Today, a titan of private equity – KKR – joined the social media fray with their first ever tweet. It commemorates their 38th anniversary. Though Carlyle and Blackstone have been on Twitter since 2011 and 2012 respectively, KKR apparently needed to do deeper due diligence on the benefits of the platform.
If Carlyle, Blackstone and KKR are all active in social media, should everyone be active? Likely – but probably for different reasons.
For the public giants, like KKR, the benefit of social media is as another channel of communication and helping their investors understand the firm’s stance on different issues. It’s not entirely separate from investor relations. With thousands of shareholders, and a much broader audience with which to engage, having multiple channels of mass communication is valuable — especially if your competitors are better at it. At the time of writing, KKR’s 364 Twitter followers pales in comparison to Carlyle’s 6,217 or Blackstone’s 27,400+.
The benefit is slightly different for smaller, private shops. Middle market private equity has other challenges, usually more associated with deal sourcing than fundraising or IR. Social media can help become a point of differentiation and branding, driving real business results. One of the primary problems for private equity historically has been the ‘private’ nature of their business. PE groups often try to stay out of the spotlight, resulting in few business owners understanding why they exist or why they should be trusted.
But that’s probably not the best strategy going forward for most private equity groups.Using social media well can help answer the questions CEOs have about your business. Why are you the best buyer or financier for a company? How will you treat their employees? What strategies do you tend to employ? How do you think about running a business? What does your company really care about?
Competition in traditional private equity has started to look more and more like venture capital the last few years. With so much money floating around, access to capital is no longer a major problem for quality companies. For the most part, every private equity group is looking for similar criteria – solid, growing businesses that can scale with good management teams. Like good startups, great middle market companies also usually have the upper hand in choosing the private equity group that will buy or fund them.
Venture capitalists tend to be a little bit ahead of the curve because they have to be – the business is cutthroat, returns are unpredictable and only the best generate positive returns. A decade ago, few VCs were well known publicly. Today, Brad Feld, Fred Wilson, Mark Suster, Tomasz Tunguz and others are finding that engaging in social media helps them communicate their ideas to prospective CEOs more readily. It helps them win better deals because great companies connect with their ideas and approach them first for investment.
As David Hornik – the first venture capitalist to begin blogging over a decade ago – wrote, “blogging has become an incredible megaphone. Over the years, millions of people have read what I have to say about venture capital and entrepreneurship.” He continued, “In combination with the powerful amplification of social platforms like Facebook and Twitter, VentureBlog has proven a valuable tool for me and my firm to rise above the noise.”
Many middle market CEOS are engaging in social media regularly as well. They’re using it to read the news, connect with employees and market their businesses. But they’re also using it to connect with thought leaders. They’re reading articles by potential partners, capital providers and future acquirers. Are you part of their conversation?
Just as investors prefer investing in lines not dots, CEOs prefer to really know their partners before engaging in a transaction. Learning how to become a part of deeper conversations with a wider range of business owners before they’re interested in a doing a transaction can give you a leg up when it comes time to work together. Social media is where many of the discussions happen – both on Twitter and LinkedIn. Differentiation happens one tweet and connection at a time.