Building Brand Formation into the Startup Journey

October 1, 2015

6:00 pm

There has never been a wider gap between the top and the bottom in the world of startups than what we see today. Over the last three years, the peak valuations that startups have received from private and public markets have reached unprecedented values.  At the same time, we have seen a high rate of failure; a 2013 Harvard Business School research study found that 75% of all startups fail. The payouts of success have never been more attractive, but have also never been more difficult to reach.  So what separates the top from the bottom?

In such a cluttered market, and with so many competing products and services, startups need to do something different to stand out. Today, success in the world of startups requires more than a novel product or service; startups must capture the imagination of customers with a compelling story. Developing a compelling brand is one powerful solution for enabling startups to standout in the eyes of customers and investors.  Startups need to place emphasis on forming the story they want to tell the world, and then carefully crafting the brand around their story. The startups that prioritize brand forming at the start of their journey will find success where others fall short.  But, what does brand formation mean? What are the “costs” that hold startups back from investing in brand formation? What are the benefits to be gained by investing in brand formation? Why should startups invest the time and resources?

Brand formation is when the founders of a startup translate their key idea into a compelling narrative that explains how it will add value to people’s daily lives. This entails developing a brand vision and mission, which can be a very difficult exercise.  This exercise can be challenging because founders tend to be focused on product capabilities and functionality rather than consumers’ needs.

Time and resources are two of the most significant constraints that startups face as they consider whether to invest in forming their brand.  The typical mindset is that investing in brand formation at the onset of the startup journey will adversely impact the speed at which a startup is able to get to market, and that it is an inefficient allocation of resources in the immediate term. However, the reality is that emphasizing brand formation at the beginning of the startup development journey reverses the paradigm on both of these constraints.  In fact brand formation acts as a catalyst for enabling startups to be the first to market in a more powerful way, and allows startups to more efficiently allocate resources (rather than act as a drain on them).

First Brand Advantage

The ultra-competitive nature of the startup world has created a frenetic sense of urgency among entrepreneurs, leading them to believe that the recipe for success is to be the first firm to bring a product to market.  This mentality has blinded them from the importance of being brand-led, and yet the most successful firms are those that are able to introduce the first brand to the market.

For example, if we look at social networking today, we all recognize Facebook as the network of choice for most of the world; however, it was not the first network of its kind. MySpace was brought to ‘market’ over a year before Facebook. And there were several iterations of social media before MySpace – remember Friendster? But with little idea of what their vision was, MySpace lacked a cohesive story for communicating what the brand was about.  Facebook, on the other-hand had a more complete and compelling brand story to tell about connecting people and bringing the world closer together. Having this established story gave users a tighter package to understand what social networking, and Facebook, were all about, and why users should care. It also provided internal guidance to Facebook on how to create a more meaningful UX and the necessary direction on how to expand the functionality of the network.

The key piece is recognizing that a product on its own does not equal a brand; it isn’t until the complete package (brand and product) is delivered to the market that there is any advantage in being first to market. Knowing why you are going to market is far more important than being the first to build something. Having the first brand versus having just the first product suggests that brand formation should move forward as an equal part of the startup creation journey. As a result, brand formation should begin at the start of the Startup journey.

Brand as catalyst for resource efficiency

With any startup, resources are precious; maximizing the impact and gaining efficiencies are paramount.  Traditionally, the startup culture has been based around developing a product or technology that is in some way new or better than any previous option, leading many startups to be product-led above all else. As a result, maximum resources are devoted to the product, leaving an under-allocation of resources, or none at all, for brand formation.

The lean startup model has yielded new and innovative approaches for agile product development.  In particular, the concept of Minimum Viable Product (MVP) has attracted great fanfare, and for good reason. MVP is an iterative approach for product development where startups release a product with the absolute minimum functionality required for customers to engage with and provide feedback on.

While, MVP helps startups increase efficiency and maximize resources, the approach is confined to product development. Incorporating brand into the iterative process allows the startup to gather more focused and useful consumer feedback because it is provided within the context of the startup’s brand vision. This creates an even faster and more productive product development/refinement iterative loop that guarantees that the end result truly corresponds to a market need.

Thus, a more holistic view of maximizing the impact of finite resources would show that incorporating brand formation at the beginning of the journey allows for resources to be used more efficiently across many different functions.  In addition to product development, brand can help drive efficiencies in sales, investor relations and recruiting.

So what does this all mean?

With startups, branding is even more important than it is for established corporations. Unlike corporations, startups don’t have rich histories, or a range of existing products to help form customers’ perceptions about their company.  They must use smart and efficient branding, and namely their brand vision and narrative, to intrigue and captive customers. It is important that the brand formation process takes place at the beginning of the startup journey and it should receive proper allocation of resources. Neil Blumenthal, CEO of Warby Parker, once said, “Going to factories in China is the easiest part of the process. The hardest part is building a brand that stands for something and will resonate with customers”.  For startups, forming a brand vision identifies the destination for the journey ahead.

Written with help from:

Agathe Blanchon-Ehrsam, Andrew Holland, Jessi Mardakhaev and Larry Lucas

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Senior Consultant, Vivaldi Partners Group

Alex brings experience in brand strategy and management, fused with a background in economics. Since joining Vivaldi Partners Group, Alex has helped a global enterprise software provider form a consumer-centric brand strategy and a new product architecture system.

Prior to joining Vivaldi, Alex was a Consultant at Prophet Brand Strategy in New York City. While at Prophet, Alex worked with numerous Fortune 500 companies across a wide range of industries, including industrial manufacturing, telecom, financial services and consumer package goods. Alex helped companies build strong brands, tackle complex business challenges and drive top-line growth.

Before Prophet, Alex worked as a Research Assistant for Professor Kevin Lane Keller, the E.B. Osborn Professor of Marketing at the Tuck School of Business. Alex’s efforts were spent working on Professor Keller’s acclaimed textbook Strategic Brand Management.

Alex is an avid runner and skier; in his spare time, he can be found jogging in New York’s Central Park or skiing in Vermont, depending on the season. Alex graduated from Dartmouth College with a B.A. in Economics modified with Earth Science.

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