Two weeks ago saw an unusual tie-up between worlds that rarely meet – sports and venture capital: Mangrove Capital Partners, a European-Israeli VC fund, announced it will be sponsoring the soccer team Hapoel Petah Tikva. In exchange for a payment of 350,000 shekel ($99,000), the fund’s name will appear on players’ shirts.
A lot of eyebrows were raised in the Israeli VC industry. What is an international VC fund doing sponsoring an ailing, second-string sports team whose name isn’t known outside of Israel? “They’re frittering away their investors’ capital. I can think of a lot better things to have done with that money,” groused one investor.
Others, however, see the relationship as a positive step. “The fund spent $100,000 and got press coverage that everyone is talking about,” said Eyal Miller, managing director of Samsung Next in Tel Aviv, a corporate VC fund.
Roy Saar, a Mangrove partner, explained the unusual decision as a way of sending a message about the values it espouses, like democracy and technology for the people – values expressed in portfolio companies like Wix.com (website building) and K Health (online self-diagnosis).
“We spent money to help the community, but it’s not really a donation. We could have sponsored a team in the premier league, but the number of people who will look positively on us in Petah Tikva is higher in absolute terms than if we had sponsored Maccabi Tel Aviv, for example,” he explained.
“Petah Tikva is team that was acquired by its fans and we are a fund connected with the community,” said Saar. “We believe in democracy and making technology accessible for people … Instead of advertising on a billboard, we wanted to touch people. Petah Tikva is trying to attract high-tech companies, so it fits in with that, too.”
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It also represents uncharted territory for VCs who for the first time find that they need to market themselves. Last year alone, 30 Israeli VC funds raised $2.6 billion, a 45% increase over 2017 and three or more times what they were raising five and six years ago.
Now they are competing among themselves to invest all that capital in the most promising startups. To do that, they are building up their brand, linking up with relevant communities and differentiating themselves from their competitors.
“If in the past it was entrepreneurs who came running to the VCs, today the tables have turned and it’s the VCs chasing after the best companies,” said one veteran industry player.
There are many different tools for funds to reach their target communities. They sponsor industry meet-ups for their portfolio companies and the industry sector they want to invest in. They publish blogs with tips for budding entrepreneurs. Some have launched websites that post job openings across all their portfolio companies. It’s not just a way to find new hires, but to show entrepreneurs how much they care about them.
VCs also sponsor industry conferences in exchange for getting stage time for their partners and/or portfolio companies, which in turn gets them press coverage. TheMarker is among those that hold conferences with VC sponsorship.
But there are also less conventional ways for VCs to market themselves. Group 11, a California-based fund led by Israeli Dovi Frances, sponsors a Hebrew-language technology podcast called “30 Minutes or Less.” Lool Ventures produced a rap video starring one of its partners that explains what the fund can do for its portfolio entrepreneurs.
Viola was a pioneer in VC marketing when two years ago it adopted a completely new branding strategy. It has a research team which publishes industry reports that receive media coverage. Its staff routinely wear branded shirts, just like employees of startup companies often do.
The bigger funds have even hired marketing managers, although they sometimes give them titles that mention “value creation” or “business promotion.” Whatever the title, the task is the same: to strengthen and expand the fund’s deal flow by attracting more candidate startups.
“Like any business organization, the funds are always thinking about how to reach their market, whether it’s new entrepreneurs or companies thinking about their next financing round, or funds that are thinking about cooperating with other funds,” said Miller.
“Funds don’t like to talk a lot about it, but it’s clear their brand is a major asset,” said Erez Shachar, a partner in the Qumra Fund. “The best way to create a brand is by successfully investing and backing hot companies. But like everything else with a brand, you need to employ conventional marketing. That’s the case especially now, when there is so much money looking to be invested and the best companies have a range of VCs to choose from.”
Shachar said startups also benefit from being associated with a fund with a strong brand, so they can say, “I got money from Sequoia” – a leading American VC fund.