The Startup Dilemma: Systematic Marketing for Growth and Valuation

Editor’s Note: This article explores the complex world of startups and the critical role systematic marketing plays in their growth and valuation. It also highlights groundbreaking research conducted by professors Gary Lilien and Ofer Mintz, which sheds light on the surprising trend of early-stage B2B startups foregoing systematic marketing despite its potential benefits.

As the startup ecosystem continues to evolve and become increasingly competitive, it is crucial for entrepreneurs and investors to understand the factors that influence a company’s success. The insights provided by Lilien and Mintz’s study serve as a valuable guide, emphasizing the importance of strategic decision-making when it comes to allocating resources and implementing marketing initiatives.

Industry News – Investment Beat

The Startup Dilemma: Systematic Marketing for Growth and Valuation

ComplexDiscovery Staff

In the fast-paced world of startups, deciding whether and when to invest in systematic marketing has become a critical juncture for companies aiming to scale and boost their valuations. A study conducted by distinguished professors Gary Lilien from the Smeal College of Business at University Park, Pa., and Ofer Mintz from the University of Technology Sydney, reveals a surprising trend: nearly half of early-stage business-to-business (B2B) startups, despite having the most to gain from marketing investments, choose not to implement such strategies. The findings, published in the journal Industrial Marketing Management, shed light on this perplexing phenomenon.

The researchers analyzed data from 693 startups that sought financial assessments through the online platform Equidam between July 2016 and April 2018. They discovered that only 55% of these startups reported engaging in systematic marketing, which involves collecting and leveraging customer data to improve offerings, communications, and distribution programs. To validate these findings, the professors conducted an additional survey through Survey Sampling International, encompassing 377 startup firms, which yielded similar results.

Intriguingly, the study found that early-stage B2B startups were less likely to adopt systematic marketing compared to their business-to-consumer (B2C) counterparts, even though B2B startups stood to benefit the most from such strategies. Conversely, B2C startups, which were more inclined to implement marketing initiatives, experienced diminishing returns on their efforts. This dichotomy highlights a crucial insight: the effectiveness of marketing and its impact on firm valuation depend on various factors, including the target customer base (direct consumers or other businesses), the stage of the firm’s development (early or late), the previous startup experience of top management, and the specific industry environment.

One of the most striking findings was the significant proportion of startups – 60% in the Equidam cohort and 61% in the supplementary study – that made suboptimal decisions regarding systematic marketing, potentially hindering their growth and valuation. Professor Gary Lilien shared a pivotal ‘aha’ moment during the research: when asked about a hypothetical increase in funding, most startup managers admitted they would allocate none of it towards marketing efforts. This hesitation stems from the scarcity of resources and the reluctance to divert them from other critical operations.

The study also shed light on the influence of experienced entrepreneurial leadership and investor support on a startup’s likelihood of engaging in systematic marketing. Notably, B2B startups, often emerging as spin-offs from established companies, benefit from smaller, more knowledgeable customer groups that can validate their business credibility through targeted marketing endeavors.

In an increasingly competitive and innovative market, systematic marketing serves as a signal to potential investors, indicating a company’s quality and potential for success. The research by Lilien and Mintz offers startups and investors a strategic roadmap, emphasizing the need for further exploration to encourage early-stage B2B startups to embrace systematic marketing as a key driver of growth.

Beyond academia, expert voices also stress the importance of strategic marketing for startup success. The Nasdaq Entrepreneurial Center, in partnership with GoDaddy Venture Forward and the Wells Fargo Foundation, recently highlighted the rise in women-led entrepreneurship, while acknowledging the ongoing challenges they face in accessing capital. The virtual event hosted by these organizations aimed to foster a deeper understanding of the complexities faced by women business owners as they pursue financial stability and growth.

Collaborative initiatives like these, along with empirical studies from institutions such as Smeal College, contribute to a more comprehensive and informed discussion about the entrepreneurial landscape. By bringing together the expertise of academic researchers, corporate entities, and philanthropic foundations, these efforts help equip startups with the knowledge and tools necessary to navigate the ever-evolving business world.

As the startup ecosystem continues to thrive and evolve, the insights provided by Lilien and Mintz’s research serve as a valuable guide for entrepreneurs and investors alike. By understanding the nuances of systematic marketing and its impact on firm valuation, startups can make informed decisions that propel them towards sustainable growth and success in an increasingly competitive market.

News Sources

• Nearly half of B2B startups choose not to market themselves, researchers find
• Recap of Key Factors Driving Women Entrepreneurial Success
• Small Business Ideas to Start at University

• Assisted by GAI and LLM Technologies

Additional Reading

• The eDiscovery M&A Chronicles: 2024’s Early Moves and a Two-Decade Recap
• An Abridged Look at the Business of eDiscovery: Mergers, Acquisitions, and Investments

Source: ComplexDiscovery OÜ