How to set a Wildfire
It’s January, which means it’s “east coast schools visit Silicon Valley” season. Harvard Business School, in particular, does a great job at connecting students with alumni entrepreneurs out here. A week or so ago, I attended one of these HBS events featuring ‘08 alum Victoria Ransom, co-founder of the social media marketing pioneer Wildfire. Victoria started Wildfire during our Summer@Highland program in ‘07, and recently sold her company to Google for an undisclosed (but most likely very favorable) price. Victoria had a couple pieces of advice for the audience, which I’ll share here.
Just say “no” to customization.
Customization leads to low margins, due to a higher level of service and added distraction for the development team. While some companies may charge separately for services, adding a services component in most businesses reduces the ability to scale quickly, even if revenues are higher.
Victoria took the position that Wildfire would build tools for its customers to manage social media marketing campaigns, but would not customize its tools beyond the core feature set. Such behavior should be saved for digital agencies, not tech companies. This decision was a contentious one, since Wildfire was often approached by companies with big marketing budgets demanding special attention. Yet, it enabled Wildfire to have great margins, the evidence for which is how little venture capital it raised to get to a similar scale as its competition.
Use a commission-based sales model with a low base.
Setting a low base salary for her inside sales force created several benefits for Wildfire. First off, sales costs scaled in line with revenue, so the business stayed capital efficient. Second, a high commission structure relative to base attracted a different type of sales person: younger, hard-working, more driven to succeed. Finally, because high commission structures are attractive to those earlier in their careers, the pool of people to hire was significantly larger.
The caveat here is that a great sales machine, which takes inexperienced young people as an input, requires world-class training. As such, Wildfire hosted regular sales bootcamps and promoted its own star salespeople into managers to run them.
Enable every employee to be a recruiter.
In the competitive Silicon Valley hiring market, relying on paid recruiters is an arms race, where the company with more money and more recruiters wins. Wildfire took a different approach. A key metric watched by management was employee churn (excluding those let go for performance reasons). They noticed that low employee churn correlated with a high degree of job referrals from the employee base. No surprise: happy employees tell their friends to come work at their company.
Today, roughly 50% of Wildfire’s new hires come through employee referral. When you’re running a business that scales with a sales machine, that organic hiring ability is a real competitive advantage.