IVCA Article: Highlights of the IVCA Toolkit Event, ‘Brand Building for VC & PE Professionals Including How Registered Investment Advisors Can Participate’

IVCA Article: Highlights of the IVCA Toolkit Event, ‘Brand Building for VC & PE Professionals Including How Registered Investment Advisors Can Participate’

April 2, 2014

How does a Venture Capital or Private Equity firm use the Social Media to their best advantage? This was the question going into the latest IVCA Toolkit Event on March 20th, 2014. The cutting edge topic, ‘Brand Building for VC & PE Professionals Including How Registered Investment Advisors Can Participate’ brought in the experts on using the Social Media both for individual and firm marketing. The event was sponsored by the legal firm of DLA Piper LLP (US), and moderated by Jeff Zilka, Executive Vice President and General Manager of Financial Communications of Edelman Chicago.

Included on the panel with Mr. Zilka, as moderator and participant, was:

•    Wesley Nissen of DLA Piper LLP (US)
•    Jason Heltzer of OCA Ventures
•    Eric Olson of Origin Ventures

Introductory Remarks

Jeff Zilka: We are passionate believers in the benefits of Social Media for both VC & PE professionals and their firms. What the internet does is allow each firm to be their own media company. It’s incumbent on you and your firm to put your point of view out there, and to do it in ways that are compelling and interesting. If it’s good, people will find you.

Another principle we’ll talk about is the type of information you can share that is well within your regulatory guideline. Don’t let the things that you’re not permitted to do discourage you from starting. You can absolutely talk about your firm, you can absolutely talk about why you invest at the various stage you invest in, why you focus on the verticals, and you can start to comment on trends in the industry in which you yourself have expertise.

The internet is a call center. There is so much data out there that people are searching for, that it’s best to use analytics, use evidence and use data to figure where the executives for your fund congregate, what is on their minds? Who are the leading bloggers? Maybe you can comment on their blogs. In other words, find where people are and be where they are, and say things that are of interest to them, and suddenly you become an expert. Because every entrepreneur is interested in someone with access to capital.

There are some vital platforms that really work for our clients...

First is your website, because you can control and approve the content. Websites can also be optimized for white papers, your point of view on types of investing or new B2B software, for example. It’s a hub, and it should be a content hub. Videos and visuals have high click-through rates, so start with your website.

The second platform we find that works is LinkedIn. The page should be optimized, and once that is done look for groups of people that you want to reach. Virtually any area of investment focus you have, there are people who are there and you can publish to that group.

The final platform is Twitter. It’s a great way to amplify the content you’ve already created. So If you’ve done your website, and your LinkedIn page speaks to the expertise that you and your firm has, then you can start to use Twitter to promote that material.

Jason Heltzer: First, there is no substitute for great returns and being a great investor, helping the companies however you can, and having a great reputation. What we’re talking about today is ancillary, to amplify what you’ve done with humility – which is a key way to do it. This isn’t a substitute for being a good investor.

There are a lot of ways of using Social Media as an investor that has nothing to do with having to create your own content. There are a lot a ways to get competitive intelligence – I figured out that other venture firms are looking at the same deal I am – and by using Social Media it’s a way to get deals, it’s a way to due diligence and it’s a way to monitor portfolio companies as to who is doing well or poorly. All that can be done as a participant in social media without having to create content.

As a firm, our first steps in Social Media have been by the individuals in the firm, as opposed to the firm itself. Firms have different personalities within it, and that can be a strength. Individuals can have more time to write or like to do it, and that’s how we’ve approached it. OCA Ventures does use Social Media, but’s it’s used to disseminate news and updates about portfolio companies. The blogs tend to come from the individuals and less from the firm.

The goal of Social Media and brand building is to establish myself or my firm as an expert in a particular area. That’s what brings deal flow, and you can get a lot more scale on Social Media today. And recruiting – both for the portfolio companies and the fund – you really can build a network of people. If you build an audience by recruiting on the various Social Media outlets, and you disseminate that information, you’ll be amazed at the people that will come out of the woodwork.

Also a good use for Social Media is business development. Twitter, for example, is a good amplification for business development. But watch out for self-aggrandizement, pumping yourself up so much that it can be annoying. Everything should be centered on humility, and there are a lot of ways to talk about yourself without seeming like a jerk. If you are honest, candid and transparent – showing mistakes as well as wins – are the ones who do it pretty well.

And finally, it really helps to have younger colleagues, as they’ve grown up with these networks, and know the reach and the tools.

Eric Olson: Throughout this conversation, we should talk about effectively the framework you want to use when considering Social Media. It’s going to be about ‘what is the message’ in a lot of cases. For investment firms, it’s about driving the notion that you are an expert. And then, ‘what is the medium’ to deliver that expertise.

One thing to be vigilant about is getting over the fear of missing out. It’s hard to do everything well. It’s hard for one single person in a firm to have a really good blog that’s published regularly and be really active on Twitter and active on LinkedIn with a lot of groups. It’s best to think about the message you have, and the medium that will be most effective. What’s the best method for you as a communicator, with the time you have available. Those are the questions to get serious about answering.

I began as an active long form blogger. As I began to move forward in my career, I got interested in Twitter. What I like about Twitter is that it allows me to quickly put out a point of view about something. Plus you can use Twitter as an intelligence tool, even without putting anything out there. I also use it to put out articles from other sources, and add a quick point of view on them.

So think about the time you have available, the message you want to get out and which social media can you use effectively. Those are the important questions to answer so you don’t spread yourself too thin.

Heltzer: The one thing I’ll add is that the tools available to you are getting better and better, and allows you to time shift a lot of the effort. There are a lot of great tools that allow you to produce content when you have time, and schedule out when things get published, promoted over Twitter or placed on LinkedIn.

‘Buffer’ is an example of a tool that allows you to schedule out your media all in one place. I can write my headline for a blog post for Twitter late at night and schedule it when there are a peak number of Twitter followers on line. You can do all that and schedule it up. Even when I go on vacation, I can schedule a Tweet to appear 20 times over that time about content I’ve written, even though I’m not there when it appears. Even blog posts can be scheduled like that as well.

Wesley Nissen: As the lawyer on the panel, I like to remind everybody that there is an old adage – ‘innovation outpaces regulation.’ There is no better example of that than Social Media. People are amazed to learn that the main law that governs Social Media, at least among Venture Capital, Private Equity and all types of asset managers, is the Investment Advisers Act of 1940 – a law that was written in 1940 governs our technology access in 2014. It doesn’t fit, but that’s the way it is right now.

You have to understand as you’re using Social Media the law hasn’t caught up to the use of it, so we apply old laws to new technology. The Investment Advisers Act applies to all asset managers who are dealing with securities, whether you are registered or not. Even Venture Capital advisors exist pursuant to an exemption that was created by the Dodd-Frank Act of 2010, which means Venture Capital advisers are what is known as ‘exempt advisers.’ They are exempt from most obligations under the Investment Advisers Act, but not the anti-fraud rules. From the standpoint of the Securities and Exchange Commission, whether you are a registered adviser or not, certain laws under the Investment Advisers Act apply to your activities.

The second thing you have to understand is that when you apply old law to new technology it creates weird anomalies. For example, Social Media is viewed as written advertising. It’s so pervasive in today’s society that when people send an email or post a blog or engage in a chat room, isn’t that the same as a phone conversation? If I Tweet something, isn’t that the same as a phone conversation? The answer is that the SEC views all of those as written communications which create problems. For example:  how do you deal with book and record-keeping requirements under the Investment Advisers Act for something that is as instant as a Tweet. There are no clear answers to that right now. You can understand why the SEC is concerned about Social Media right now.

As a lawyer, I don’t like to say “no” to everything. As was mentioned, there is a place for Social Media amongst Private Equity managers and Venture Capitalists, as long as you do it properly and know where the regulations apply, when it needs to be recorded, and what risks you’re taking in its use.

In January of 2012, the SEC came out with a communication called ‘Risk Alert: Investment Adviser Use of Social Media.’ In that alert, the SEC advises that Private Equity and Venture Capital firms need to have a compliance program, and they need to be proactive about it. There has to be a way to deal with it in advance of its use. All compliance program should also be evaluated periodically, to measure its effectiveness.

For example, there is a differentiation between speaking for yourself on Social Media, or speaking on behalf of the firm. If you identify yourself as part of the firm, and you like a particular company, that can be perceived as an endorsement testimonial. The other thing you have to understand about this regulation is that it tends to protect the lowest common denominator, which is typically retail investors. The SEC is concerned that certain types of advertisements might be perceived as misleading. For example, if I post a recommendation on my Facebook account, and I get 59 ‘likes,’ are those likes a testimonial? The SEC said, under certain circumstances, that the answer is yes. So again, it’s about trying to fit new technology under old laws, and you have to be careful about how you differentiate that.

The SEC recommends you create usage guidelines at your own firms for the usage of Social Media, that provides content standards. What are you and your employees allowed to say? There needs to be an approval mechanism – a person can be designated as in charge in the use of advertising and Social Media. Also monitoring and training employees on the use of Social Media is important. And probably the most difficult, is the creation of a policy for record keeping. It can be as simple as a screenshot of every posting – in the end it’s about compliance with the Investment Advisers Act.

Audience Q&A

QUESTION: What is the best way to separate your communication from that of the firm – do you document it in some way?

Nissen: It’s really about what you do. If you are employed as a registered investment adviser, you would be required to have a full set of compliance manuals, policies and procedures, and a written supervisory procedures. You would also already have a chief compliance officer that probably would have developed certain requirements involving any advertising, let alone Social Media. If the firm is registered, and has advanced to the point in which they allow their employees to use Social Media, there would be guidelines already in place.

If it’s not about being a registered investment adviser, there is no easy answer to the question. What I would tell you is that if you’re online on Facebook or Twitter talking about business related information, about a portfolio company or prospective portfolio company, then you have to make it clear that you are acting on behalf of the firm, and the information is being supervised by a compliance officer.

There are times when your firm may prohibit you from talking about investments or investors unless you are representing the firm, and they are approving it. They don’t want a situation in which you’re making comments that are not attributed from them.

Zilka: If it’s your own personal Twitter handle, and you identify your position in Private Equity or Venture Capital, you can disclaim that the opinions are your own. I’m not sure if that’s a force in law, but it does imply that it is your point of view. In the platform you can make it plain that the account is your own, as opposed to a corporate position.

There are things that you can talk about, and there are other things I wouldn’t talk about unless the regulations become more clear. In the verboten area, anything relating to fundraising or return on investment are absolutely best avoided. The areas in which you can talk more freely, is about positioning your expertise in a vertical subject, are trends in that vertical – things you see happening and a perspective on it. If you’re making comments that are akin to what a professor would make, it would be safer. As in, ‘this sector will do well,’ as opposed to talking about specific opportunities. Generalities and trends are safer.

QUESTION: Has the SEC taken any action against anybody regarding Social Media, given the large amount of investment activity that goes on day to day?

Nissen: They have. There is another old adage, ‘bad facts make bad law.’ There was just an SEC enforcement action that came out earlier this month. It was entitled, ‘SEC Halts International Pyramid Scheme Being Promoted Through Facebook and Twitter.’ And this was a situation that was a fraud – somebody was trying to induce retail investors into a non-existent investment scheme through Facebook and Twitter.

The question is, can’t we differentiate the use of Social Media when seeking investment opportunities versus using Social Media to seek out investors? Yes, that is meaningful. Has the SEC drawn that distinction yet? No. Like anything else, it becomes a facts and circumstances test.

QUESTION: Generating content is important, but how do you go about building an audience network for that content?

Olson: What makes a content situation work and what makes an audience grow quickly is maintaining a high degree of quality in content – if it’s helpful then good people will pass it around. Also frequency is important, both in consistent output and Twitter feeds. It’s a regular source for people and they can trust what you do. On the non-online side it’s about being a good investor and developing a good reputation, and of course networking at events like this to build an audience one on one.

Heltzer: There are several distribution networks now - including LinkedIn and Twitter. I can track who is following me, who sends me a LinkedIn request and I can view that as a conversion to my audience. You can instrument these tracking mechanisms, and then understand what is working. Looking at something empirically can help, and then experiment to see what works best.

Olson: You have to be a media company on your own. One example of that, and he has great tips, is Tom Tunguz of Redpoint Ventures [Twitter @ttunguz] who has almost 14,000 followers and has a number of blog posts on these issues that are really instructive.

Heltzer: Remember interest level. Develop a niche that will generate audience interest. You have to think about what that niche is and where to find those people.

QUESTION: What process do you recommend for people just starting out?

Heltzer: Begin by finding good bloggers, and start commenting. Follow people who have good Twitter Feeds. Also install Tweetdeck. This can break down your Twitter feed to columns and categories of priority. For example, I have portfolio companies in one feed, hashtag topics in another and eight columns total. That can give you a sense of what is interesting to you, what you’re clicking on. It’s a great way to get started.

Olson: Determine what medium or format is best for what you want to say. If long form is what you’re most comfortable with, start with a blog. If that doesn’t work or appeal to you, go to Twitter and plug into an audience. That will begin to allow you to understand what your differentiator is, and find it.

Heltzer: ‘Quora’ is a site that allows persons to ask and answer random questions, so as you build yourself there as an expert, it’s a great way to build audience. You would have a bio there, and those bios can link back to blogs, Twitter handles and LinkedIn pages. That’s a good way to indirectly build conversions.

Zilka: Often I’ll go to event related sites, such as a conference coming up, because people who are attending are a target audience. So you find target rich environments and participate in them.

QUESTION: Since Private Equity firm investors are registered, is the approach to be more conservative when posting?

Zilka: Private Equity firms can absolutely communicate. Your firm probably has certain verticals in which investments are concentrated. So right off the bat, your deal professionals are trying to originate deal flow. In those verticals, who are the bloggers and who Tweets on those specifics? So after getting a sense of who is out there, who is talking, and what they are talking about you can discern the content that the people you care about are following.  Then form a coalition of the willing within your firm, so you enlist who wants to do it andwork with your compliance people to come up with a calendar of postings.

A good start is the firm’s own blog, because you control the frequency. You can Tweet once or twice a week, and the issues that can be on Twitter are points-of-view, firm events and communications on exits. Without too much difficulty, there is a fair amount that you can do, while staying clear of the verboten areas of fundraising.

Nissen: There is no numeric limitation as to how many times you can post on Twitter. Good rule of thumb – if you can do it in the old media, like the Wall Street Journal, you can do it in the new media. Again, you do have to be careful about content.

Heltzer: I teach Social Media for both Venture Capital and Private Equity. Regarding Twitter handles, for Venture Capital, I had a list of over a hundred. For Private Equity, I had five. It comes down to audience. Private Equity audience are more mature companies, and tend not to form opinions on what they’re reading on Social Media, and that is not where their audience is. That will change over time.

QUESTION: How are Twitter hashtags used for creating an audience, and how are hashtags defined?

Heltzer: A hashtag is basically an automatic search term for Twitter users. If for example, you were Tweeting this event, it would be a way for someone to follow commentary here under a subject heading, like #ivcasocialmedia. It opens up to an audience that may be looking for that hashtag. If you say something interesting under a hashtag, and people notice it, it’s another way to build an audience of followers.

Olson: If you don’t have one that is pre-set – and you want to establish a hashtag –  it’s about the potential audience, as in what would they search for in a specific term.

Heltzer: The more density of Tweets in a hashtag, the more likely the message gets out to more people. It’s organic, and there are no rules on how long your hashtag can be. You can also search for a relevant hashtag, and use that if it fits.

QUESTION: What are the tools or products that can allow us to coordinate communication among professionals in a smaller organization, not only for compliance but for marketing?

Heltzer: Tweetdeck might be a good start. If anyone mentions your firm on Twitter that can be a separate category, or you can monitor employee Tweets about the firm.

Zilka: You might want to look into a service called Comply [CMP.LY]. It is used primarily in Private Equity, and that helps in the record keeping portion of it. Also training an individual in the firm to act as monitor, the human factor is important.

QUESTION: Diane Swonk is an example of an Economist [at Mesirow Financial] who has successfully branded herself. Wes, can you comment on how she complied?

Nissen: What she does is promote herself as an expert rather than promoting any element of investment opportunities or fundraising. She never has commented on how Mesirow might attract clients, for example, even as she promotes herself as part of the organization. Her expertise could attract clients, but she primarily talks about herself as her own brand. This is the best strategy – promote yourself as the brand rather than investments or fundraising.

QUESTION: What about the issue of crowd funding?

Nissen: That is about raising money from less savvy investors, true crowd funding. If you are in a situation in which you are raising your own funds or funds for a portfolio company, the crowd funding issue may arise in the future. The types that are allowed to exist so far are the Kickstarter and Indiegogo donation-type models, nobody has an equity interest in that. The greater concern in crowd funding is, for example, somebody gives a hundred dollars for a piece of a venture. The rules haven’t been written for that type of crowd funding, but it’s coming.

QUESTION: You talked about humility, how do you establish a balance between public forums and writing or Tweeting about yourself?

Heltzer: In general, I think people are interested in stories. It depends on the audience. These stories can have me as a protagonist, but the nuance is about the information and how it leads back to you. On the negative side, there are some people who will put Tweets out there that talk about a “big announcement” and never follow through.

Olson: And whatever platform you are on, it’s got to be genuine. People can detect something that is forced.

QUESTION: What are some other tools you use to analyze your audience reach or to find that audience?

Heltzer: I use Tweetdeck, Buffer for scheduling and analytics, Google Analytics, Google Webmaster Tools for basic SEO monitoring and an effective site called ‘If This Than That’ [ifttt.com] – if something happens on the internet, then you can do something else. For example, if somebody follows me on Twitter, I’m alerted via text. WordPress is also the best way to a website, because it’s the easiest way to add plug-in functions and make the site look good. All these things are interconnected, and I use them on a regular basis.

QUESTION: What are the vital risk management practices that protect a firm the best?

Nissen: Make sure you have a Social Media policy. The SEC’s real concern about this is that it has transformed what used to be a two party communication – investment adviser to investors – have evolved to a multimedia, multi-party communication. The SEC is still struggling on how to deal with that, so the best answer is not to shy away from Social Media, but be proactive on having policy and procedures on how you deal with it.

QUESTION: What is the future for how firms have a Social Media presence?

Olson: I keep going back to the idea that for now it will remain individual, because individuals represent themselves better – it will still apply to the firm as they comment, but it will be better suited toward the individual. As a firm, we maintain the press release as a communication device.

Heltzer: For us, it will be maintained as individuals. It’s about having different expertise, which is critical to attracting deal flow. That is still best done through an individual, who is free to communicate different subjects, and build the respect that again attracts deal flow. The corporate blog and Social Media presence is restricted by the brand, but as a firm we do have the ability to do more.

To follow the panel on Twitter: Jeff Zilka (@jeffzilka), Eric Olson (@ericolson) and Jason Heltzer (@jhelzer).