Chief marketing officers are now spending more of their budgets on technology than they are on internal staff, according to a Gartner survey. Additionally, CMOs expect that their budgets for innovation will grow next year. If a business were to go lean, shedding away the latest integrated tools and analytics, it might not be able to effectively compete.
Marketing technologies such as web content management systems, email marketing platforms, and analytics are now widely used. On top of that, businesses can consult with third-party vendors in order to leverage the latest in location-based analytics, retail sensors, programmatic advertising, and AI. Marketing technology vendors are in the business of helping other businesses. As their results become evident, and as executives redirect their budgets accordingly, marketing tech startups are capturing the attention of venture capitalists.
To get an investor’s perspective, I interviewed Cheryl Cheng, general partner at BlueRun Ventures, a VC firm that focuses on early-stage opportunities across mobile software and services and also FinTech. Cheng’s own background includes retail marketing and brand management, as well as mergers and acquisitions. BlueRun’s mantra proclaims, “We help entrepreneurs build businesses that will transform industries.”
BlueRun has made investments in marketing technologies such as Verve, a local mobile ad network, and Sendwithus, an email production platform. Additionally, Cheng says that other startups have pivoted upon realizing the value of their data.
B2B press coverage
Arguably, the mainstream media is better at covering consumer products than B2B companies, simply because B2B is by definition kind of narrow. Marketing tech is a niche even beyond that, albeit a potentially profitable one. Afterall, people in marketing and in San Francisco are very familiar with Salesforce, but Marc Benioff and his company may not command as much name recognition on Main Street. I asked Cheng whether this lesser publicity allows startups to advantageously fly under the radar, or if it presents drawbacks when it comes to customer acquisition and valuations.
“B2B doesn’t get the mainstream press but I don’t think that affects the startup’s ability to get customers,” said Cheng.
She noted that B2B ventures ultimately have to solve a business problem, and customers are always open to solutions if you’re solving their problems. Excessive press coverage of a particular niche could actually distort a startup’s priorities and strategies.
“Everybody feels compelled to get their own press or do their own marketing, and then you’re spending just a lot of venture dollars on marketing as opposed to building product,” added Cheng. “And so B2B companies tend to be a little bit more capital efficient in the early days because they are focused on what I call air cover marketing tactics, and they can go very grassroots, customer by customer. They rely on a lot of account references and build their early business case that way.”
Cheng noted that B2B companies also tend to thrive at trade events and conferences. By directly engaging their customers, they reduce the need to build a mainstream brand.
“If you look at 2016, 2017, and 2018, the most successful IPOs from a valuation, retention, and growth perspective were all B2B companies, as opposed to B2C companies,” said Cheng.
Data compliance from an investor perspective
New data protection and privacy regulations could constrain the growth of marketing technologies. Cheng says she sees both sides. Investors want unfettered access to data to use however they want, but consumers are rightfully concerned about the state of their personal information. Entrepreneurs should be upfront about data governance practices. Adaptation to regulation is possible. The healthcare industry has needed to comply with the firm standards of the Health Insurance Portability and Accountability Act (HIPAA) since 1996.
“We haven’t seen HIPAA-level public policy in advertising, and we’re starting to see that, which I don’t think is a bad thing,” said Cheng. “Unfortunately what happens is that it disadvantages the smaller companies disproportionately to the big companies.”
Unique considerations for marketing tech investments
When asked if there are any unique considerations that set marketing tech apart from other types of technology investments, Cheng said that there is a common aspect to her evaluations.
“I like to see and understand how the use of data can help make better decisions,” she explained.
For instance, if a consumer is relying on an app for time-efficient driving navigation, real-time data should factor into the route planning. Cheng said that marketing technologies should ideally operate in the same way. However, some marketers have a backward-looking view of their campaigns. They try to extrapolate insights from past performances and data that isn’t necessarily relevant.
Marketers should process data in real time, whenever possible, so that they can change campaigns and marketing tactics on the fly. Secondary and tertiary data might reveal that a particular campaign has been re-contextualized by current events, necessitating a creative overhaul. Nimble, data-processing tools can allow marketing teams to connect more deeply with consumers. Some startups aren’t well-suited for venture funding, but marketing tech companies with intelligently-designed, real-time solutions are more likely to attract interest.