The Wall Street Journal "PR as King - Tech start-ups are begging public-relations firms for help "
PR as King Tech start-ups are begging public-relations firms for help By ELEENA DE LISSER
Public relations, as a corporate function, often seems to get about as much respect as Rodney Dangerfield. After all, a well-publicized mess at a business is often called a public-relations problem, while a business known for doing well is simply...doing well. In Silicon Valley, however, just who matters most is changing: Businesspeople now are groveling before public-relations agencies, pleading with them, please represent my company. They're searching for lawyers, accountants and other outside service people, too, who can be in short supply in a strong economy. But the most fervent pleas are aimed at those known in some circles as "flacks." David B. Wamsley, chief executive of campsix, says "it feels ridiculous" having to ask public-relations firms to represent his San Francisco Internet incubator, rather than sit back and have them ask him for the work, "especially when you're paying $30,000 to $60,000 a month." He adds: "You're the one always buying lunch." At least Mr. Wamsley could delegate the menial tasks to his marketing chief, Neil Cohen. Housed at the time in the same building as a coveted public-relations firm, InterActive, campsix's Mr. Cohen took to monitoring InterActive workers' movements, including coffee breaks, and "coincidentally" bumping into them as they went for lattes in the lobby coffee shop. "I have this theory that presence builds preference," Mr. Cohen says. Bumping into the folks at InterActive "enabled me to chat them up a little bit. Tell them a little bit about the progress that we were making. I wouldn't ask them how's the decision going, it was more just building up a relationship with them." Rich Guth, a marketing executive at Sendmail Inc., felt like a jilted spouse when InterActive late last year dumped his company -- because it had outgrown the start-up phase that InterActive focuses on. "I'm shedding a tear as I write this," he said in his last e-mail to the firm, at the prospect of having to go out and find replacement public relations help. Has the typical PR person suddenly become a business guru? Probably not. Has the economy changed in ways that make public relations more important to start-up companies and other newer small businesses? Most certainly. So, PR firms overall say their revenue rose 30% last year, and those serving the technology industry boast a 47% increase, according to the Council of Public Relations Firms, in New York. Monthly retainers have more than tripled in some cases. Of course, the bloom could wilt at any moment, though the Nasdaq technology stock correction has yet to curb demand, PR firms say. For now, the begging is limited to technology companies and isn't being enjoyed by more traditional public-relations practitioners. "Do you know where I can apply?" jokes an envious Kevin Donnellon, principal of a public-relations agency in Chicago. His business is growing. But unchanged, he says, is the that "the client is pretty much the decision maker." Technology start-ups, however, particularly those tied to the Internet, have a development sequence that cries out for good press. And PR people offer the hope of getting it. Traditional start-ups have an idea and a little capital, go out and find a lot of customers, and sometimes will gain some media attention along the way. If not, no big deal.
Need for a 'Buzz' Today's Internet start-ups, however, begin with an idea, often a lot of capital but hardly any customers, and hope through media coverage, and perhaps small-investor interest, to create a "buzz" for the company itself that will then help sell the product. If there is one. Many of these start-ups are known initially not for their products but for the stories of their founders, and these are tales that can be sharpened up by experienced PR operatives. The success of Netscape Communications Corp. and Yahoo! Corp. as mainstream business stories during the mid1990s changed everything. Early stories about Marc Andreessen of Netscape and Stanford University grad students Jerry Yang and David Filo of Yahoo focused on their youth and personalities. "How do you get the story out if you're a new start-up? There's not enough advertising money in the world to do that," says Srini Anumolu, a former Wall Street bond manager and now president of eLance.com Inc., an online services exchange. Mr. Anumolu speaks from experience: Chris Holten Hempel, his representative from SparkPR, Palo Alto, Calif., alerted national media not only to eLance's technology, but to the company's need for a cross-country move to Sunnyvale, Calif. from Jersey City, N.J. Headlines read: "Elance.com Entrepreneurs Pack Bags to Look for Gold in Silicon Valley" in The Wall Street Journal and "Internet start-up leaves its New Jersey nest, heads west" on the Associated Press. (Mr. Anumolu sought out Mrs. Hempel after reading about her nuptials in Business Week magazine. "If you can get your wedding covered, you must be really good," he says.) The articles helped him attract talent and investors, Mr. Anumolu says. Many start-up firms won't last. And in hindsight, they'll be seen as more PR pitches than businesses. But for some that do last, PR people will get the credit for helping to jump-start the operations. "PR firms are like the rock bands of the Internet," says James L. Till, senior vice president of sales and marketing at SkyDesk Inc., a data protection and storage company. "The best ones make a whole lot of noise for you and bring you attention, but you've got to treat them like stars. There's no lack of vanity in this business." What exactly do start-ups get for $35,000 a month? PR agencies help young companies figure out an image, known as "brand position" these days; design marketing plans; make introductions to industry analysts who might write investor reports about the company; provide media training. When seeking help from a PR firm, a start-up might want to ask questions such as: What am I hoping the firm can accomplish? Has it achieved such results for others? And if they pull it off, will I be prepared to take advantage of it? But remember, these days the PR firms will be asking plenty of questions, as well. During a recent meeting with a prospective client, Marissa Verson Harrison of InterActive peppers the start-up's management team with a series of questions. "Do you have software developers in house? What's to prevent Arthur Andersen from coming in and going after the same market? What do you have beyond the idea and cool name?" Some questions Todd Wade and Hugh Jackson of a start-up called eSubscriber anticipated. Others catch them off guard. After the meeting, Mr. Wade is upbeat and seems mildly relieved that it's over. "The directors are the ones who are supposed to ask those questions," he says, impressed by the grilling. "That wasn't a conversation I expected to be having with a PR person." ESubscriber was accepted by InterActive about six weeks later. Extra Benefits A decade ago, Ms. Verson Harrison says she drummed up pubic-relations' business by hanging out at trade shows and randomly introducing herself to complete strangers. She and her partner, Julia Ginna, went on to represent Internet companies such as Ask Jeeves Inc., Inktomi Corp., and Red Herring.
But now Ms. Verson Harrison is getting used to being wooed. To win over InterActive, SkyDesk's Mr. Till says, "We made many trips to San Francisco sort of like the Three Kings bearing whatever we thought was necessary. We even went so far as to get our friends at Tiffany's to provide, how shall I say it, 'influencers.'" Ms. Verson Harrison says her firm kept the Tiffany's gift certificates because they decided to take SkyDesk on as a client. "It's sort of like an engagement ring as part of the courting process," she says. "You only give back the ring if you break up, right?" At OutCast Communications, in San Francisco, co-owner Margit Wennmachers says that in one typical e-mail exchange last month, an entrepreneur initially suggests paying $35,000 a month to retain a PR firm. He later sweetens the offer by volunteering to pay $25,000 monthly and awarding 10,000 stock options that vest upon signing of the contract. "If the stock goes up to $105, that's $1 million. Not bad for a six-month contract, " he wrote. She declined. Stock options, with the Nasdaq's plunge, have lost some of their currency. Indeed, many PR firms previously happy to get some options are now demanding more cash up front. David Copithorne, a Boston-based managing director of Porter Novelli Convergence group, a large public-relations firm, worries about the economic bubble bursting. "That's when people will feel like their investments aren't paying off," he says. "You've got to worry if they're going to shoot the messenger. And who's the messenger, but the PR guy?"