A key factor in negotiating a VC raise is the amount of “runway” a startup has left—the number of months before it will be out of money completely. A startup with a short runway will need to raise money fast (and their investors will know it—and will know they can get a big chunk of the firm, at a good price, with lots of extras thrown in). A startup with a longer runway can afford to set its own terms.
There are three obvious ways to affect how much runway a startup has left: raise more money, increase the revenue run rate, or cut expenses.
From a founder’s perspective, the second and third options are far superior. For many companies, there’s an underused marketing channel that can provide substantial growth at a low overhead cost: SEO. SEO (Search Engine Optimization) involves three basic processes:
- Identify what people are searching for.
- Adjust your site’s copy to highlight those terms—in a way that’s visible to site visitors and to search engines.
- Get contextually relevant links to your site.
There are paid tools for helping people accomplish any of these goals, and any number of third-party consultants can get the job done, too. But most of this work can be done by an in-house team—especially in a small company where the “business” side can’t stay busy until people on the “product” side get things moving. In short, if you replace paid marketing channels (AdWords, Facebook ads, an outside PR firm) with in-house SEO, you’ll cut your overhead (lengthening the runway) and you’re likely to raise your repeat revenue (further lengthening the runway).
Here’s a basic process for a non-expert interested in getting an SEO strategy up and running:
- Start typing descriptive terms for your startup’s product (or terms you think a user might search) into the AdWords keyword suggestion tool.
- Note every relevant term that generates some traffic. Google that term.
- Look for results pages with few to no relevant results.
- Edit a page on your site (or create a new one) incorporating that keyword into the title in a sensible way.
That gets you content. But search engines care about links, not just content. Getting links is a more complex process. For most companies, the cheapest source of links is from industry bloggers. Start reading every blog in your field (use blogrolls and the Google “related:” query to find some more), and write content on your company blog that responds to or cites their content.
You can also create content with proprietary data; OKCupid’s business was built on this practice. And there’s no reason to restrict yourself to the industry; moving to something peripheral but much more interesting is often a great way to get links. For example, a printing company might blog about graphic design, or a tax company might write blog updates about political issues and economics. Search engines recognize context, but only in a vague sense—so someone getting lots of semi-related links is in a great position.
SEO is a constant arms race, both among practitioners and between practitioners and search engines. But for early-stage companies, it’s an especially compelling deal: what other marketing channel gives you an ongoing stream of new customers, plus an infinite supply of competitive intelligence, not to mention a healthy do-it-yourself PR strategy?
High valuations are built on defensible business models. The sooner you use search engines to put distance between yourself and your competitors, the better off you’ll be.
(For much more on SEO, see the SEOMoz Beginner’s Guide. SEOBook also offers a helpful email series for free. Both sites are, of course, selling something.)
About the author: Byrne Hobart is an experienced online marketing consultant. His Digital Due Diligence Advisors venture provides SEO-based valuation consulting to M&A practitioners and investors seeking to understand online customer acquisition models.
