The Gyft That Keeps On Giving

Yesterday, I posted my exclusive Q&A with CJ MacDonald, founder & COO of virtual gift card company Gyft -- a company backed by Manatt Digital Media Ventures (my company) and Google Ventures, among others.  The company is less than one year old, but already is generating millions of dollars.

In my Q&A, I pointed out that Gyft is donating 100% of its profits in December to a worthy cause -- the Immunity Project -- a team of scientists and entrepreneurs who are offering the HIV vaccine for free to people around the world.  But, this point was buried -- so I raise its visibility here.

Why?  Because it is the holiday season after all -- and, as cliche as it sounds, it is the season of giving.  Gyft does just that.

Yes, that is a smart business move.  But, it is a real commitment nonetheless -- one that is worthy of two consecutive days of visibility.

5 Questions with Gyft’s COO CJ MacDonald -- My Exclusive Q&A

      Gyft is a digital media/e-commerce company I have been watching for some time.  The company takes a unique approach to gift cards, which are a staple of the holiday season.  Gyft offers virtual gift cards -- and enables the transfer of value from physical gift cards already purchased -- to your mobile phone so that you never lose that value.  Gone are the days that your cards are discarded into some drawer and never seen again.  Now, that gift card value is never lost.  And, merchants don’t mind because -- and this is something I previously didn’t know -- they were not able to book gift card revenue anyhow until those gift cards were actually used.  

      My company, Manatt Digital Media, is an investor in Gyft.  So, I believe.  We believe.  So does Google Ventures -- also an investor.  The company -- which is based in the Bay Area -- is less than one year old.  Yet, it already has generated "millions of dollars of revenue,” in the words of co-founder & COO CJ MacDonald.  Even more impressively, CJ expects several millions more in revenues being generated in the Thanksgiving to Xmas period.  And, get this -- in a perfect ode to Thanksgiving (with an emphasis on “giving”) -- CJ and Gyft are donating 100% (yes, 100%!) of all of its profits to a worthy cause for the entire month of December -- to the Immunity Project.  So, Gyft is not your typical e-commerce play.  It is innovative, disruptive (in the most positive of ways where everyone wins), and has a social conscious.  

      With that intro, here is my exclusive Q&A with co-founder & COO CJ MacDonald:

      (1) What is the reason your company exists (and what problem(s) are you looking to solve)?

Over $100B is spent every year on gift cards in the US alone.  90% of these cards are plastic and often end up lost, stolen or forgotten.   At Gyft, our mission is to digitize the Worlds gift cards and make it easier for consumers to transact.  The reality is most people have their phones on them at all times so why not store your gift cards on your phone.  Gift cards are becoming more and more popular and our vision is to streamline the market.

     (2) How are you different from your competitors?

Biggest difference is we are focused 100% on gift cards.  There has been a lot of buzz recently around social gifting and mobile wallets.  Gyft is often thrown into one of these buckets.  We spent a lot of time thinking about the consumer experience and wanted to make sure we built something simple and elegant.  We often get requests to add loyalty cards and coupons but need to tackle and provide the best experience around gift cards before we tackle anything else.

     (3) Why will you succeed (and what is your single most important ingredient for success)?

We have a team full of Rockstars!  We have a great product! We are tackling a massive problem for both retailers and consumers. They key is focus, execution and passion but we are in an excellent position to disrupt a massive market.

     (4) What makes you unique (and what do you enjoy most outside of building your business)?

I never take “no" for an answer or leave any rocks unturned.  There are a lot of ways to make money but I believe you have to be passionate about what you are doing in order to be extremely successful.   Family is #1 and I love sports and the outdoors.  I try to surround myself with people smarter and better looking and I believe you get out of life what you put into it.

(5) What digital media trend is most interesting to you (and what is the least)?

The most fascinating digital media trend is hands down the evolution of Bitcoin.  Watching the Bitcoin price skyrocket over the past 45 days and all the media love/hate relationship is very entertaining.  You have to admit there is something there.  Least favorite:  Lack of mobile adoption from large companies.  So many massive companies and players trying to play catch up these days.

"Moneyball" Investing Poised to Disrupt the VC Game? Google Ventures Thinks So

As the new CEO of Manatt Digital Media Ventures, I play, in part, the VC game.  I and others at Manatt actively seek deal-flow and evaluate investment opportunities with early-stage digital media and tech companies in which we can add value.

Venture investing, of course, is a subjective exercise.  One person's "absolutely-in" investment decision is another person's immediate "pass."

Or is it?

That certainly is the conventional wisdom -- i.e., that venture capital is significantly based on individual differentiated intuitive judgment "calls" and gut feelings.  In the words of Matt McIlwain, managing director of Madrona Ventures, "the intuition part is ultimately the biggest factor."

Google Ventures, however, disagrees for the most part -- and takes its "big data" approach to anything into the realm of venture capital.  In a recent New York Times article, Bill Maris, managing partner of Google Ventures said the following:

"If you can't measure and quantify it, how can you hope to start working on a solution?  We have access to the world's largest data sets you can imagine, our cloud computer infrastructure is the biggest ever.  It would be foolish to just go out and make gut investments." 

Google's "big data" analytical approach to venture capital feels awfully like the Oakland A's "Moneyball" big data analytical approach to baseball that disrupted the game of baseball back in the day --  a sport that had been steeped in the subjective gut feelings of old-school baseball scouts who judged the look and feel of baseball prospects.

So, is Google doing the same thing here?

Let's take a closer look.  First, Google Ventures itself does not rely upon big data alone.  General partner Graham Spencer concedes that he is "distrustful of any single factor in determining entrepreneurial success."  Even further, in his words, "We would make an investment in a founder we really believed in, even if all the data said we're making a mistake."

This sounds closer to the traditional model of investment, although Google Ventures' approach falls significantly onto the analytical side of the spectrum.

Let's look at that "traditional" approach.  Yes, some VCs invest purely on "gut" feels.  But, based on my experience, that is the exception, rather than the norm.  Most VCs, instead, do weigh a number of "objective" factors, including the track record of a start-up's founders, CEO.  There are real numbers here.  According to the New York Times article, blue chip VCs Kleiner Perkins and Sequoia, for example, track "how many times a start-up is mentioned on Twitter, or where it ranks in the App Store."  And, of course, any good VC looks at the trajectory of the company's "traction" in terms of adoption when that kind of data is available.

So, yes, some VCs are purely data-driven, essentially throwing out the concept of subjectivity and judgment (Ironstone, for example).  And, some are on the complete opposite end of the spectrum (although these are very few -- and generally are angels).

In other words, perhaps we're all not so different after all?

At a minimum, I absolutely believe that "big data" will play an increasingly important role in the overall VC calculus.

Generally, the more data and factors smartly considered -- objective or subjective -- the better.