One of the most enduring challenges any Internet marketer faces is getting users to come back regularly and engage on their website.  In other words; loyalty. Social gaming companies and a few very popular consumer web services have gotten extremely good at creating loyalty, where loyalty rate is defined as Daily Active Users (DAU) / Monthly Active Users (MAU). Yet when you look at loyalty rates on the rest of the web, they look downright abysmal.  According to data from Nielsen, of the top 2,000 biggest sites in the US, only 21 of them have a loyalty rate better than 25%.  In fact the average loyalty rate among the top 2,000 US sites is less than 7%.  Do some quick math (7% * 30 days) and that means that on average their “active” users are only visiting their site two days out of the month.

That doesn’t feel very loyal, and this is the challenge, or opportunity, that our portfolio company BigDoor set their sites on.  The team at BigDoor has been busy building a gamification and rewards platform, but after two years of work and a lot of learning they discovered that what they had really created was an engine that helps publishers increase user loyalty and engagement.  Once they realized this, they also realized they needed to have a drop dead easy way to measure the impact they were having on loyalty rates.  So they built in cohort analysis that automagically creates a random control group and the analytics engine needed to compare control groups versus reward user groups.  Next came an iterative exposure function, because no smart marketer would roll something out to their entire site without testing it first on a subset of their traffic.  Then they made it as easy as possible to implement, with the requirement being that it should take the same technical ability that a person needs to install Google Analytics.

BigDoor has been in private beta with this latest version of their gamified rewards program for the last few months, and the results surprised all of us.  That’s because when a user goes to a site that is using BigDoor, they see a tightly integrated and highly gamified rewards program that lets them earn real rewards for engaging with the site.  The more loyal and engaged the user is, the more points and rewards they get.  Think of it like a fun and engaging frequent flyer program for any website.  But behind the scenes is a white-label gamification engine that is churning through data, comparing cohort performance, and measuring results.  And what has their impact been on loyalty rates?  On average, across all of their publishers, they saw a lift in loyalty rates of over 150%.

If you talk to the BigDoor team they will tell you that they still have a ton of things to improve upon.  They want to make the implementation process for a new publisher even simpler.  They want to create more and better integrated widget templates.  They want to get their loyalty score lift even higher.  They are busy doing all of those things, but what’s already there is working incredibly well.  That’s why we decided to double down with our investment in BigDoor and lead another round of investment into the company.

In addition to announcing their new funding round, yesterday BigDoor also announced they were bringing their gamified rewards program out of private beta, so it is now available to everyone.  They currently have a huge pipeline of publishers they are working with, but if you manage a website that is struggling with that never ending challenge of loyalty and engagement, give their gamified rewards program a look and let them know what you think.

I love getting post board meeting emails that are retrospectives from execs in the meeting. This one came a week ago from Jeff Malek, the CTO and co-founder of BigDoor. They’ve been on a tear lately and are in the process of a massive set of Q1 launches for new customers. 

We had a solid board meeting, but I suggested they were being too casual about a couple of things, including communication about what was going on. This is NOT a casual group and I knew using the word casual would press a few buttons. And they did – the right ones. Jeff’s retrospective is awesome and he was game to have me share it with you to get a sense of what’s inside a CTO’s head during and after a board meeting.

I have a retrospective addiction.  But as a result of looking back at our meeting today Brad, words like ‘casual’ still ringing in my ears, I recognized I’d let some of my own assumptions drive away potential opportunities, maybe even creating some problems along the way.  I’ve always run under the assumptions that :

1. your inbox is an order of magnitude more onerous than mine (quite)
2. the best way to respect and value your time would be to limit email/communication
3. you and Keith have regular communications complete with bits about what I’m up to and thinking
4. you know even in the absence of communication from me that I’m working like a madman, doing everything I can to make it happen
5. you also know through some process of osmosis how much I value you, Foundry, your approach, feedback, etc

Just so you don’t get the wrong idea, it’s not that I took your feedback and concluded that I needed to give you more BigDoor insight, or that you needed more info in general to get a better picture – that’s what the numbers are for.

So while all of the above assumptions are probably true to some degree, here’s the new protocol I’m going to start optimistically running under:

1. thanks to your candor and aversion to BS, you’ll tell me to STFU as needed
2. you’d like a concise ping about whatever, whenever from me
3. you’ll give me feedback if/when it makes sense to, and I won’t expect a reply otherwise, unless I’m asking a direct question
4. doing so is likely to benefit both of us, one way or another – hopefully more candid feedback will ensue
5. you know that I value your time highly, and mine specifically in the context of devoting most waking hours to making BigDoor a success
6. you know that I am incredibly grateful to know you and have you as an investor

Those are my new assumptions.  I felt like giving this topic some time and thought, glad I did, will keep it (mostly) short going forward but hopefully you know a bit more about where I’m coming from, out of this.

Thanks again for the time today, I thought it was an awesome f-ing meeting.   I always leave them on fire.

Today one of our portfolio companies BigDoor announced the acquisition of San Francisco-based OneTrueFan, a community and web check-in company. We invested in BigDoor a little over a year ago and they’ve made amazing progress on their gamified loyalty platform since then. In addition to having over 300 live customers, BigDoor is also conducting a private beta of a truly innovative solution that they call the Engagement Economy, and we expect it have long lasting implications on how the digital world engages and monetizes their audiences.

Recently the market demand has been outpacing their ability to keep up, so they turned to OneTrueFan as a means of accelerating their product development and overall growth. When there is a great fit, I love seeing our portfolio companies make acquisitions. In this case, BigDoor gains access to a team of incredibly talented entrepreneurs (led OneTrueFan co-founders Eric Marcoullier and Todd Samson), thousands of publishers, and tech that fits perfectly into BigDoor’s gamified loyalty platform.

The former OneTrueFan team will be primarily focused on building and running a BigDoor branded rewards program that is targeted to long tail and medium size web publishers. When they launch BigDoor Rewards next month, it will carry with it many of the same characteristics publishers loved from OneTrueFan; brain-dead simple to implement, great analytics, increased content sharing, and far more user engagement. Shortly thereafter BigDoor will be taking the wraps off of their Engagement Economy private beta, and making it publicly available to larger publishers and online communities.

Todd and Eric have been friends of mine for a long time. Between the two of them they have co-founded IGN.com (IPO in 2000, acquired by NewsCorp in 2005), MyBlogLog (acquired by Yahoo in ’07) and Gnip (which I’m an investor in). Needless to say, I’m excited to see what happens as they join the BigDoor team.

I’ve thrown my hat into the SXSW Panel Picker this year – please click here to upvote my panel titled An Inside Look at BigDoor’s Venture Funding.

I’ve never presented at a SXSW panel because I usually like to stay flexible and check out whatever’s interesting, but we came up with an idea that got me excited enough to commit. An Inside Look at BigDoor’s Venture Funding is going to be me, Keith Smith (BigDoor CEO), and Andy Sack (Lighter Capital, Founder’s Co-op, and the TechStars Seattle Managing Director). Both are good friends of mine and have really interesting philosophies about startup funding.

I think Keith was once quoted as saying “I’d rather give up my left nut than give up equity in my company” and having gotten to know him over the past couple years, I don’t think that’s far from the truth. Keith has over a decade of experience running startup companies and is extremely passionate about BigDoor, which made him aggressive in any discussions involving giving up a stake to both Founder’s Co-op and Foundry Group.

Andy’s a serial entrepreneur who has spent the past few years working on ways to make the funding process better for entrepreneurs. He led the first round of funding for BigDoor through Founder’s Co-op, but used a creative structure, partly because Keith is such a stickler on valuation. Andy and Keith will discuss this more on the panel, but they used a RevenueLoan approach to bridge the gap on price.

The RevenueLoan structure is something new Andy’s been working on at Lighter Capital, where instead of making an equity investment, they get a set percent of the company’s revenues over time. It’s a cool idea that worked out well for Andy and Keith, since it got Keith the funding he needed on terms that Andy was comfortable with.

As a side note, Lighter Capital is the leader in a new funding approach called revenue based finance which is an interesting alternative for entrepreneurs to fund growth in their small business. I may write about this more in the future, but in the meantime Lighter Capital is funding an “explosive” company in August (you’ve got two days left to apply), a fun idea to keep small business funding interesting and worth checking out if you need 100K to 500K right now.

During the panel, I plan to bring Keith and Andy water to support them, as is my typical role. I actually didn’t like Keith’s business when I first came across it but as we got to know each other he did an awesome job keeping me in the loop, listening to my feedback, and iterating, so after about six months, I came around especially to Keith but also to BigDoor’s business. I’ll be giving my thoughts on how Keith convinced me to invest by just running his company and interacting with me over an extended period of time rather than by pitching me.

If you are into this, upvote our panel. Either way, I’ll see you at SXSW.

Many of the companies I’m an investor in are hiring a lot of people right now. For a current view, take a look at the Foundry Group jobs page. I’ve interviewed and hired a lot of people over the year and I’ve developed my own perspective and philosophy on the best way to do this. However, I don’t feel like I have all the answers so I asked a few people that I respect a lot (and fit in my definition of VP of People) to weigh in with their thoughts.

Ring Nishioka from BigDoor is up first. I’ve loved working with Ring over the past year as he’s helped grow the BigDoor team from five people when I first invested to the 20 or so people it is today. Ring totally gets it, has a great interviewing philosophy, and also has a fun blog called HRNasty. Enjoy.

Interviewing sets the tone of the culture to everyone that comes into the company.  This is the very first exposure to the company. It can be an effective tool to use to not only set the culture with new hires but to reinforce the culture to existing hires involved during interviews.  If you want a culture of teamwork, reinforce that during the interview process.  If you want a culture of “always closing” reinforce that.  Ring the bell during an interview and let the candidate know you celebrate closers.

I believe that everyone who comes into contact with a candidate should go through interview training.  Even if the person doing the interviewing is a senior person, they should hear from the HR department what the company’s interviewing philosophy is.  Just because they understand the Microsoft interviewing philosophy and conducted interviews there for 10 years doesn’t mean they know how to interview at a small startup, or what that start up is looking for.  Interviewers should understand exactly what the company is looking for in the position, what specific questions need to be asked and how to represent the culture.  If your company uses Behavioral Interviewing, that should be shared.

The candidate should have a consistent experience between interviews.  Interviews hopefully consist of the following:

• Introduction from the person doing the interview including name, role, and tenure, and what they like about working with the company.
• Offer of a beverage and the opportunity to use the restroom.
• Explanation of what will happen during the interview.  (We have some questions for you, I’d like to be able to answer any questions you have at the end, HR will tell you what your next steps are)

When I worked in Corporate America, we would dedicate an entire day to interview training through an interviewing class.  A long time you think?  This is the vehicle that will vet out the folks that you are going to pay 1000’s of dollars a year, maybe 100’s of thousands.  Why wouldn’t you invest a little time into interview training?  This will be way too long for most startups, but again, interview training can reinforce the culture.  We had a lot of exercises including mock interviews in this class.  We wanted folks to complete six mock interviews before letting them loose on our next potential candidate and chasing them to the competition. At BigDoor, I spend about one hour explaining our philosophy and then follow up with candidate specific training.

Even if the candidate is not qualified, you don’t want the candidate walking out of the interview feeling crushed, dumb, or stupid.  Even if they are dumb or stupid you want them to walk out of the interview wanting to work with your company.  Sometimes, when folks are not able to answer an interview question, the person doing the interview feels like they are wasting their time and body language conveys this.  There is nothing worse than feeling put out while going through an interview process.

If the candidate isn’t a fit now, they may be a fit for another position in six months or two years.  You want the candidate feeling like your company is a great place to work and remembering the experience as one of the best, especially if they made it through a few rounds.  You want them telling their friends and family about your company, your openings, your products and especially your team.  Just like we all share are car buying stories, we all share our interview stories.  This is free advertising and the person that you are interviewing probably has friends with similar interests.

Most of our initial interviews are at a local coffee shop.  I am trying to create a situation where the candidate is a little less nervous, and it is a more of a personal atmosphere.  I want to create a personal connection between our company and the candidate.  This isn’t something that most recruiters at the larger companies will do, and can set us apart.  I want to see the best in a candidate; I don’t want to see their “nervous worst.” Some folks will feel like if they aren’t able to perform in a job interview, they won’t perform in the work environment.  I believe that if you have the support of your peers, you know what is expected of you, you will perform better.  You don’t have either of these in a sterile interview room.