Overcoming a Bear of a Communications Gap

It's no surprise that relationships are the driving force behind the business success of firms like Kodiak Venture Partners--finding investors and potential business partners is what venture capital is all about. And because Kodiak focuses on seed and Series A funding for technology companies in eastern North America, missing out on an opportunity can be fiscally disastrous. What is surprising is the difficulty most such businesses have in leveraging those relationships. "The biggest challenge with venture firms is that the partners know a huge number of people, but the organizations do a poor job of consolidating that information in any meaningful way," says Steve Maxwell, recruiting partner for Kodiak. The company has seven investing partners and two operating partners, managing three funds composed of more than 40 active portfolio companies--that's a lot of data to put together. Finding investors and executives is best done through personal relationships, and when that well turns up dry, Kodiak must use an executive search firm. That takes time and costs money. The typical search fee is equal to one-third of the successful candidate's total first-year compensation. "Sometimes you'll do a search for a venture-backed partner, and two months in the partner says, 'Oh, I know somebody there.' It feels like a real waste," Maxwell says. "It's also a bad feeling when you end up at search and it's somebody you discover you knew all along." Leveraging relationships was the problem for Kodiak, but it also turned out to be the solution. "Kodiak was looking for ways to catalog, track, and search relationships within their own company. One of Steve's colleagues at another VC firm, Graylock Partners, mentioned that we were building a system for them to do just that," says Jakki Glivicky, senior director of marketing and communications for Contact Networks. "He contacted us to see what we could do for him." The company's ContactNet automated search tool helps professionals generate more new business by enabling them to leverage their firm's entire extended network of relationships, identifying colleagues that have the strongest relationships with a valuable prospect. "We have an easy methodology, which is a very good fit for Kodiak," Glivicky says. The system "ContactNet lives on the server, providing the same level of functionality to small companies as to large ones." According to both sides, the interface is similar to an Internet search engine, with all the ease of use that entails. But one of the best things about ContactNet is its quick implementation time: According to Glivicky, the software can be fully active in seven days or less--Maxwell says his company was up to speed in two days. "It was a totally painless installation--they just need access to the Exchange server and you're up and running." He also reports no pushback from the partners regarding implementation. ContactNet helps Kodiak with two modes of use, a recruiting module for locating new executives, and a venture investment search for finding companies to fund. The recruiting module has been especially helpful. "In 2005 we added about 35 new executives to our portfolio, and we were able to find two-thirds of them with Contact," Maxwell says. "Normally, we'd go to a search firm for half of them." Kodiak thus saved a ton on search fees. In addition, Contact helps with sales activities involved with getting additional investors. "I wish our partners would use it more than they already do," Maxwell says. "Those that do really appreciate it." What's next for Kodiak and Contact? We're not allowed to say, except to note that Kodiak is helping develop and test new functionality that will be part of a future Contact release. The Payoff By using Contact Networks to make relationships actionable, Kodiak Venture Partners:

decreased search fee costs by half;

added 35 new executives to its portfolio;

improved understanding of the reach and value of its contacts; and

got first shot at a number of new features.