups may be, their development is very similar. New products or services are quickly made ready for market, with the aim of winning over as many customers as possible at the lowest price possible, so as to quickly become profitable. At the same time, the processes adapt to growth, until the marginal benefit has been reached. Leading venture capitalists, such as Project A Ventures, have also identified this pattern.10 It’s quite paradoxical, then, that start-ups would be well advised to invest in their brand earlier. Why? Because the short-term savings can turn on them in the long run.

That’s because the following rule applies: If the use of a higher and higher budget for performance marketing becomes less and less efficient and, at the same time, a level playing field prevails among competitors – then the stronger brand will always win. This phenomenon has been widely researched by Byron Sharp,11 Les Binet,12 and others. But, unfortunately, start-ups normally dedicate their efforts to their brand much too late or not at all13 – and remain dependent on cost-efficient leads, without a clear brand vision, without charisma, without genuine consumer relationships.

In a world of pure performance budgets, the promise to become less dependent on Google, Facebook, and Amazon through a brand should be worth its weight in gold. But instead of taking advantage of this, the majority of agencies remain stuck on rigid processes and service packages – knowing that start-ups would be good role models and good customers, but being too slow to question themselves and become learning organizations once again.

HOW TO COME TOGETHER.

The time has never been better. Agencies and start-ups can give so much more to each other if only they would finally wake up, think in new ways, open up to one another. Those were the findings of the JvM 2020 Start-Up Report.

Methodology and details

For the JvM report, a total of 14 video interviews (qualitative survey) with experts from the start-up scene were conducted. We spoke with founders and marketing decision-makers alike, as well as with decision-makers at venture capital funds (VCs). After the interviews, all the participants were given an additional questionnaire (quantitative survey). The goal was to gain a deeper understanding of the general needs of start-ups on the one hand, and of brand development and communication on the other. The advisory role of decision-makers at VCs served to give an additional perspective.

SCOPE 14 qualitative interviews With experts from the start-up scene

8 start-ups Founders or marketing decision-makers

6 venture capital funds (VCs) Investment or marketing decision-makers

QUALITATIVE SURVERY Survey medium: Video interview Length: 45 minutes Period: June 18 to July 19, 2020 Conducted by: Paul-Christian Brenndörfer, Leroy Adams, Oscar Franz (recorder)

QUANTITATIVE SURVERY Survey medium: Online form Length: 10 minutes Period: July 13 to August 3, 2020 Conducted by: Automated

EXPERTS SURVEYED Benedict Rodenstock, CEO – ASTUTIA Ventures GmbH Bettina Engert, Director Communications – Acton Capital Dr. Florian Resatsch, Managing Director – Finleap Florian Weber, Chief Commercial Officer - SevenVentures Fritz Trott, co-founder and CEO – Zenjob Henrik Siemers, Managing Director – DrSmile Inas Nureldin, co-founder and CEO – Tomorrow Maximilian Jochim, Chief Operating Officer - SevenVentures Minna Philippson, Vice President Brand and Marketing – TIER Mobility Nawid Ali-Abbassi, Principal – HV Ventures Nico Hribernik, founder – Spring/Wellster Healthtech Group Nora Blum, co-founder and CEO – Selfapy Stefan Herbst, CXO and founder – helden.de Dr. Simon Walter, VP Brand & Communications – Project A Ventures Valerie Bures-Bönström, CEO and founder – VAHA – etone Motion Analysis GmbH

Survival has become more difficult – for everyone.

"See to it that you get further than originally planned with your existing resources. The time until the next financing round can take longer than you expect." – Nawid Ali-Abbassi, Principal – HV Ventures

The coronavirus crisis has deepened existing challenges. Capital has become more difficult to get hold of. As a result, investors are managing expectations and urging players to broaden their horizons. Finding alternative markets is more important than ever, since fields in decline can be balanced out with new segments or target groups. Especially in this case, new top talents are indispensable, but difficult to find. Even if the job market has weakened in general, specialists in IT development and sales will continue to be highly sought after.

"Static target groups are becoming dynamic. The old is breaking away – the new is rising. We’re taking advantage of the new …" – Stefan Herbst, CXO and founder – helden.de

Capital, new markets, and recruiting are traditional brand topics. A clear brand vision turns a good story into a great one – and makes start-ups more attractive to new target groups, talents, and investors. While most only cultivate their own brand in much later phases, in times of crisis it becomes clear that they should have done so much earlier.

  • 48% of German start-ups applied for government support.14 German COVID-19 start-up survey, dealroom.co

  • 7/8 see the search for talent as being their biggest challenge.15 Start-ups

  • 6/8 see the build-up of their brand as their biggest challenge.16 Start-ups

The situation demands adaptability more than anything else. Now, when we must dare to take new paths, the chances are also high of discovering the true value of our brand. Agencies should get the ball rolling – but they don’t.

One has a need. The other skills. But there still seems to be a lack of fit.

"Many think that they can do everything in-house, but one thing that’s difficult to do in-house is to be creative and have big ideas." – Nico Hribernik, founder – Spring/Wellster Healthtech Group

Creativity comes last. The start-up culture is shaped by the need to be profitable fast. In the first few years, many short-term decisions are made. This leads to a noticeable pattern in marketing, with a strong focus on performance in the early phases and on brand building later on.

Traditional agency services are generally not in demand. Start-ups normally keep their work on the brand to a minimum and use freelancers or design offices. The agency world lacks understanding for the start-up culture. This can be seen, for example, in the lack of alternatives to elaborate branding processes.

  • 14/14 focus on performance media.6 Start-ups and VCs

  • 8/14 have not made optimum use of their brand so far.9 Start-ups and VCs

  • 12/14 want to work more strongly on their brand in the future.13 Start-ups and VCs

"Most want to go to market quickly and try to generate as many leads as possible as fast as possible by leveraging performance marketing. They only really think about the brand itself when the marginal benefit or the efficiency of performance marketing begins to fade." – Dr. Simon Walter, VP Brand & Communications – Project A Ventures

To date, the collaboration between start-ups and agencies has been based first and foremost on costs. In the early phase of their existence, start-ups would welcome support. But they also need the right answers. Agencies can find these answers by offering new services or payment models – and decision-makers at start-ups by keeping an open mind.

Agencies are expensive. Start-ups are exhausting.

"No start-up can afford a big agency. Individual packages or co-ops, however, would certainly be appealing from a VC perspective." – Dr. Florian Resatsch, Managing Director – Finleap

The question of price is at the top of the list. Start-ups often don’t approach established agencies – even if they have a concrete need. The reason for this can be that agencies often decline any collaboration because they want to avoid the commitment. But there is only very limited reflection on this within the industry.

Commitment means, for example, taking new payment models into consideration. Equity deals are more common in other areas of marketing. Big media companies, for instance, offer advertising slots in exchange for shares in the company.

Another option would be to use venture funds to make ties. Up to now, VCs have helped to search for an agency only in individual cases, but they remain reserved when it comes to creativity. Volume deals could make the collaboration for agencies profitable and increase the influence of VCs.

"Unlike with performance marketing, I never know in the end how many customers I can win with the help of an agency." – Henrik Siemers, Managing Director – DrSmile

All in all, there is a host of options allowing start-ups and agencies to find a better way of coming together. For agencies, the question is whether they want to take on the risk. Investments require competence and resources. Streamlined packages or volume deals are additional options. At the same time, start-ups need to keep a better eye on long-term measures – but their success can rarely be captured in live data.

"For start-ups in the B2C business, reach is a decisive success factor. Media for Equity offers young and strongly growing companies access to high-reach TV commercials in exchange for a share in their capital." – Florian Weber, Chief Commercial and Chief Operating Officer – SevenVentures

Long-term brand building in the world of live data.

"Sales have to grow faster than the costs at some point. A strong brand really helps to achieve this." – Nawid Ali-Abbassi, Principal – HV Ventures

Effectiveness has to be measured. Although brands continue to be a black box for many, some are already using fixed KPIs to understand their impact on sales. The bigger the company becomes, the more informative tools such as the Net Promoter Score (NPS), brand tracking, YouGov, and similar are. In terms of the definition of “brand,” experts agree that a brand is more than just communication. However, actions tell a different story in real life. While many only begin with development when a big campaign is in the works, there are others who take this topic seriously early on.

  • 13/14 see the brand as a fundamental part of a company.17 Start-ups and VCs

  • 7/14 use KPIs to measure the brand.18 Start-ups and VCs

  • 3/14 leverage public-opinion KPIs.19 Start-ups and VCs

"We have an Apple score in all departments. This doesn’t compare us to Apple itself, but with the quality of the customer experience." – Valerie Bures-Bönström, CEO and founder – VAHA – etone Motion Analysis GmbH

The value of a brand is difficult to measure – but not its impact. Agencies could make clearer how value is added through their work on a brand. In a world of purely performance-based budgets, the promise to become more independent of Google and Facebook is worth its weight in gold.

Common goals and joint experiences.

"The biggest challenge is being able to make this shift. The earlier, the better. Begin by building your brand, the time when you need to do so will come anyway – and then it will be even more expensive." – Henrik Siemers, Managing Director – DrSmile

Long-term collaboration is attractive and valuable for both sides. Only in this way can the potential of both worlds become a reality. All start-ups are on the search for a media boost. When the budget doesn’t allow for communication in wide-reaching media, a brave appearance can outweigh the lack in funds. This is when start-ups often search at PR agencies for what the creative industry has to offer – in vain.

"I’ve always found it more difficult to manage an agency than to bring a smart junior on board who proactively learns about our internal processes. I think freelancers are popular because it’s easier to make ties with them. You simply want a permanent contact person." – Bettina Engert, Director Communications – Acton Capital

The agency and start-up universes are two very different worlds – and by virtue of their nature, there’s something of a gulf between them. But this gulf can be overcome. Coming closer together, however, means questioning yourself first.

Manifesto of the Brave

The time has never been better. Agencies and start-ups can give so much more to each other if only they would finally wake up, think in new ways, open up to one another.

01
Tread the path together.
AGENCIES

GET GOING:

Follow the champions of tomorrow – equip them with strong brands!

START-UPS

BE PREPARED:

Don’t just rely on performance – get yourself a sharp brand sword!

02
Listen to one another.
AGENCIES

QUESTION YOURSELF:

Be creative when it comes to products and sales – do for yourself what you would do for others!

START-UPS

FINE-TUNE YOUR VIEW:

Don’t just ask what agencies cost – listen and discover the value they can create!

03
Rely on allies.
AGENCIES

EXPAND THE CIRCLE:

Ask yourself how it could work – if you don’t invest yourself, get an investor on board!

START-UPS

ACCEPT HELP:

Use your partners – business angels and VCs serve as the bridge to the agency world!

04
Make brands more than a superficial veneer.
AGENCIES

SHOW YOUR COLORS:

Go forward and create facts – show the impact a brand makes!

START-UPS

OWN YOUR BRAND:

Your brand isn’t just your heraldic animal – it’s your workhorse, too!

05
Reach out.
AGENCIES

BE BRAVE:

Leave your comfort zone – begin a dialogue with start-ups and they will follow suit.

START-UPS

BE BRAVE:

Risk a long-term collaboration – give agencies a chance and they will show you what they can do for you.

  1. https://paymentandbanking.com/die-wertvollsten-unternehmen-1990-2018/

  2. https://de.statista.com/statistik/daten/studie/12108/umfrage/top-unternehmen-der-welt-nach-marktwert/

  3. https://www.horizont.net/agenturen/kommentare/zukunft-von-agenturen-start-ups-und-agenturen-its-still-complicated-174244

  4. “I’ve always found it more difficult to manage an agency than to bring a smart junior on board …” Quote: Bettina Engert, Director Communications – Acton Capital

  5. “No start-up can afford a big agency.” Dr. Florian Resatsch, Managing Director – Finleap

  6. When asked “Which forms of marketing do you (or start-ups in your portfolio) use?” 14/14 gave the answer “Performance media” (surveyed: start-ups and VCs).

  7. “Individual packages or co-ops, however, would certainly be appealing from a VC perspective.” Quote: Dr. Florian Resatsch, Managing Director – Finleap

  8. 8/14 did not agree with the statement “Your own brand (or that of the companies in your portfolio) meets the criteria previously mentioned” (the desired influence of the brand was previously asked about; surveyed: start-ups and VCs).

  9. https://www.deutschlandfunknova.de/beitrag/warum-start-ups-scheitern

  10. “Most want to go to market quickly and try to generate as many leads as possible as fast as possible by leveraging performance marketing. They only really think about the brand itself when the marginal benefit or the efficiency of performance marketing begins to fade.” Quote: Dr. Simon Walter, VP Brand & Communications – Project A Ventures

  11. How Brands Grow: What Marketers Don’t Know – 2010, Byron Sharp

  12. The Long and the Short of It: Balancing Short and Long-Term Marketing Strategies – 2013, Les Binet, Peter Field

  13. 12/14 agreed with the statement “We are planning to develop the brand even more in the future” (surveyed: start-ups and VCs).

  14. https://blog.dealroom.co/covid-19-impact-venture-backed-european-start-ups-surveyed/

  15. When asked “Which of these topics are important challenges for you?” 7/8 gave the answer “Search for talent”; this was the most commonly selected option (surveyed: start-ups).

  16. When asked “Which of these topics are important challenges for you?” 6/8 gave the answer “Building our own brand”; this was the second most commonly selected option (surveyed: start-ups).

  17. When asked “Which areas of your company does the brand have an influence on?” 13/14 gave the answer “All areas – it’s a fundamental part of the company” (surveyed: start-ups and VCs).

  18. 7/14 agreed with the statement “We have hard KPIs for brand measurement” (surveyed: start-ups and VCs).

  19. 3/14 agreed with the statement “We measure public opinion (e.g. PR, social listening)” (surveyed: start-ups and VCs).

Jung von Matt 2020