VCs: Deal With Them
Bain and Co. is getting a bad rap. There it is, I’ve said it. Might not be the coolest thing to say these days, but if you’re in the digital marketing, commerce or measurement business, you’re in a business that Bain has very positively affected. It’s time for the media to better understand Bain and embrace their presence.
Batman villains and political mudslinging aside, Bain and other VCs deserve better treatment and perception these days. They have essentially built this business and continue to build it. And if you don’t like Bain, I have some news for you. In the next several months, they’re about to play a major part in how this business is measured.
Bain is a driving force behind the IAB 3MS initiative (key components being the viewable impressions shift and online GRPs). That initiative is bound to create its own controversies, which is fine. Nobody said we all have to sing from the same sheet music here.
And in full disclosure, Bain is not an investor in our company. I just know from my experience in this business that the Internet is built on venture capital, like it or not. The current round of fire being aimed at Bain, Private Equity, and VCs is simply uninformed. It doesn’t take into consideration what firms like Bain do. The venture capital process requires companies to scale quickly and make quick decisions. It’s the bed you make.
The Bain of the Matter
Bain has built an excellent reputation and should be not be tarred by negativity, regardless of your politics. Fred Reicheld (NetPromoter System) was a Bain principal who placed a spotlight on poor customer service, showing big and small how to measure theirs effectively. Many ecommerce companies have been built with Bain financing and expertise: DoubleClick, LinkedIn, Gartner Group, m-Qube, ProfitLogic, Shopping.com, Staples, Taleo, HookLogic and vAuto.
Some media pundits have accused Bain of being outsourcers, job destroyers and worse. Again, this is not a political issue for me. But we need to look at these practices and how they helped to create the companies that grew as fast as the Internet needed them to grow.
Private Equity and Venture Capital companies do create jobs; they create opportunities. The Internet experience has proven this. In my experience, when it comes to anything digital, normal growth curves go out the window. Look at Internet usage since 2000. There were only 361 million Internet users in 2000 – in the entire world. For perspective, that’s barely two-thirds of the size of Facebook today.
There are now more than five times as many Internet users today as there were in 2000. Without access to fast capital, there’s simply no way to keep up with that kind of growth.
While VCs have helped create almost every Internet company, they have changed the business model and trajectory of growth a lot more. Ask anyone who has run for political office. Ask anyone who used to be in the Egyptian government. Ask any of the Egyptian citizens now enjoying more freedom.
Partners for Growth
As Jamais Cascio, research fellow at the Institute for the Future in Palo Alto wrote in Newsweek recently: “The Internet is a rather brittle weapon of transformation. If the icon of revolution in the 20th century was the AK-47, for many observers the 21st century icon is the Internet-connected cameraphone.”
More seriously, Internet technology has displaced jobs at retail, publishing, financial services, and several service industries. The newspaper industry of my father’s era helped put me through college--probably couldn’t do that today. Like any huge technological leap it has created some jobs, destroyed whole businesses and displaced entire industries. This has happened several times since the industrial revolution. Remember TV antennas? Landlines?
What Private Equity and Venture Capital companies do is a matter of choosing the devil you know. They apply pressure to executives to produce top-line results, and if you don’t produce the necessary top-line results, you’re going to cut it from operations. That’s why call centers have been outsourced. That’s why some types of manufacturing is offshored (yet some, like BMW, thrive in America). It is a simple fact of business life. They are not patient by nature. Their speed is built for the Internet.
Now, Bain embarks on the 3MS initiative with the IAB, MRC and other groups to change the definition of an impression to a viewable impression, and get closer to online GRPs. I expect that the 3MS initiative will bear the Bain hallmarks of speed, thoroughness, aggressiveness and revenue-centric attitude. That was a nice way of saying the 3MS initiative is going to happen quickly and profitably for those involved with minimal tolerance for rebellion.
Which is fine. Private Equity and Venture Capital firms have been unforgiving but perfect partners for Internet growth. Deal with it.
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Hughes grew eBay’s Half.com from zero to 8 million online customers as its VP of Marketing in less than three years. Half.com was sold to eBay for over $300 million six months after launch. He has spent close to $100 million online ad dollars, which planted the seeds for creation of C3 Metrics’ attribution algorithms and arrival in 2008—seeing the need to help Advertisers and Networks discover previously missed revenue drivers and increase ROI. Hughes brings a wealth of creative and quantitative experience in consumer marketing from PepsiCo’s Pizza Hut Division; Pep Boys, the automotive aftermarket retailer; and American Mobile Satellite (now XM Satellite Radio). Hughes is the son of a Pulitzer Prize winning journalist, and Hughes’ own book, "Buzzmarketing," is published in 15 languages. In its first year of release it was heralded by Fast Company as one of "The Ten Best Business Reads of the Year" and named by The Financial Times of London as one of the ‘Best Business Books of the Year’ along with "Freakonomics." Hughes holds his MBA from Columbia Business School in Marketing & International Business.