The
problem is that nobody knows with certainty which movie or venture-backed
company in the portfolio will succeed, so finding a success is a numbers game
requiring investment in many prospects. The same goes for viral marketing
efforts.
To gain some
additional insight into how VCs think (so we can apply their theories to the creation
of viral marketing campaigns), I spoke at length with Chris Greendale, a
general partner at Kodiak Venture Partners. Kodiak is a VC firm investing in
seed and early-stage technology companies. Greendale and I are both on the
board of directors of Kadient, a Kodiak-funded company that provides
salespeople with the information tools they need to close deals. Before working
with Kodiak, Greendale was a founder of Cambridge Technology Partners and an
early investor in Seibel Systems.
“Putting a
film together is no different than investing in a company,” Greendale says. “It
is a roll of the dice. With a film, you start with a good script. I’m like a
producer, and I get a lot of scripts in the form of business plans. I look at
the quality of the value proposition, the go-tomarket strategy, and the quality
of the individual. I probably see 200 deals a year, which is about one each
working day, and I’ll likely do only two deals a year. So that means only one in
a hundred gets funded. If you look at our size fund, which is $300 million, we
look to invest $8–10 million per company, all in.”
Thus, if we
apply our venture capital/viral marketing analogy, we might suppose that one
needs to think of hundreds of ideas and then choose a handful to “fund” (i.e.,
actually create). I’ve worked with organizations that have thought up literally
hundreds of viral marketing ideas over the course of a day’s brainstorming
session. That’s great! You never really know which one is likely to succeed, so
the more good ideas, the better.
To minimize
poisonous internal groupthink, invite people from outside your organization to help.
Teenagers are especially tuned in to Internet trends and viral phenomena, so
you might want to recruit some to help you come up with ideas. I’ve gotten
involved with Facebook, which has started to go viral for me, and I now have
several hundred “friends” as a result of my fourteen-year-old daughter’s help
and encouragement. My Facebook friends share my ideas with their friends
and colleagues to help me meet new people online.
Once Greendale
funds a company and it becomes part of the Kodiak portfolio, he uses a simple
rule-of-thumb to monitor performance. “There is a bell curve, and we are
constantly managing our portfolio on a weekly basis based on that,” Greendale
says. “We look at each company based on three buckets: We expect that, out of
ten companies, three will be winners that we can sell for a profit or that
might even go public, three are companies where we will only get our money back
but no profit, and four are companies where we end up just flushing our money
down the toilet.”
