For startup companies in Connecticut, it’s no secret that trying to find seed funding in the state is a challenge. Investors remain skittish about injecting cash in a state many perceive as business unfriendly, while venture funding in general has moved upstream.

Read more at the Hartford Business Journal.

The key to surviving in today’s challenging business environment is delivering consistent performance over time. But more than revenues and profits, performance today is measured in terms of value. While often hard to quantify on the balance sheet, value is what separates great companies from their competitors. The following beliefs are key for a company to succeed and be profitable:

• Be true to your customers and your people.
• Recognize the power of character and credibility over charisma.
• Establish trust and building brand loyalty.

The pause in the current economy provides an opportunity for businesses to reassert their values and set a course for a stronger future. Leading-edge companies are using this time to their best advantage by developing incorporating an integrated marketing communication approach to their business goals. Business problems can only be solved by addressing them strategically. Look at the “big picture” before any work or analysis begins on a project. You have to make certain that all marketing plans and strategies are informed by your business goals and objectives.

How does a Smart Marketing Process work?

1. Situation Analysis – What’s happening now?
   Define the problem or challenge.
   Purpose: Determine internal and external perspectives and attitudes about your products or services.
   Tools: Primary and secondary research through informal and formal methods such as surveys, reviewing existing materials, focus groups, interviews, etc.
2. Planning and Programming – What should we do, say or change?
   Determines goals, objectives, strategies and tactics based on information gathered and evaluated from the Situation Analysis.
   Purpose: Define how to get your internal and external audiences to gain acceptance of your organization’s idea(s), attitudes, beliefs and/or sales proposition.
   Tools: Advertising, public relations, promotion via campaigns, direct marketing, and online communication.
3. Taking Action and Communicating – How do we do it?
   Implement the plan
   Purpose: Achieve the specific objectives for each of the publics/audiences in order to accomplish the overall program goals.
   Criteria: Timetable, budget, personnel assignments, outsourcing, etc.
4. Evaluation and Assessment – How are we doing?
   Assess the development, implementation, and results of the plan
   Purpose: To make adjustments based upon the evaluation feedback and determine if the program should be continued, stopped or concluded.

Even before the downturn of the last 9-12 months, capital availability was becoming more of an issue for these companies. The consolidation of the venture capital community led to substantial increases in the minimum size investment considered by many VC firms, often reaching $5-10 million. At the same tine the financial capability of high net worth angels and/or angel groups typically limited their ability to provide more than $1 million for an individual funding. The resulting “gap” in funding availability has been particularly troubling for companies that are frequently the most attractive investment prospects – those seeking $1-5 million in growth capital to roll out or expand already proven product and service concepts.

As the financial environment has worsened, traditional sources of limited partner capital for VC firms such as pension funds and university endowments have reduced their allocations to risk capital categories. This has further accelerated VC community consolidation, and caused VC firms to focus more on existing portfolio companies rather than new investments. Stock market losses have had a similar effect on individual angel investors, who have pulled back their participation in early stage investing. The combination has contributed significantly to further reduce the availability of traditional sources of capital for early to mid stage companies.

While some traditional funding continues to be available in the gap range, we have been advising our clients to also focus on strategic affiliations as sources of growth capital. Larger corporations are not expected to play the role of a multi-industry VC investor, but facing their own financial challenges, have become more receptive to affiliations that could combine a strategic business purpose with providing growth capital.

Examples could include expansion of customer/supplier working capital considerations, joint marketing or product development, licensing and other forms of strategic relationships, potentially coupled with direct minority investment. Clearly companies where there are existing relationships are the most likely targets, but properly crafted, an approach that coupled the prospect of a strategic relationship with an investment opportunity could be a new business initiative as well. In either case, a careful review of all the implications of these types of discussions, and a well crafted and targeted business and financial rationale are key.

The first step is thinking out of the box to expand financing options beyond traditional VC and angel capital sources. The current market challenges place a priority on that approach, and strategic affiliations are becoming a more viable alternative.

Positioning is how your offering fits in the minds of your customers and end users. Why is your product more desirable to them or better suited to their needs? Is it less expensive, easier to use? Does it solve a problem that is important to them? Does it work better than their current options? Does it provide them with intangible personal benefits – status, ego satisfaction, etc.?

This concept first came into widespread use by Alfred Sloan when he created General Motors. His stated approach was “ a car for every purse and purpose”. Chevrolet for the entry level, then Pontiac as one became more successful, followed by Buick and then ultimately a Cadillac once you make that big exit at a very high multiple. While this seems quaint in the face of GM’s current situation it led them past a dominant Ford in the 30’s. Then to over 50% market share in the US for many years in the 50’s through the early 80’s. Arguably it was lack of understanding of positioning that led to GM’s downfall. The Japanese competitors recognized and created a high value for reliability and practicality in small cars versus the style, power, size and brand focus of the American car companies.

A more current example is the Internet search market between Google, Yahoo and Bing. Google’s mission is to organize the world’s information and make it universally accessible and useful3. Bing is positioning themselves more narrowly on decisions: “When it comes to decisions that matter, Bing & decide.” Yahoo is trying to make themselves more human with their positioning focused on people: “To connect people to their passions, communities, and the world’s knowledge.”

Each of these companies has specifically focused their efforts to offer something unique to their customers. Have you?

Over an amazing lunch at Sparks in New York, I had a conversation with a man who is a major developer of industrial properties in the tri-state area. We were discussing his relationship with a well-known discount book chain. He told me, “I know what business I’m in. I’m not in the warehouse business. I’m not in the real estate business. I’m in the ‘lowest unit cost quickest on the shelf’ business”. He understood exactly what point of pain he solved for his client. Books are heavy and take up space. It can take a long time to move books from the printer to a warehouse and then to a store. Books are sold today like fresh produce – they have a short shelf life. So the retailer needs to be able to restock big sellers quickly but not crowd their shelves with slow movers. My host worked at solving that problem and built a long term profitable relationship with the solution.

What business are you in? Look at your market and customers as abstractly as possible. Which of their points of pain do you touch in your business? How do you resolve the pain? That is what business you are in. Have you resolved it as completely and inexpensively as you possibly can? If so, congratulations; if not, you need to do better because if you don’t someone else will.