We all know the world is increasingly networked and connected. And businesses realize the importance of using compelling content to attract clients and opportunities. Yet business development pros working in PE have been slower adopters of social media marketing. Despite what traditional deal professionals may believe, social media enables private equity firms to more efficiently generate a steady flow of investment opportunities.
Here’s why I think social media is a valuable asset to your investment firm:
Strengthen your deal flow
Researchers have studied how social media can be a valuable tool for deal professionals. In a 2010 study conducted by Harvard Business Review, researchers concluded that social media boosted deal flow because it made investors more aware of others and the types of deals they were seeking. Sharing deals and investment opportunities encouraged others to do the same. Investors pooled their opportunities which allowed them to access deals that they otherwise would not have been aware of.
Personally, I’ve followed this “give-to-get” mentality and it has helped me become a prolific business developer with a robust referral network. Our platform expects our deal sourcing machine to uncover 50 to 80 opportunities a month. My need for reliable and recurring deal flow has never been more important especially given the competitive nature of today’s market.
Improve your new business outreach
Another advantage of social media is that it can be a passive form of outreach. Email blasts can be intrusive and spam filters do a better job than ever keeping salespeople out of your inbox. However, once you establish your expertise and develop an online presence, the content you develop and curate while help interested parties seek you out, rather than the other way around.
If this sounds too good to be true, it isn’t. Take Chicago-based Parker Gale, a PE firm that produces a great podcast with a cult-like following. Their PE Funcast (click here for podcast) sees regular updates, sometimes as often as five times a week. Topics seem to always remain relevant, touching on a range of questions from the value of getting an MBA to evaluating and developing portfolio companies. To date, PE Funcast has more followers than Parker Gale’s own Twitter account. This is proof that content marketing remains key and should be part of any social media strategy.
Another social media-savvy firm is Incline Equity, whose Twitter, LinkedIn, and YouTube accounts are all very well followed (they even have an Instagram account!). They produce an annual Christmas video and other comical content that help them standout (YouTube videos). Their LinkedIn and Twitter profiles contain an assortment of best practices: consistent, engaging content, as well as a light personal touch, helping build community through sharing a diverse mix of friendly moments, social events, and inspirational sayings and tips. Bottom line: Incline does a great job of casting itself as a very human, transparent firm–and one that’s easy to do business with.
Done right, social media will boost your brand name and image, creating plenty of opportunities to follow-up on. Unfortunately, while various firms execute social media well, for the most part, it’s rare to find lower middle market investment firms with strong all-round social media game that encompasses all the major channels (LinkedIn, Facebook, YouTube, to name a few).
Social media as a funnel
As David Teten of ff Venture Capital points out, private equity is an industry that is largely built on relationships. Towards that end, social media is one way to streamline (and even supercharge) the relationship building process. With channels like LinkedIn and Twitter, it’s far easier than ever to build connections with mutual acquaintances, stay in touch with members of your social networks, and stay informed on the latest deal closings.
One PE firm with a strong social media presence is MCM Capital–and their methods are surprisingly straightforward. They simply optimize their blog and website with specific, helpful keywords; through this, they rank within the top 100 websites for such search terms. But more importantly, MCM also sees healthy payoffs from their social media results: referral traffic from emails, the blog, LinkedIn, and Facebook grew by 119 percent. Overall, some 16 percent of total visitors were funneled to the website from either the blog or social media channels.
These are some impressive statistics. Bear in mind that even if the majority of such visitors don’t end up closing a deal with MCM, the company has widened their funnel, boosted their deal flow significantly, and raised investor interest.
Consider closed networks
For those deal professionals who are still wary of using open, traditional social media channels like Twitter or LinkedIn, note that it is possible utilize closed networks to generate deal flow. As the name suggests, the key difference is membership: instead of being open to everyone, these networks are carefully vetted and generally only include a select number of individuals and organizations.
Take First Round Capital, for instance. Its closed network is limited to executives and investors from approximately 200 companies, who meet to exchange insights, deals, and strategy. That way, these organizations (all of which are in the same portfolio) can create a strong community, share best practices, and ultimately, succeed together.
Such closed networks can also pool resources more effectively and share best practices around sales, finance, and human resources. In one instance, a firm backed by First Round Capital suffered a serious website crash. One First Round partner called experts for help, but also suggested that the firm email other CEOs in the closed network for help. Within hours, the problem was solved, thanks to a concerted group effort.
Clearly, social media not only improves efficiency within its member companies, but also strengthens relationships between such organizations. Members can swap advice and experience, act as brokers or middlemen, and make it easier for information (and deals) to move through the market.
Moreover, because your firm is functioning within a closed network, there is a level of exclusivity and trust that other, more open forms of social media won’t have. Within a private group, there is no need to worry about common social media concerns, such as trolls, spies, or the harassment and shady activity such actors bring.
In the end, it’s clear that social media offers many opportunities to increase deal flow.
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