Can social media impact a start-up’s ability to get funding?
There are several ways that start-up owners can raise funds to grow their business. Some ask friends and family, whilst others go after investors with an inspiring pitch deck and business plan.
This latter option can be challenging, as start-up owners need to find the right investors and then get in front of them to pitch. Some developments over the last decade have made this process a little easier, such as peer-to-peer lending and crowdfunding through platforms such as Seedrs. Has social media played a role too?
The Wharton Study
According to a recent study by Wharton Business School entitled ‘Social is the new financial: How start-up social media activity influences funding outcomes’, social media activity and the ability to obtain funding are positively linked.
The researchers found that, of the start-ups they looked into, a one standard deviation increase in Twitter Influence measure (this is the equivalent of a 5% increase in mentions, a 12% increase in impressions or an increase in followers of approximately 200k) could lead to an extra $1.5 million in second-round funding.
Why are investors attracted to a strong social media presence?
Social media can help promote a positive brand image, draw in a larger following and help boost visibility – all of which will attract investors.
Company culture is also incredibly important in attracting funding. If investors love a company’s culture, chances are that customers will too. Social media posts that present a company as being a great place to work, having strong values and a clear mission and having engaged employees will look good.
If start-up owners talk about placing an emphasis on customer service, investors can take to social channels to find out the truth. Investors will want to see speedy and effective customer service and may also look for signs that customers are engaging with and excited about the business (which means they’re more likely to stick around).
How should start-ups use social media?
Whilst the Wharton report focussed their study on Twitter (they found it to be the most commonly-used platform for start-ups in the US), businesses need to ensure they focus on the right channel for their audience. If there’s uncertainty about what to use, start-up owners should test a few channels to see which one yields the most success in terms of follower growth, website clicks and engagement rates.
Businesses should also regularly interact with their audience through different kinds of content such as videos, photos, graphics and polls. They need to ask their audience questions and comment on current events to drive engagement. It’s also vital that they analyse what kind of content performs the best and at what times – and adapt their content strategy accordingly.
They should also provide frequent updates on the funding progress and thank investors at each stage – unless, of course, they wish to remain anonymous.
What about employees?
Investors looking into a company are going to google the CEO and C-suite executives, so those individuals need to ensure that they have a positive social media presence. They need to share thought leadership, showcase their achievements and demonstrate their commitment to the organisation. Investors need to have faith in the individuals running the business.
Last but not least, businesses should have an employee advocacy programme in place to keep junior colleagues engaged and passionate. If they can be incentivised to share posts about the business, it will help drive even greater visibility and buzz.
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Written by Harriet Chamberlain, Head of Digital