WHY PR FOR STARTUPS? SHIFT Communications March 10, 2014
WHY PR FOR STARTUPS? SHIFT Communications March 10, 2014
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Sequoia Capital has a wonderful market research framework as part of their pitching process for funding to determine how viable an investment a startup might be. The framework is called TAM/SAM/SOM, short for Total Available Market, Serviceable Available Market, and Serviceable Obtainable Market.
TAM
SAM
SOM
THE SEQUOIA MARKET MODEL
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Total Available Market is the largest possible portion of the population that could be in the broad market for your products or services. As an example, our TAM here at SHIFT is any corporation in business. After all, everyone needs public relations, right?
TAM
SAM
SOM
THE SEQUOIA MARKET MODEL
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The Serviceable Available Market is the section of the market that could buy your specific products and services. In our example, SHIFT is not a small business boutique PR firm. Businesses who want a PR firm that just specializes in, say, public policy and lobbying, would be in the SHIFT TAM but not in our SAM, because we don’t offer services that would fit those needs. Other companies who want a PR firm that delivers exceptionally low prices ($10/month PR!) would also be in the TAM but not our SAM.
TAM
SAM
SOM
THE SEQUOIA MARKET MODEL
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The Serviceable Obtainable Market is the portion of the market that you can realistically obtain through your PR, marketing, and sales efforts. This part of the market is your audience share, your leads generated, and your customers. SOM is dependent on your specific competitive landscape and how many resources you’re able to devote to capturing this market. A boutique PR firm, for example, would have a very different looking SOM than SHIFT, and SHIFT would have a very different looking SOM than global mega-firm Publicis Omnicom.
TAM
SAM
SOM
THE SEQUOIA MARKET MODEL
PR FOR STARTUPS
WHY PR FOR STARTUPS?
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How does public relations fit into this picture, especially for startups? In the beginning, most startups look like this. The global market for the startup’s industry may be huge, and even the market opportunity may be decently sized, but the startup itself has little chance to gain share of mind. Marketing can do an outstanding job of monetizing the SOM, but if the SOM is tiny, revenues will be tiny and an investment will not meet expectations.
TAM
SAM
SOM
WHY PR FOR STARTUPS?
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The first job of PR is to grow awareness and build trust through earned media, from traditional coverage to social media discussions to paid syndication and advertising of earned media coverage. There are lots of people in the SAM that could buy from the startup, but none of them are obtainable (SOM) if the startup has no awareness or trust. Thus, PR has to expand the SOM with earned media.
TAM
SAM
SOM
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WHY PR FOR STARTUPS?
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Each piece of earned media coverage, each hit, helps to expand the awareness and trust of the startup, growing the SOM into more and more of the SAM and giving the startup’s marketing efforts more of a chance to grow revenue from the SOM.
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WHY PR FOR STARTUPS?
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With sufficient coverage, with sufficient awareness and trust, the startup becomes a legitimate force in their SAM. The PR agency working on their behalf builds connections and relationships in the media (traditional and new) so that the startup can obtain a significant portion of its accessible market. The SOM ideally grows into the SAM.
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WHY PR FOR STARTUPS?
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After a certain point, a startup may find that its market changes, or its products and services evolve. With the great relationships that PR built on behalf of the startup through launch, a great PR agency can bridge the gap for the startup to expand outside of its launch SAM into a larger SAM with its new products and services.
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SOM
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WHY PR FOR STARTUPS?
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This is where the investment in PR pays off significant dividends for investors and startups. The startup’s new products and services have pre-built relationships with media that can accelerate growth and revenue. Instead of having to launch into new SAM territory cold, the startup’s PR agency can “land and expand” existing media relationships to garner new coverage quickly.
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SOM
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WHY PR FOR STARTUPS?
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This is why PR is so essential to a startup and why investors who are funding startups need to allocate budget not only to marketing, but to public relations and advertising as well. PR not only helps startups grow in early awareness, but provides the bridge to make the leap to an established company when the startup outgrows its initial SAM.
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