Think like a venture capitalist

     The best way to initiate viral marketing is to think like a venture capitalist or film producer. While I think it is difficult to purposely create viral marketing buzz, it is certainly possible, and the best strategy is to emulate the way venture capitalists (VCs) invest in start-up companies and studios create films. A typical VC follows a maxim stating that most ventures will fail, a few might do okay, and—hopefully—one will take off and become a large enterprise that will repay investors many times the initial investment. Record companies and movie studios follow the same principles, expecting that most of the projects they green-light will have meager sales but that the one hit will more than repay the cost of a bunch of flops.

     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.”

     Source: The New Rules of Viral Marketing (David Meerman Scott) e-book