The first blog post… About OpenView
What to write for my first blog posting… Let’s start with what I spend a good portion of my time speaking to with prospect CEOs… The OpenView story…
We aspire for OpenView to be a new chapter in technology venture capital. We aspire to re-architect the model for investing in and supporting the growth of expansion stage software companies. We are a relatively new growth capital fund, having spun out of a larger growth private equity fund in 2006.
Our model is based on three fundamental tenets:
- Extreme focus on our target segment
- Extreme focus on our investment model
- Extreme focus on delivering operational support to our companies
Our target segment is expansion stage software companies. By our definition, expansion stage companies are those that have emerged from the startup phase with a well defined customer pain point that is being addressed with a competitive solution through a profitable distribution model.
We avoid investing at the startup phase because it requires betting on a number of ideas and waiting for the few winners to emerge. This inevitably means that there will be a larger number of losers. Investors in the startup phase are forced to spread their money, and support, over many companies. The support that the startup investors provide to their portfolio companies (if any) tends to shift away from the companies that falter to the ones that are showing the highest probability of success. The problem is that every company falters, and every company runs into issues as it tries to figure out the right formula. This is where the interests of the investor begin to deviate from that of the entrepreneur.
At OpenView, we avoid the startup phase and subsequently invest in the few emerging winners. This allows us to focus on a fewer set of companies, each with a high probability of success. And it permits us to aim for a portfolio of companies that can all exit with success in one form or another. And it allows us to dedicate our collective attention to each and every company, through thick and thin.
We are also very focused on a specific set of investment criteria. We invest in companies that have reached $500k in quarterly revenue; with 80-100% year-over-year growth; a competitive solution addressing a significant customer pain point; sold in a big market; with a profitable distribution model. Companies with these characteristics have the highest probability of growth with capital efficiency. They are also really hard to find!
Once we invest, we shift our energies on the delivery of extreme operational and business development services. We do this in two ways: first, we made sure that we staffed the firm from top to bottom with operationally centric resources. Ultimately, we are all former operators, not bankers. Second, we invested in OpenView Labs. Labs is a full-time consulting team that is dedicated to working with our portfolio companies to bring best practices to all the key functions. More on that later…
We are not hands-off venture capital investors. In fact, we’re as hands-on as investor get. At a 100k feet, we look more like a management consulting firm focused on expansion stage software companies… a firm that makes money through capital gains rather than fees. More on that later…
Leaders from Twilio, IBM, SurveyMonkey and more share their best tips.
B2B brand and product positioning will only continue to become more important with the rise of the End User Era.