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Threats to the fabled world of creative agencies are as numerous as they are relentless. Fee compression, piece work, transient client relationships, in-housing of creative teams—all are squeezing not just agency revenue but the agency model itself. Yet, amid the hand-wringing, a new way to do business is on the rise.
Private equity and venture capital firms are hiring creative agencies to accelerate their investments. While no publicly available trade data exists, in my conversations with consultants, PEs and VCs—and having managed a handful of such projects—it’s become abundantly clear that investments from PEs and VCs to agencies are real. And they have the potential to subvert not just the traditional agency-brand dynamic, but also to catalyze durable, sustainable business transformation.
On the face of it, pairing investment firms with creative shops makes zero sense. The monogrammed Patagonia vest and Stüssy tee are both aesthetically and philosophically opposed. Investment firms are frequently cast as evil raiders who ruthlessly gut an organization, load it up with debt and temporary leaders, then draw a profit, leaving the business to its own devices and burdens. Of course, the quieter narrative around these firms is that they often save companies, create jobs and drive innovation.
Creative agencies, meanwhile, traffic in ephemeral quantities like brand equity and consumer mindshare. Traditionally high-growth and in-demand, they earn fees based on their understanding of the intersection between design and technology. Often hired by brands to reimagine existing experiences, they trade on speed to market, leading-edge tech and their ability to understand consumer behaviors. They also tend to focus solely on execution rather than attacking the underlying mechanics that can create or hinder growth.
So why would these divergent worlds attract one another, let alone grow codependent?
For one, a handful of agencies have been burnishing their consultative chops. Now they not only complement PEs’ and VCs’ due diligence by digging into the guts of the acquired brand to see which parts are strong and which require targeted interventions, they can also marshal and deploy the creative muscle that fuels growth for those acquisitions.
Additionally, as consumer markets have become more crowded, digital platforms more accessible and talent more ubiquitous, the burden has increased for PE and VC firms to prove real value and distinguish their investments from the competition. Given the imperative to drive more conversions in digital experiences, it’s not a stretch to see why the left-brain world of PEs and VCs would seek out creative partners to help them realize greater returns. PEs and VCs are purpose-built to pinpoint where a business made the wrong move but, provided strong investment and leadership, holds untapped potential. Designers, strategists and engineers at creative agencies now form an important part of that calculus.
