When startups and agencies don't mix

Chin Su Yuen was not speaking in code — she should know; coding is her forte. But the PR agencies she approached had a hard time understanding her Singaporean startup, MomoCentral.

Quite a number of them did not grasp that MomoCentral was a tech freelancer marketplace, or even how online marketplaces worked. One agency was adamant it wanted to angle a media pitch around how the company secured funding, until Chin pointed out that MomoCentral was entirely bootstrapped. The others struggled to find compelling stories to dangle at news editors, despite Chin herself already being featured on several news sites — one of which dubbed her “Singapore’s poster girl for startup success”.

“All those meetings, getting quotes, figuring out a story that sells, it was really taking up too much time. With that amount of time, I could have built a few more websites and mobile apps,” says Chin, adding that the agencies she had talked to were well-established ones in the region.

Being in the business of making things work, startups have little patience for back-and-forth exchanges with agencies. It is even harder to glue founders to their seats for long-winded meetings when their ventures have gained traction.

MomoCentral, for example, has over 230 companies from Asia, US and Australia signing up as clients and 350 tech freelancers on board, despite being only about a year old. Clients return 95 percent of the time.

Dil Mil, a South Asian matchmaking app, also enjoyed success without drafting in outside help for its marketing (see case study below).

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Case study: Dil Mil Taking control: App aims to connect ‘suitable’ partners. Dil Mil is a South Asian solution for a South Asian quandary — arranged marriages. Many singles are unhappy being transacted between families, but still want to respect cultural norms. Dil Mil, therefore, aims to help South Asian expats to find companions, nearby or overseas, of whom their parents will approve too. It verifies profiles with external data sources and allows users to search based on detailed preferences, such as religion, education and occupation. Founded in 2014, the startup is reportedly behind millions of matches and an average of three marriages a week. It also raised about US$4 million in pre-Series A funding. Mudit Dawar, vice-president of Dil Mil, tells Campaign in an email interview that over half of Dil Mil’s growth has been organic. After relying on word-of-mouth for user acquisition, the startup has doubled-down by producing video content for its social media platform four months ago because “it’s a lot more shareable”. For example, its satirical ad on arranged marriages recorded 1.4 million views. Success story videos are also pushed out regularly — one featuring divorcees getting a second chance in love hit 1.9 million views. All marketing efforts, including content production, are done in-house, Dawar says. He foresees this will continue even as the startup penetrates new markets.  “We choose not to work with agencies because being on both sides of the product — developing it as well as being users — we’re best situated to understand the product’s market fit and its growth. Plus, we have a pretty exhaustive list of innovative growth ideas to implement before we … resort to outside agencies,” he says.

The lack of agency-designed campaigns does not seem to have hindered these companies’ growth — and it is easy to see why many other startups remain sceptical of the need to outsource marketing and communication functions.

Different ball game

The booming startup scene in Asia is a gold mine. Last year, research showed that private investment worth US$26 billion rained down on tech startups in China, where internet firms made up half of the 4.9 million new companies. Southeast Asian ventures received a further US$2.6 billion. Agencies across the continent are salivating at the thought of such a lucrative pie, but many may be yet to get a firm grip on how startups work. Despite the investments rolling into the region, individual startups usually have the bulk of their funds parked in product development.

With this in mind, some agencies have tried to gain a foothold in the market by reducing their prices, according to Nathan Millard, CEO of the marketing and communications agency G3 Partners in Seoul. Unfortunately, he points out, the level of attention agencies give startups often dips in line with the price.

This doesn’t tend to lead to a happy partnership, given that startups tend to need a degree more hand-holding than well-established companies in terms of marketing.

Millard says few of his company’s startup clients have a marketing playbook. Most of the founders are tech whizzes who “expect their technology to simply sell itself”. Some startups do have a marketer within the team, but that person often lacks the level of experience needed to manage international campaigns.

“The thing is that agencies are adapting their prices to startups, but they are keeping too many of their bad practices,” says Erik Cornelius, COO of G3 Partners, which has startups as its core client base. In his previous job handling PR and marketing for a large electronics company, Cornelius says he was tasked to score brand appearance in media outlets that the CEO liked, regardless of the media’s actual audience. These are precisely the habits that agencies can pick up from years of servicing clients with hefty budgets, wasting marketing spend, of which startups have little to spare. They need straightforward solutions, not the razzle-dazzle that Fortune 500 companies expect, with monthly brand performance reports, thick pitch decks and meetings heavy with marketing jargon.

Rather, Cornelius says, startup clients much prefer pitches that are “basically a few lines of email with a price at the bottom”.

Breakneck pace

Even paperwork can get in the way of the breakneck speed at which startups operate. Millard says that G3 recently closed a deal with a startup over the phone and immediately began executing the project. The contract and fees were sorted out only after the project completed. However, he insists that this practice is only for “special cases”.

To Millard, taking such risks is part and parcel of the agility required when working with startups and in his experience, they honour agreements and pay on time.

What startups do hesitate to pay for, however, is what marketing agencies are often selling — vague metrics. “Startups are performance-focused,” says Jan Cho, general manager of TBWA Hong Kong, which has mentored startups on branding and marketing in partnership with accelerator programmes. “How much ROI marketing can generate over a period of time is sacred to them. But most traditional agencies are used to tracking brand awareness, readership, brand health, and so on. And usually startups don’t quite understand those metrics.”

All this raises the question — why bother?

With such a yawning divide between their priorities and working methods, one might wonder whether startups even need agencies.

They don’t initially, according to Bernard Chan, CEO and founder of tech startup academy AlphaCamp. “In the early stage, marketing is not what kills you,” he says. “Most startups die from not building a good product.” That being said, the best products often have “marketing built in them”, he adds, citing the example of cloud storage company Dropbox, which encouraged user referrals with free space as an incentive.

In other words, marketing know-how and product development go hand-in-hand. This is why AlphaCamp teaches digital marketing courses to tech founders: the brains behind the next disruptive products need to know how to be their own mouthpiece.

Michael Hong, CEO of the South Korean private investment firm Red Herring Inc, agrees that founders of a newborn startup need to be its first marketers and ambassadors to understand customer needs and the pain points of the products. This allows for better-targeted marketing spend in the future. He cites the example of Pandora TV, one of the top video sharing platforms in South Korea before YouTube came along, and which he co-founded about a decade ago.

“We made a number of highly viral campaigns with low marketing spend using hyperlinks and keyword search optimisation,” Hong says. “At one point, [Pandora TV] was among the top 15 sites in Korea. This was done with a marketing team of about six people. We did not work with any outside agency then; we only used a local PR firm temporarily to help boost our image in traditional media.” In addition to Pandora TV, Hong has been an angel investor and co-founder of several startups.

Once a startup is ready to grow in size and scope, he says, it can then improve marketing performance by working with boutique agencies, which tend to be more affordable and attentive to the specific needs of startups.

Viva Republica did just that. The South Korean startup has an internal marketing team to propel its payment app, Toss. More than 2 trillion Won (US$1.8 billion) worth of financial transactions were completed over the app before it hit two years old. But when the firm wanted to go global following large investments from Silicon Valley, the team was stumped. Their bids to be featured by global news sites were unsuccessful.

Eventually, they enlisted G3 for the task and in March, a photograph of the CEO of Viva Republica beamed at the world from feature pieces on both TechCrunch and Forbes.

“If [a startup] can handle everything inside the team, they do not need to hire agencies,” says Ahn Ji-young, Viva’s PR director. “Most startups, however, have limited human resources and time. The efficiency of work can highly increase when they properly use resources outside, and it can be a great chance to pick up external capacities.”

Reinventing the rules

To play ball with startups, it seems agencies need to do a certain amount of reinvention of their techniques. Is it worth the overhaul for an industry with an infamous nine-in-10 failure rate? According to those interviewed by Campaign Asia-Pacific, the answer is a resounding yes.

“If marketing agencies can effectively adapt to working with the new breed of entrepreneur-client, startups will provide great potential for revenue into the future. I bet big on that when I founded G3 Partners,” says Millard.

Study hard: Agencies such as G3 hold training seminars to help startups get to grips with marketing strategies.

Through working with startups, TBWA Hong Kong is also learning to be — as the agency calls itself — “The Disruption Company”. Cho notices that his team has picked up the entrepreneurs’ agility and knack for problem-solving, meaning operations are faster and more cost-efficient. They even hold fewer, but more productive, meetings.

“A lot of people from creative agencies are from the Mad Men era,” says Cho. “We are used to a waterfall, linear and convergent ideation process – when clients give you a brief, you bring in the strategists, then arrange a briefing with the creatives, and then weeks later the creatives will present to the clients. But now, everyone expects things to be cheaper, faster, and better. Without changing the way we do things, I don’t think there’s a chance we can achieve that.”

To him, adapting to startups is necessary for the agency to do business in the 21st century — just part of the evolution process.