October 1, 2006
I haven’t posted in a while. Unfortunately there has been little time, as I have been working around the clock with my team to launch a new Venture Capital firm, OpenView Venture Partners, located in Boston, Massachusetts. Today, we officially launched the firm with the closing of our inaugural fund on Friday night. Given my excitement about this new venture, I thought that I would take the time to share our concept and some of the details. (Also, take a look at the new website, www.openviewpartners.com.)
The overarching thrust for the firm is Operational Value Add (in addition to capital) for InfoTech companies, who have reached the expansion-stage of company development (as in “I have a product and some customers, Now What?”), and are located anywhere in the world.
We set the goal of operational value add because, in our experience, this involvement helps improve products, sales and marketing, and customer service. The improvement leads to enthusiastic customers and increased growth rates, profitability, and long term competitive advantage. Net net, the more value we provide, the greater and faster the enterprise builds value.
We developed and refined the approach at our prior firm, Insight Venture Partners (we had been working as its Boston Office). As we evolved the approach, we have found the results to be both significant and significantly different than the approaches used by other firms.
The goal of operational value add is a principle that we have spent a great deal of time operationalizing through a combination of focus, value add resources, and a small fund size. We believe that staying focused, having the best resources, both internally and in our network, and then “putting all the wood behind the arrow” is a great approach for delivering the most value (I gave similar advice to emerging growth companies last year and, again earlier this year). Finally, and perhaps most importantly, we work extremely well and in partnership with our portfolio company senior management (an earlier post on the topic is here). The feedback to date from our approach has been outstanding.
Some details on each of the points:
Our value add starts with the focus that we have on market and stage. With this focus, we have developed a much deeper understanding of the issues and opportunities facing our portfolio companies and have geared our firm to help address those issues and opportunities. Our focal point includes the following:
- Our Market Focus is InfoTech, particularly around companies that configure software, data, and/or hardware into packages that provide meaningful value to their users. At this point our list includes software (all flavors from installed to on-demand), internet, information services, and technology enabled business models.
- Our Stage Focus is Expansion Stage. Expansion stage to us starts when a company has worked out the major kinks in its core product, has begun to address its first market, has a viable approach to reaching the market, and has some customers that use, like, and reference the product. (Generally, a good proxy for this is company revenue in the $500k to $1MM per quarter at a minimum with good historic growth).
- Our Geographic Coverage is Global. Our belief is that expansion stage InfoTech companies all need to develop a global presence, so the starting location is not as important as the company’s desire to expand globally, particularly in North America (given our North American presence).
We strongly believe that the issues and opportunities that emerging growth InfoTech companies face at the expansion stage are very different than the issues faced by companies in other sectors or in other stages of development. By choosing a sector and a stage, we could then more deeply gear our firm to deliver the most value against that more specific set of issues and opportunities. Separately, we have found that the major issues facing expansion stage information technology companies are independent of their geographic location, enabling us to have a wide geographic coverage (that is, we invest globally) without diluting our value add.
Operational Value Add
Our operational value add programs are described on our website. Our general approach is to determine the key issues facing each portfolio company at the senior management level, compare notes with the management team, help determine the top goals of the company, and then offer each company a “menu” of ways that we might help. The menu includes items such as offering our portfolio companies people on our team for small or large projects, introductions to our network, and/or helping our portfolio companies recruit senior staff and add to the “DNA” of their team.
Our efforts also include a number of functionally specific (sales, marketing, development) “best practice” forums for our portfolio companies. The forums are designed to help our portfolio companies network among themselves and also help to spread “best practices” in each functional area between and among our companies. These forums take the form of one-day events in Boston, each devoted to a particular topic.
My blog is also meant to be an extension of this work. By reading some of the posts in the blog, you can get a pretty good feel for the issues that we work on with the companies and some of the principles that we use to address the issues.
Optimal Fund Size
As OpenView took shape, we thought a lot about the optimal fund size. We believe that a smaller fund is better for both our investors and our portfolio companies, which ultimately makes it better for us. Yet, it was important that the fund was large enough to create a level of diversification and to give us enough time for the portfolio to develop before raising our next fund. Net net, we set the fund size at $100 million, which we believe is the optimal amount to meet our goals.
From a portfolio company perspective, the smaller fund size relative to some of the other VCs means that we will do fewer investments, allowing us more time for each portfolio company. From both a portfolio company and investor perspective, it means that a larger portion of our income comes from creating value in our investments, which results in highly aligned incentives between our portfolio companies, our investors, and us.
Working In Partnership
Finally, and perhaps most importantly, our belief is that we can’t add value without building strong relationships and working in close partnership with our portfolio company management teams. Every member of our team has outstanding professional credentials, great values, and a strong desire to build meaningful relationships with senior management teams. These characteristics, as well as an intense desire to add value, help to create great partnerships between our team and the portfolio companies.
You can Help!
To the extent you are interested and willing to help, there are a few things that you could do that would thrill us:
- The team would be very appreciative if you would be willing to mention OpenView Venture Partners and our URL (www.openviewpartners.com) so that the search engines have an easier time picking us up. Version 1.0 of the site just went live, so it will probably take some time for the spiders and indexers to register its presence. Your mention of the site would greatly help this effort,
- We are constantly looking for people to add to our network globally. To the extent you are interested in helping our portfolio companies, let us know via e-mail, and
- We are always on the lookout for the next expansion stage InfoTech company to meet with (our focus is above). If you know of one, send us an e-mail!
OpenView Venture Partners is all about Operational Value Add aimed at Expansion Stage InfoTech companies located anywhere in the world. Our approach has been in place and constantly refined for several years now and we take great pride in the references that our current and former portfolio companies offer about us.
If you want to participate in some way or have an interesting company that we should know about, let me know. My new e-mail address is email@example.com. I do my best to keep up with the e-mail, so drop me a line. This post marks the end of the beginning of what we hope will be great for everyone that participates!
A Special Thanks
It is hard to talk about the launch of a new fund without reflecting on and acknowledging some of the people that enabled the success. We had a significant amount of help from our portfolio company senior managers, enthusiastic and extremely high quality investors, and our tremendous network of individuals and companies who have helped us be successful over time. In addition, the team at Sparring Partners Capital did a fantastic job as the fund’s placement agent and the team at Goodwin Procter have done an equally outstanding job as council to the fund.
The group that I would like to single out here are my (now technically former) partners from Insight Venture Partners. The partners have been very supportive over the years as I pushed on different initiatives, and since the idea of OpenView started gaining traction they have been extremely supportive, helpful, and generous with their time. In addition, we have been able to work out an approach whereby we will continue to work directly with our Insight investments until each of the investments has grown and exited, something that is extremely important to us given our value add focus. Thanks guys!
EndNote: I have apologized many times to my network that has had difficulty reaching me over the last several months and appreciate the enthusiastic support and encouragement that has come from everyone. I expect that now that the firm is formed and the fund is closed I will be returning to a more normal schedule of focusing on my portfolio work and network and even updating my blog more frequently 🙂
October 25, 2005
I finally got around to setting up my blog. Why? Partially because I give a tremendous amount of advice to emerging growth technology companies that I want to share with a broader audience, but mostly because I have a lot of unanswered questions about the best approaches for building technology companies.
I was finally convinced by my friend Ed Sim that if I posted my thoughts and comments on particular topics then I could expect to receive additional comments and perspectives that I would find useful. both Ed and Brad Feld were encouraging and gave me the basic steps to get started.
My world is different than many VCs, in that I focus on expansion stage companies in the software and internet markets. I define expansion stage as companies that have build a product, gotten some customers, and are now in a position to scale.
The issues faced by technology companies at this stage of development are very different that early stage companies. The major issues are around distribution strategy and execution, but as companies scale they tend to need more formal development approaches and have many other process, organization, skill, and staffing gaps as well. Every CEO is also looking for more leads, customer introductions, and ongoing advice in every category, personal and professional.
The overarching question from most CEOs (not in these words) is “I have a product and some customers, Now What?” (truth be told, I wish most of them said this. In actuality, most have a belief in the “right” direction for the company, but either need assistance getting there or need some help stepping back to 100,000 feet periodically).