Marketers Unleashed

The Investor’s Lens: How Marketing Fuels Valuation, Growth & Exit Strategy

• Kathryn • Season 1 • Episode 12

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In this episode of Marketers Unleashed, host Kathryn Strachan is joined by Streisan Bevan to explore the critical role marketing plays in private equity investments. Streisan shares her journey from advertising and strategy at Facebook to becoming an independent operating partner in private equity. The discussion covers the typical profile of businesses backed by private equity, the importance of professionalizing marketing to enhance brand awareness, and the metrics investors scrutinize. Streisan emphasizes the pivotal role of leadership profiles in attracting investments, the strategic balance in budget allocation, and the nuances of internationalization. Whether you are preparing for your next funding round or aiming for rapid growth, this episode offers invaluable insights and actionable strategies.

Social Media Links:

Kathryn Strachan - linkedin.com/in/kathryn-strachan

Streisan Bevan - linkedin.com/in/streisanbevan

Welcome to Marketers Unleashed, the podcast where marketers break free from the noise and dive deep into the raw truths of the marketing world. We're here to go beyond best practices and uncover the bold ideas, untold stories, and hard lessons that shape real marketing success. From dissecting, daring campaigns to confronting the challenges, keeping us awake at night. We're unleashing honest, unfiltered conversations to inspire, educate, and challenge you to think differently. Get ready to conquer the untamed side of marketing. I'm your host, Kathryn Strachan, and this is Marketers Unleashed. Where we're not just talking marketing, we're redefining it. For anyone who doesn't know me yet. I'm Kathryn Strachan, author of Scaling Success Building Brands that Break Barriers, international Keynote speaker and fractional CMO for cutting edge brands. I have spent years navigating the ever-changing world of marketing and have seen it all. As your podcast host, I bring my expertise and curiosity to the table diving deep into honest conversations with industry leaders to uncover the insights, challenges and bold ideas shaping our industry. Let's get started. Hello, and welcome to Marketers Unleashed. Today I'm here with Streisan Bevan and she's going to be talking to me about the role that marketing plays in investments and funding. I know it's something that a lot of us are thinking about when we're supporting our clients and our tech companies, so I'm really excited to be exploring this world today. Thank you, Kathryn, for having me here today. Very excited to unleash all my insights to your followers. I have worked in private equity for the last six years specifically as an operating partner. You find me today as a independent operating partner. What that actually means is I advise businesses that are backed by private equities specifically. So these are typically scale ups they have outside investment. and my role is about advising those businesses to grow faster and more effectively so that the investors can hit the investment thesis that they've developed. How did I get into this? I had a career in advertising and commercial strategy focused on the advertising industry media in particular. So I spent 10 years at Facebook from 2009 until 2018. And in that time I got to see, Facebook grow from 20 people based in the London office to 5, 000 And then before that I was at a startup called Bebo, which probably many of your listeners, they may not have ever heard about it, but it was actually bigger than Facebook back in 2008. We sold to AOL within an 18 month period. So that was fun, exponential growth to be a part of as well. So scale ups, can be quite a like broad definition. Can you give me a little bit of a breakdown on like what the profile of the clients that you normally work with looks like? Typically the businesses are anywhere from 20 million turnover to 100 million turnover. They've been around for a while, they have potentially a great product and what we've identified is they need professionalization. So they might be around for a while. They've grown organically quite well. They might be still founder led or founder in a previous round has stepped away, and they've got a professional CEO in. What we identify is in that there's a sweet spot in that business. There's something about the product or about the people or a combination of both, where it seems right for private equity investment. Private equity typically will invest in a whole range of industries. There is some will specialize in tech enabled services in healthcare in other industries that have been around for a while. But the recent experience I've had is more general. They want to back good management teams with a great product and see an opportunity to grow quickly. Marketing at this stage, with the clients that you normally work with, can you tell me a little bit about what their marketing setup normally looks like when they first get involved with you? So this will vary from company to company, but what private equity will do pre investment is that marketing may not be professionalized at this stage, but they'll see that as an opportunity. A great example, a professional services business. you've got great people, you've got great consultants, delivering a service and delivering great work. But the opportunity is not enough people know about the brand. it's a very competitive market and it's fragmented, so we need to differentiate ourselves from a marketing perspective that looks at brand positioning how you go to market, who your customer is, who your customer is today, who you want it to be in the future. That whole piece of work Typically hasn't been done yet. So they don't typically have great marketing resource in the business. They might've hired some junior people just to keep the wheels on the track, to do LinkedIn posts, to do kind of channel marketing, but actually that deep dive strategy on who we are, what we do, what do we want to be famous for hasn't been done. Private equity would look at that as. an opportunity. Is marketing really important at this stage for them to start professionalizing it? You say that it's an opportunity, but what exactly do you mean by an opportunity? Yeah, good question. So I think it varies depending on the industry and business type. If marketing is really important. In financial services, for example, when it's a sales led type organization where it's around client relationships. And those client relationships build the business. Then you want to spend less on marketing, right? That return on investment is not nearly as high. But if you think about direct to consumer businesses, where branding is everything, and community led businesses, word of mouth recommendation is really important, so building that brand, and how you communicate to your customers today and in the future becomes increasingly important. So an investor will look at all those things and make an assessment because at the end of the day, when you're taking investment, an investor will look at the risk associated with spending money, right? It costs money to invest in marketing, resources capability and systems. And what's the return on investment? How do we predict that in advance of doing an investment and then factor that into our investment thesis? When they're doing that equation, are there certain elements of the marketing that they're really looking at, or certain channels of the marketing? How do they determine, this company is, a low risk, from a marketing perspective, so an investment director will factor brand awareness, for example, into a broader evaluation of the business. At the end of the day, it's about EBITDA. the financial metrics but they need to factor in, the brand awareness and that can actually significantly influence evaluation. So the market positioning, the competitive advantage and then getting into the, KPIs of marketing. So cost per acquisition, lifetime value of a customer. These are all metrics that they want to be able to measure and they want to be able to predict. Is our cost per acquisition, our CPA, going to stay stable, or is Facebook going to get really expensive because we're spending so much money on Facebook, on Instagram to acquire customers? Which is a cost that we need to factor in now. When they're looking at brand awareness, because a lot of brand awareness is top of funnel, as well as, bottom of funnel metrics. Because, I mean, sometimes with top of funnel activities, you can't always measure whether or not that led to that sale, for example. So it was difficult to factor into a CPA equation. Do they look at metrics across the funnel or is it really the bottom of funnel metrics that they care about? That will depend on the nature of the business. If it is a direct to consumer business, performance marketing is a very important part of the overall plan. Then they'll spend a lot of time into the data. to understand the CPA, the lifetime value of a customer and retention rates. they'll go into engagement rates the number of followers on LinkedIn and how much of that is growing organically versus, paid acquisition and that all gets factored into the overall financial model and investment thesis. Is raising brand awareness and brand profile as important or, should more money be invested in, having a massive sales team? What about the B2B sector? If I look at, for example specialist agencies, a pricing agency or a tech enabled professional services agency that has a group of consultants that work in the business that are really smart and understand industry. And understand their functional expertise really well. They will typically spend way more money on salespeople and spend more time working within a sales led organization. And it's a sales led process that they will follow, but that will only get you so far because as we all know, you need potential customers to keep you top of mind, and so that will be part of the growth plan. We've built the business on having a great product, having great sales, organization, converting that sale very quickly from top of funnel to bottom funnel. But the data says that actually, we don't have great brand awareness. When we ask people who we are and what we do, they just don't know. that would be what we call a value creation lever. So as part of the value creation plan, one of those levers will be around the brand positioning and professionalizing the website professionalizing LinkedIn, actually creating thought leadership. If you've got great people within your organization that have perspective. How do we amplify those perspectives? How do we get them out into the ether talking about, whatever their experts in and that's marketing, right? That's all about storytelling and creating key moments that we want to then use to to increase awareness. So It's really interesting to hear the other side of this, because as a fractional CMO, I'm normally brought in at that stage when they're like, okay, how do we professionalize this? How do we put a proper strategy in place? Normally they've tried a little bit of execution in the past, but often they have to fall on their face two to three times before they're actually ready and understand the value of strategy and are ready to put that in place. If you are getting ready for investment and to raise, what are some of the things that you should be thinking about both as a founder and perhaps as a marketing leader? I think as marketing leaders, we quite often get this brief of okay, we're gonna go for our series B. But you don't quite know how you can support those efforts. So using marketing PR to make the market aware of your business is really important. You need to be seen as an attractive investment, and your founders need to have a profile, it's not mandatory, but just having a profile. And actually I was just reading an article in the Sunday Times Magazine that talked about the founder of Minecraft and how he posted on his Twitter feed, I'm tired of managing this business. Does anybody want to buy it? And Microsoft came along and bought it for 1. 5 billion. It's great ROI on that post Exactly. I was just like, oh my gosh, cause he had a profile. And I would say you have to do that, 18 months out. You need time to build that momentum, right? You need time. to figure out what is your strategy? Who are you? What do you want to be famous for? How do we articulate our product in a way that It's going to resonate with the market and where we in the market cycle, right? What are investment types of business that investors are investing in? You've got to reach out to advisors. You've got to reach out to corporate finance houses and get a read, on what's happening in the market, what's the valuation for specific businesses, and how do you fit into that. I think having a strong profile is essential. It's how I grew my business. I had a content marketing agency that I scaled and then exited and almost all of the growth, almost all of the opportunities came through my profile in some shape or form, obviously there was a lot more to it, that acts as a massive marketing lever. One of the things that I run up against with fractional clients though is like a lot of the founders of these companies are very technical, which means that they're very introverted and it can be quite scary for them to go out and build their profile. So I'm telling them, you need to do this because it's going to de risk you. It helps you look like a safer bet, both for like your prospects, but also for investors. Investors are often investing in the potential of a business and what they want to see is, are you a strong leader? Are you going to be able to take this company from, where you are now, to where they want you to go? Do you have the right mindset, the right approach, the right attitude? And having a profile is probably one of the best ways to do that as an individual, as a leader. So I'm always banging on about it, but it's really nice to hear it from you an expert in investment that it's actually true. But can you tell me a bit more about what a good profile looks like? How is this measured? Is it followers on linkedin? Is it speaking at all the big conferences? What exactly does a good profile from an investment viewpoint look like? So you have to be an expert in your space. The thing with taking outside investment is that people are investing in you. If you're the CEO or founder of a business, they're investing in you and your management team. So you have to be confident in who you are and what you do. And you have to present it in a way that people want to back you. Because it's a calculation of risk is this product fit for purpose, Is it going to survive is this management team fit for purpose? Typically investors are quick to judge. And they put people in boxes very quickly. And it's hard to get out of those boxes once you're in one. In advance of taking investment, there's decisions that you as a founder CEO need to make, Are you going to continue on this journey or do you want out? That will dictate your profile. And also, those are conversations you need to have with your potential investor to say, actually, I've got great people underneath me. So you're backing them and I'm out vice versa. I'm here to stay. I want to go two more times. You've got me. This is who I am today, but the evolution of me, meaning, I realized in order for our business to grow significantly, I need a profile on LinkedIn. I need to provide a thought leadership, perspective. And I haven't done that. There are lots of people out there that could do that for you. And actually you never even have to log into LinkedIn. The founder, CEO, needs to be focused on the day job. They need to be driving this business. They don't need to be worried about their LinkedIn posts, but they do need professionals in the organization who are going to do it for them. No, and in fact, they're probably one of the worst people to do it, because they're so busy fighting fires and fires that are immediate priority that to get them to do something consistently like consistently posting on linkedin, which is what's required for the algorithm. Is almost an impossible task. Bringing in an agency to do the personal branding or having a dedicated resource ensures it keeps going despite all the fires and whatever it is that you're facing is yes, definitely 110 percent the right move. So like we're sold now marketing brand awareness is obviously very important, but how do you decide how much to invest and is there such a thing as too much investment in marketing? It varies, so how much you're going to spend in marketing is based on the business plan. There'll be different points of any business's journey where they feel like they need to turn the marketing tap on to acquire customers. So in the beginning pre investment, they focused on retention, because they identified the insight showed that actually retention led to higher acquisition because people love the service so much that organically were referring it. Middle of the investment, we need to fuel the funnel. So we need to turn the taps on acquiring new customers, that's a different strategy. We need to identify what are the strategic levers for increasing acquisition, not pushing too hard on the acquisition cost because It's a constant battle, You're going to pay more, you need to acquire more, but this, you need systems, you need people in place to be able to figure that out. And so through the investment life cycle. You'll be turning different taps on depending on where you are and how the business is doing. So in exit readiness you'll identify strategically what levers you need to pull that will be of interest. And this is where getting information from corporate advisors and management advisors to understand what's happening in the industry, competitive awareness of what's going on and then go, okay, what are the levers that we need to pull now in advance of going to exit and what are those things that we want to leave for the next owner? Because in an investment life cycle, you're always thinking about we don't want to fix everything because then what is the next owner going to do? It's a lot of strategic thinking and marketing and pricing and all of these things are part of the process. a lot of times when companies are going through bad times, marketing's one of the very first things that they cut, whether it's making redundancies in their team, so I know that Meta has made four massive redundancies in the last two years or it's slashing marketing budgets down to almost nothing. How does this impact a company's ability to then raise and grow? I I remember one of my investment directors telling me once, you know, you can't cost cut to growth. And that stuck with me because you do get into these cycles where, if there's no cash in the business and they've lost their biggest clients, you just start cutting and you think that's, how you're going to survive. And you do go into survival mode, right? In order for the business to survive. But at a certain point, that has to stop because you're not going to grow. And then when you're backed by private equity, the only thing that makes you successful is growth. So you have to look at this strategically. And this is where having confidence in the management team and the leaders in the organization to make the right decisions at the right time is really important. this is where you have to, under promise and over deliver. And you need to figure out what that strategy is and when are you going to turn the marketing taps back on. Yeah. I mean and a lot of times when cuts are made, there's no plan of okay, in four months, we're going to turn it back on at this level, and let's recalibrate for that, it's just, okay, cut, done. And then you're like, how are we going to recover from that? For companies who are maybe listening, who are going through a difficult time at the moment, how should they determine how much to cut without, shooting themselves in the foot? Yeah, I mean I don't think there's a magic number, runfortunately. If only. I think in that situation you have to go back to the basics. You need to look at where you are as a business, what the plan is. It's not uncommon for a private equity firm to rip up the plan. They've created an investment thesis. a financial model that shows hockey stick growth and it doesn't always work. In collaboration with management, if something happens macroeconomically, something happens with a product, they lose their biggest client, they lose their best salesperson, whatever that is, there'll be a point where it's actually we just need to rip up the plan and start again. Which is awful, because investors are only successful when their companies are successful. So it's gonna be a really uncomfortable 12 months. But then you have to go back to the basics and go, where do we need to spend? do we need to fix our systems? Do we have a really shit CRM system? Do we not use, HubSpot in the right way? You've got to look at the business and go, okay, if we're going to prioritize one or two things, this is what we're doing. all they want is confidence in, what you're doing and you're doing the right things. And you have a vision, and you're headed in that direction that everybody's agreed on. So going back to, investing in marketing and becoming ready for the next round of funding, once you have your positioning, where you play in the market and what your right to win is, you're then starting to look at building the founder's profile or the CEOs or, if they don't want to stay on board, you're looking at building the senior leadership teams, what other marketing activations might you be thinking about? If you're really aware, VC or private equity is where you want to be is the investment vehicle that you're interested in. You've got to be where they are. So you've got to be going to the conferences where you believe they are. if you're a tech enabled, services business, there's a lot of conferences that investment directors are at because it is, private equity venture capital. This is a relationship. business. They're courting potential acquisitions way in advance of actually starting to engage in conversation. A lot of these firms want to invest off market. So if they've identified an industry and then specific assets within that industry that are really interesting. They'll start reaching out directly lots of the businesses I've worked on over the years are getting interest because typically if you're backed by VC or PE you're in a cycle and you're always for sale. You will get asks regularly, Are you for sale? Some will say not now, let's stay engaged. Let's have a coffee every six months. I'll let you know how the business is doing. Sometimes they send out teasers. One or two pages which outline how the business is doing. Where they've come from, where they're going the acquisitions that they've made, and what they're thinking about in the future. So it sounds like a really smart idea that when you're building your marketing strategy and you're looking at ICPs, one of the ICPs you should be building is also of your investors. Typically from day one of investment, they'll have a list. part of the investment thesis is who are we going to sell this business to? Another private equity firm, trade. So is this a potential strategic acquisition? That list will be discussed at the investment committee in advance of making an investment. This is a long running list of potentials and every time the investment committee comes together to discuss this portfolio business, they will review the list. And so it's up to the founder, CEO, management team to continue to engage in the industry. When they come together to discuss the investment thesis, are they also reviewing the marketing strategy at that time? Is there regular marketing reports that go into it? What role does marketing play in these meetings and in these strategies? So if the investment director has identified that marketing is a lever. As part of value creation, which, there's lots of levers. So sales and marketing is one of the professionalizing the sales and marketing, for example, it could be one another is by build. Actually, sales and marketing is great. We've got a great product, great teams, and now we just want to do more, so let's go buy more businesses internationalization is a big one right now. We're only working in the UK. let's internationalize into the US. How do we do that? all those things will be discussed. It'll be part of a bigger investment thesis that is written up, and then each one of those things will be discussed at the investment committee. As I've talked about previously, it's about weighing up the risk, how much is this going to cost us, and what's the return going to be? is the capability in the business already or do we need to go and hire a whole bunch of people and change systems, but that will all be factored into the forecast, into the financial model that they build. If they think actually the systems part, technology isn't great, but if we professionalize the technology we'll be able to do all these other things more effectively. Okay, how much is that going to cost us? Million pounds. Okay, stick that in to the forecast into the financial model and all those things will get weighed, but it will get airtime. It will be discussed, not in detail because the other piece here is they will ask the operating partners like myself or, my colleagues, what's your read on this? Expanding into a new market is always a better idea than it is in reality. It's so much harder than people expect, especially expanding into the U. S. What should companies think about before they just expand internationally? It looks great on paper, but whether or not it's the right fit for a business and whether or not it's the right fit at that stage of their growth can often be a different situation. I always say, hard work leads to lucky breaks. You have to put in the hard yards. You have to have done the research, done the work to identify, is this opportunity what you think it is and then create a budget can you actually sell 100,000 pounds worth of product in the US in the next year? How do we figure out that's actually possible. That's the job of a CEO and a CFO. And so the hard yards have to go in to identify is this something that we can actually do? you know, As you say, the product market fit is everything. Is this what Americans want? Is there a gap in the market that we can fill? Do we have the right relationships? And weighing all those options is part of the job. Yeah, and having, a dedicated marketing strategy for that market, because what works in one market isn't necessarily going to work in another. just because the U. S. speaks English does not mean that they are the same as U. K. In fact, there's a really great saying that the U. S. and the U. K. are two countries separated by a common language. Having spent 22 years of my life in the U. S. and 12 in the U. K., I can tell you that is true, I wrote a whole chapter in my book on internationalization and, creating an international marketing strategy because I've seen so many companies in my career want to expand into a new market, but not have the right framework in place, not have the right strategy, not have an awareness or understanding of that market, and just think, oh, this seems like a really good idea. But then when they go to expand discover how much harder it is than they expected it to be, how much more time, money, resource it requires to really break into it. So I don't think it's something that should be taken light hearted or, should be rushed into, but yeah, you do really need a solid plan and foundation in place for it. Don't do it without having a very clear strategy there's a bit of luck obviously, but as I said, hard work brings lucky breaks. So, before we wrap up, I want to ask about any final advice you might have for our listeners who are getting ready for their next round of investment. So I think my final piece of advice the earlier the better, as we talked about, you said from day one, some of this stuff takes a really long time to get right. And a lot of it depends on where we are in the market. And if your business is still seen as attractive, it's really tough not to take a personality. This is a long game to get investment and then it's a very short game when you're in it. you need to take the time to prepare and you need external advice. Because you're in your business and you're running it every day and you think everything is amazing and look at us and we've got great people and investors will rip open those doors and tear your business apart. And it can feel really personal and can feel like, shit, this really hurts. It's not personal. It's business. They've got their own business to run, their investors to satisfy. And if it doesn't fit into the investment model of what they've chosen to invest in, then you can't take it personally. But going back to what I said initially, the more you can professionalize and specific areas that are going to be of interest, the better off you'll be. I think that's great final advice. I just want to thank you for being on the show today. I've learned so much. I find it really fascinating. Thank you for being here and sharing all your great insights and wisdom. No problem. That's super fun. That's the wrap for this episode of Marketers Unleashed. Thank you for tuning in and diving deep with us into the unleashed world of marketing. We hope you're leaving with fresh insights, new ideas, and maybe even a few aha moments to fuel your next big move. If you've enjoyed today's conversation, don't forget to hit that subscribe button so you never miss a new episode. And hey, we'd love to hear from you. Drop us a review or connect with us on LinkedIn to share your thoughts and join in the conversation. Until next time, keep thinking bold, challenging the norms and unleashing your inner marketer. After all, what's the worst that'll happen? I'm your host, Kathryn Strachan, over and out.