Crooning a Different Tune1 Oct, 2011 By: Doug McPherson Response
TV and Internet management veteran Doug McCormick turns his talents to venture capital, helping Rho Ventures tune into the best media buys.
To better understand Doug McCormick, the man who can green-light millions for a new media company start-up, you first need to know you might find him in a bar belting out karaoke songs. One of his favorites is “My Way,” made famous by the legendary Frank Sinatra.
To look at McCormick, it’s a bit of a stretch to picture him on stage. He does indeed look more like a venture capitalist than a singer — he’s in his 60s, getting thin on top and dons a gold watch. But he does have a winsome smile and a twinkle in his eye that denotes a fun-loving spirit. And clearly, the “My Way” lyrics fit him like a glove:
I've lived a life that's full
I traveled each and every highway
And more, much more than this
I did it my way
And he’s been doing it his way since a young age — age 7 to be exact. There’s proof of it in a first-grade report card (which he still has). In it, the teacher writes, “Douglas insists on pursuing his own interests.”
Singing is one of those interests. Evidently, he can carry a tune. He recalls a quick karaoke story when he and his wife, Kasia, were in Dallas. “I have a very beautiful wife. People are always coming up to me and telling me I’m a lucky guy,” he says. “But one time I had just finished singing a song on stage and came and sit down next to her, and these two guys came over and told Kasia she was a lucky girl. I think they liked the way I sang.”
Turns out, if McCormick hadn’t taken the road of business (today he’s a partner with Rho Ventures, the venture capital firm behind some game-changing media companies), he likely would have been a performer. In fact, that’s the road he started down as a youngster.
“I’ve always liked music, and I thought why not sing and write some for myself,” he says from his office in Manhattan.
Once while performing in a small bar in Greenwich Village in New York, some producers who were there to scout another singer liked what they heard from McCormick and signed him up to a songwriting contract. He ended up penning lyrics for songs that Paul Anka, Dusty Springfield and Gladys Knight all recorded.
But practicality won out in the career game. The transition from stage to desk wasn’t that abrupt: “Writing and performing and being on stage, and performing on a conference call and reporting quarterly results aren’t all that much different. And in a conference call you don’t see as many people spilling drinks, at least when it’s a good quarter,” he says with a laugh.
Ear for Music; Eye for Business
No one knows what McCormick’s career would have looked like had he stuck with songwriting. But if Grammys were awarded for business, he’d have a few shiny ones on his shelves. He has hit some very high notes in business. He may have a good ear for music, but his eye for business — well, it’s laser sharp.
Before joining Rho in 2006, McCormick laid a jeweled path of success in the media business behind him.
He’s held executive positions at The Samuel Goldwyn Company, Cable Health Network, Petry Television, and KCOP-TV Los Angeles. But he began making serious marks at Lifetime Entertainment Services, where he held several roles in sales, marketing and research ending up as the CEO from 1984 to 1993. Then from 1993 to 1998, he served as the president and CEO at Lifetime Television Network. There, he coined Lifetime’s brand slogan, “Television for Women.”
During his run, he helped hoist the company’s market value by more than $3 billion in five years, growing primetime ratings by more than 100 percent, and quadrupling revenues.
McCormick then turned his talents toward the Internet, joining iVillage Inc., the women’s online gathering spot, in 2000, becoming its CEO and then helping sell it to NBC Universal in 2006 for more than $600 million.
Getting to Know Rho
McCormick’s transition to Rho Capital was a natural next step in his career — Rho helped finance iVillage.
“I enjoyed iVillage and getting to know the Rho board. I liked their integrity and their dedication to hard work,” he says. “I’d done songwriting, TV and the Internet, and I thought why not take the experience I had and sit with new CEOs and help them when they’re backed into a corner. Sometimes they need context, someone to bounce things off of. We do a lot of that and that differentiates us from other venture capital firms. It helps to have someone from a certain background sometimes … there are not a lot of people who have run a company, but I’ve run two of them.”
For Rho, it was a no brainer. “Doug has had tremendous experience and success and he complements our investor DNA perfectly,” says Habib Kairouz, a managing partner at Rho Ventures. “He’s unique because he understands both worlds, plus he brings deep operating experience.”
Today, McCormick is tapping all of his past experiences and has a small garden of different companies he’s nurturing, ranging from vertical advertising networks, interactive TV, local and mobile new media to mobile commerce technology and social networks.
One of those start-ups that impresses him is Lucid Commerce Inc., a company applying the fundamentals that have driven direct mail performance for decades to TV advertising.
“It’s the most revolutionary thing I’ve seen since the advent of cable,” McCormick says.
Lucid is helping advertisers target media placements more effectively, tracking results generated by those media placements, and then reporting and analyzing the results from those media placements after they run. In essence, it’s attributing post-sale customer metrics to each media placement and then reporting the average lifetime value of a customer resulting from each placement so marketers can make better investment decisions. The technology allows users to predict the profitability of more than 200,000 ad placements with a high degree of accuracy, attribute Web orders and leads to the TV placements that generated them, and eliminate the time and effort spent creating and analyzing media reports.
“They’re bringing more accountability to TV advertising; it’s a great disruptive technology,” McCormick says. “Today, most TV is bought on age and affluence, but those tools don’t provide the fine-tuning that an Internet buy would. Now there’s enough data to target consumers in more scientific ways.”
Another company McCormick likes (and that Rho is backing) is called XGraph. It pioneered socially targeted online ad campaigns and focuses on a brand’s core customers and then identifies millions of other like-minded people who can be reached online. The result, the company claims, is that XGraph custom audiences outperform other methods of ad targeting.
In general, McCormick says advertising is in a great place today, and he’s enamored by the interactivity that technology is bringing to the table. “This is great news for the industry — it allows cross-media of TV, print and Internet. We’re seeing light, sound and motion added to advertising, and it can be only good news for advertisers. It’s a wonderful trend of technology and (this kind of advertising) can tell the tale to consumers who want to learn more.”
The Rho Way
McCormick says Rho differs from other venture capital firms in that it “gets involved deeply” with the companies it backs.
“We want to understand the ecosystem of the companies. Rho wants to be there and be accessible to CEOs and have them come to us with issues and not be afraid to share things with their investors,” he says. “We also have deep Rolodexes, and we’re able to attract people who worked in the same areas as our companies.”
He says he looks for three key assets in businesses that are seeking funds:
1Large markets. “We want to invest in companies that will be serving fairly large markets. We want the total market to be a billion dollars within five years. We can start out giving $5 to $10 million of capital the company can work with and start to execute their plan. We like to know where they expect to be in five years. And hopefully, the next round of capital comes up, and the company is worth more over time, that we’re building a business that will be serving a very large market and that we can get a decent exit on our investment.”
2Management. “We want bright people with previous success. We want to see the talent of the individuals who can go into a boardroom and get their ideas across. Even the best salesmen won’t make a bad idea fly.”
3Previous track record. “We like to see a great manager who has worked with venture capital before, someone who knows how to work with venture capitalists. It helps to have had a big success in the past, but we can look at failure and see why it failed. It could have been that the market moved and that it didn’t have anything to do with the individual. Entrepreneurs can have a lot of plans, but we like to see how they handle things when things don’t go as planned. It’s like a flight plan from New York to L.A. We like to see how they handle it when the first turbulence comes and takes them off course 100 miles. Can they make the changes to their game plan and keep going?”
McCormick’s advice to start-up media companies: “First, understand that all the slow rabbits have been caught, but that there’s always room for a good idea. Stay relevant to your marketplace and make sure you have a fair number of young people working with you — they know new media better than people who’ve been in media.”
One of his favorite sayings about venture capital is this: “To me – any business that doesn’t create revenue isn’t a business. It’s a hobby.”
He likes to tell new entrepreneurs that there are two very important things to remember about creating a successful business: “One is growing revenues … and I forget the second,” he says with a laugh.
Despite all the profit-minded talk, McCormick clearly has a soft side. When asked what he’s most proud of in his career, he says helping Lifetime win an ACE award for getting a bill before the U.S. Congress to guarantee 48-hour hospital stays to cancer patients who’ve had mastectomies.
“Some women are given mastectomies — I mean serious, major surgery — and then sent home the same day because of insurance companies,” McCormick says. “We thought that was nuts, and we put it on the air to expose it. We ended up attracting enough attention in Washington to get the bill on the floor.”
He adds, “If you get those kinds of wins in life, it makes you feel pretty good.” ■