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Blogging for deals

Can a blog lead to proprietary deal flow? According to one healthcare investor, the answer is ‘yes.’ By Judy Kuan

As private equity firms continue to seek ways to differentiate themselves, one marketing tool – for building both the investor base and deal pipeline – they may want to consider is blogs. After all, a growing number of venture capitalists are now sharing what's buzzing in their gray matter on these online platforms, which allow blog (nee Web log) owners to post content and readers to share comments.

According to David Hornik of August Capital, who founded VentureBlog in 2003, ?You can see that VCs are seeing this as an opportunity for communicating with a whole set of constituencies in a meaningful way. One of the clear advantages of blogging is that it allows individuals to establish a certain degree of expertise in an area and gives the individual an opportunity to express that knowledge and share it with a group of people that didn't really exist officially before. It's a smart thing to do for firms that are focused on a particular vertical.?

Andrew Anker, the chief systems administrative officer of VentureBlog, adds that, particularly in the current environment in the venture capital industry, ?Money is a commodity, so really the thing you are selling isn't the money, it's your advice, your personality. And those things that make you different as a VC make you different as a blogger. If you look at it from that perspective, I think it's safe to say that the personalizing and professionalizing of VCs' blogs quickly converge.?

Orthopedic blogging
To date, the blogging phenomenon has been much more prevalent among the VC culture – and typically at a more personal level – than in the private equity sphere or as a more formal component of GPs' brand building. However, one private equity firm, New York-based orthopedic device specialist HealthpointCapital, has adopted blogging as a key prong of its marketing strategy.

According to HealthpointCapital COO Laing Rikkers, the firm's blog, located on the firm's homepage, has been a core component of building the firm's brand since the blog's launch in the spring of 2005.

HealthpointCapitalwas built on the concept of research, in part through publishing and creating a proprietary database, says Rikkers. In addition to the blog, the firm also produces monthly white papers on current topics relevant in the industry, as well as organizes a number of seminars each year.

The idea of adopting a blog to disseminate the firm's research and provide an online space for readers to comment was first suggested to HealthpointCapitalby a Web publishing consultant that the firm had brought in to advise on its existing publishing program. ?It made immediate sense to all of us,? says Rikkers. ?The blog wasn't a trendy idea. It was really an integral tool for us to reach out to a highly fragmented global industry and try to bring it together on a daily basis.?

For HealthpointCapital, the returns on its investment in the blog have been measurable and more than satisfactory. According to Rikkers, not only has the blog has built the firm's brand among both potential investors and investees, but it also presents a significant barrier to entry for potential competitors. ?It's a highly dispersed industry and the blog allows us to be at the center of the conversation in the industry and to capture uniquely proprietary information,? says Rikkers.

Quantitatively, the cost of HealthpointCapital's publishing activities, including both the white papers and the blog, works out to roughly ten cents per reader, says Rikkers. ?Our research team is already in place, which would be generating content for internal consumption anyway, even if it were not distributed externally.?

At the same time, these activities have increased the level of traffic to the firm's website sixfold up to 10,000 readers per week from a year ago. ?From a firm's marketing perspective, it has been very valuable for drawing people in and letting them know more about what we do,? says Rikkers. ?In addition, the blog has led directly to deal flow.?

Rikkers, for her part, says that she spends about five to ten hours a week on maintaining the blog and working with the research staff and outside experts in terms of generating ideas for content. ?The longer I've done it, the more streamlined the process has become,? she says. ?It's become so much a part of our research and our branding as a firm that it's time very well spent.?

Blogging rules of thumb:

  • ? Appoint a ?managing editor? to review all content
  • ? Train in-house writers
  • ? Confer with experts on responding to more sensitive or unusual types of comments or policy decisions
  • ? Have a disclosure policy
  • ? Be aware of how to protect intellectual property