Is Hype Necessary for Start-Up Companies?

Is Hype Necessary For A Start-up?

December 1, 2011

Hype, start-up and success were the center of attention at an investor+entrepreneur meeting recently. Is hype necessary for a new business to thrive?

For investor-backed start-ups, particularly those in venture capital portfolios, it is absolutely imperative. Funding depends on notoriety. Start-ups need to leverage the excitement, they need to heavily promote and market the deals. By one venture capitalist’s estimate, thousands of people in the investment and start-up community need to know about the start-up in order to attract more investors. Hype builds market, investor, and customer confidence.

Hype builds momentum, not only with investors but also among the customers and market. A venture capitalist noted that for venture-backed companies, building their audience and gaining market traction is crucial in the first 5 years. During this time, they aren’t overly concerned about revenue and profits. It’s only after this initial market penetration phase that they look for the big push with revenue traction.

If you track media coverage of start-ups, note that whenever a start-up is looking for a new round of funding, they suddenly are appearing everywhere in the media. If the start-up is positioning itself to go IPO, it becomes an overnight sensation in the press. If a start-up is seeking an acquisition, there will be an announcement in the press about the pending deal. The reason is they want to see if they can flush out more bidders. If you are a competitor of such a start-up, don’t believe everything you read or hear about the start-up; it’s meant to paint a rosy picture.

If entrepreneurs want to turn their start-up into a big, corporate icon then they not only have to understand the importance of hype, but entrepreneurs must embrace it. And this is where have an extroverted CEO is quite helpful.

But does this hold true for those bootstrapped or self-funded start-ups?

Yes, of course. Because ultimately, what this all comes down to, is people wanting to buy from companies that are familiar to them. This is true not only for customers but also investors.

Hype was simply seen as vision; a grand vision of what the company could become. This may come down to Henry Ford’s famous quote, “If you think you can do a thing or think you can’t do a thing, you’re right.”