Indian startups, it's time to shift to 'creative capital'

“The epitaph of advertising networks will be written by us consultants” quipped a friend of mine who works for one of the big-four ‘transformation’ consultancies in the world.

But as he went on to stake his claim on what he thought was the undoing of network agencies, and the gap that networks left behind which the consultants were looking to plug, we touched upon another gap that was developing in this fast-evolving market and one that a network agency was primed to fill. That of smarter venture capital.

So, if consultants disrupted advertising, advertising networks could be primed to disrupt Venture capital. This is a potential outlook at what can be termed as marketing capital.

Why Indian startups could be a fertile ground

The Indian startup ecosystem has been booming over the last 10 years with over 40K active startups. 3500 startups came to be in 2019 alone, and as somebody who works actively in the startup community, I have been privy to upwards of 50 pitch decks over the last year ranging from DTC led startups to the ones solving the ‘biggest’ issues the country and the world is facing.

Data suggests that an average of 23% of capital raised is spent on advertising and marketing. And therein lies the opportunity for us ‘Mad Men’ to wear the ‘Wall Street’ hat and open up their share of that pie. While this is not something new or unique, with a few ‘skin in the game’ advertising agencies already gunning for a share of this pie, the game-changing aspect here would be the power of an advertising network to offer this play.

How creative capital can help better brand building

One may well wonder why an advertising network is needed when VC cash can buy the same clicks to help scale fast, you may ask. If you take the case of any new venture that is starting up, beyond world-beating tech where the delta between you and your next competitor is significant, a brand and only a brand can deliver bigger sustainable returns. And great brands are not built through acquisition campaigns on Facebook, Instagram and Google alone. They generate a product-differentiation to attract a cohort of customers, which they then scale by building a creatively distinctive identity across multiple channels. How a brand expresses itself uniquely and cements a position across different touchpoints is the difference between being seen and being heard. VC cash can help you be seen, but creative capital can help you be seen and heard.

Housing.com for me was a clear example of this failure where a lot of VC money was spent in buying visibility that lacked any clear brand communication to the audience. We failed to identify the offering they brought in or the differentiation they offered compared to the competition. While on the other hand, MamaEarth, navigated the extremely crowded child care market by weaving a strong brand story and speaking the right language to the right cohort and building a loyal base of parents who now accept the brand as it diversifies into products catering to other facets of their life. It wasn’t the big hoardings or the loud TVCs that got them to be among India’s fastest-growing companies, rather it was strong brand story-telling seeded right at the start that did the job.

The venture who has a brand baked into the idea early enough is most suited to wear the unicorn title. Bringing in the right brand building partners early on will help the entrepreneur shape the brand creatively right at the start and not wait till they raise their Series B funding to bring in the big brand-building guns.

The case for a full-service network

Nobody is better suited to partner in this journey than a full-service network that has the power of brand building, knowledge of distribution on channels, the stream of big data, learning and insights across the years and the capabilities to deliver all this, at scale. In a marketing capital model, a startup treats this expertise as a capital investment in exchange for equity in the venture at an early stage.

What they get in return is a highly motivated team whose success is proportionally dependent on your success. The unit economics of having parted with equity for this knowledge and expertise that will help you cement your brand recognition delta far higher than your competitor completely adds up. I’m not suggesting that marketing capital will replace venture capital because VC cash is equally important for the other 60% of your needs beyond the brand building. But with synergy across both, where VC cash gets you the product delta and Creative capital getting you the brand delta, the mythical sweet spot for startups can be achieved.

What’s left to see is who makes the first move. Will it be VC firms looking to build a creative capital offering by bringing a gamut of brand builders on board or will advertising networks finally disrupt themselves and look beyond being another service industry player

Rohit Raj is the co-founder of The Glitch (part of the VMLY&R network) & Chtrbox.com.