Why Investors Flock to Companies With Strong Brands

Learn from companies like Airbnb, Slack and Tandem on how branding can lead to higher valuation and better funding.

January 29, 2024

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Insights

Why Investors Flock to Companies With Strong Brands

Securing funding can be an organization’s lifeblood. It can make the difference between whether a company survives or doesn’t, it can drive growth, and it can give organizations a competitive edge. While many factors influence investor decisions, one frequently overlooked yet crucial element is branding.

In fact, branding is the foundation of any business’ strategy, because it can build affinity among customers and investors, increase sales and secure a better shot at more substantial funding.
 

The Branding Process Is Necessary for Business Success

When undertaking a branding project, the questions any organization needs to answer line up with the fundamental questions driving business strategy. These are the same questions any investor will ask when deciding whether to grant funding.

  • What is your value proposition?
  • What makes your products or services unique in the market?
  • Who are your primary audiences?
  • How might your organization scale in the future?
  • What space does your product or service occupy in your customers’ minds, and how do they experience your company?

Branding, at its heart, is about communication. Your brand communicates what your organization does, how it stands out from competitors and how it makes customers feel. The branding process helps companies answer fundamental questions about their business so that they can communicate these answers externally. The results of a successful branding exercise set organizations apart not only with customers but also with investors and buyers.

Brand Storytelling Engages Investors

Compelling brand narratives resonate with investors on an emotional level, just as they do with customers, fostering a deeper connection and understanding of the company’s mission and vision — and contributing to investment decisions. Let’s explore a few examples.

Airbnb Flies High

Consider the success of Airbnb. The company’s founders, Brian Chesky and Joe Gebbia, crafted a narrative that went beyond the mere provision of accommodation. They portrayed Airbnb as a platform that fosters meaningful connections and immersive travel experiences. This narrative, along with a pitch deck that has become the stuff of marketing legend, captivated investors, driving the company’s valuation to over $100 billion in subsequent funding rounds.

Slack Sells Synergy

On the B2B side, let’s consider Slack Technologies Inc., a leading provider of collaboration software for businesses. Slack’s brand storytelling revolves around the concept of transforming how teams communicate and work together. The company’s narrative emphasizes the importance of seamless collaboration, productivity and workplace culture.

By weaving together stories of teamwork, creativity and impact, Slack humanizes its brand and differentiates itself in a crowded market. Investors were not only impressed by Slack’s innovative technology but also inspired by its vision of reimagining work in the digital age.

As a result, Slack attracted significant investment capital, culminating in a highly anticipated direct listing in 2019, which surged 48.5% in its first day of trading on the New York Stock Exchange. In 2020, Salesforce bought Slack for $27.7 billion.

Tandem Brings It All Together

Closer to home, Sunup recently rebranded Tandem, a finance app that helps couples build long-term wealth together. Sunup organized Tandem’s value proposition around four core pillars, representing financial actions users can achieve through the app: Plan. Save. Spend. Split. Sunup then developed a cohesive verbal and visual identity system, including positioning, messaging, new colors, iconography and a photographic style as well as shapes and patterns that give each core pillar a distinct look and feel. 

This brand refresh, as represented on the app’s revamped website, helped organize Tandem’s offerings, define its value proposition and raised the app’s profile among prospective customers and investors alike.

Two months after debuting its new brand, Tandem raised its first $3.7 million in funding from individual investors and executives from companies including OkCupid, Match Group and Tinder while receiving a slew of positive press.

Brand Recognition Drives Investor Confidence

Investors are looking to fund companies with a proven, loyal customer base with the potential to grow. Effective branding can build brand connection and trust that lead to customer loyalty (and consistent revenue streams).

In fact, more than 80% of customers — across markets, ages, genders and incomes — say trusting a brand is the deal breaker or main deciding factor in their purchase decisions. And when customers feel connected to brands, more than half will increase their spending with that brand, and three-quarters will buy from them over a competitor.

In short: Strong brands are more profitable, especially when the market is volatile. According to the National Institutes of Health:

“Our findings suggest that the most valuable brands outperform(ed) the market during the overall period from 2000 to June 2018 as well as during different market conditions. However, the extent of the outperformance is much larger during market turmoil than during normal periods, suggesting that the most valuable brands tend to perform better during bearish market conditions.”

Similarly, a McKinsey study showed that strong brands consistently outperform the market, with the world’s 40 best brands yielding almost twice the total return to shareholders over the course of two decades. And this doesn’t just apply to B2C brands: Another McKinsey study found that B2B companies with strong brands outperform weak ones by 20%.

A positive brand reputation translates into higher perceived value, making investors more inclined to invest at higher valuations.

Brand Consistency Builds Investor Trust

You might have thought you were going to get out of this without a plug for the importance not only of creating a strong brand but also of deploying it strategically and consistently. Not today.

Brand consistency signals reliability and professionalism, instilling confidence in investors regarding the company’s ability to execute its business strategy smoothly and effectively. According to one study, consistent brand presentation across all platforms increases revenue by up to 23%. A well-established, consistently executed brand communicates credibility and stability, reducing perceived investment risk.

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Brand Strategy Is Business Strategy

In the realm of investment, as in life, perceptions matter. A strong brand is not only a marketing asset but also a strategic advantage that can significantly influence a company’s ability to secure funding. By investing in branding efforts that cultivate recognition, reputation, storytelling, consistency and differentiation, companies can effectively capture the attention and trust of customers — and investors.

What’s more, companies with better brands are more profitable and therefore make for more attractive investments. Recognizing the pivotal role of branding in fundraising endeavors can spell the difference between success and stagnation in today’s competitive market. In other words, a better brand is a stronger asset.

If you’re looking to attract investors with a brand that sets you apart, we’d love to find out what we can accomplish together. Get in touch today.

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