OpenView Hopes Scrum Efficiency Will Spark Investing

BOSTON, MA – Boston venture capital firm OpenView Venture Partners closed its second fund at $130 million in April, then went quiet. After deploying its first $108 million fund quickly, making nine investments over about two years, OpenView has so far put money from its second fund into only one startup, Idaho-based marketing software maker Balihoo Inc.

OpenView has instead focused on building a 15-person, in-house consulting shop it calls OpenView Labs, which has been studying a set of software development techniques called scrum, and adapting them for all aspects of management at OpenView’s 10 existing portfolio companies. With this project under way, and broader economic conditions improving, the firm now hopes to resume investing at a faster clip.

Scrum emphasizes an iterative approach, with shortened project deadlines and frequent short, informal meetings. OpenView adviser Jeff Sutherland co-founded and developed the method in the 1990s. “Our goal is institutional transformation,” he said. “We want to take scrum and institutionalize it across the company.”

Other software entrepreneurs are already doing this. Cambridge-based Virtual Goods Market Inc., a digital goods software startup doing business as Viximo, has used scrum in every aspect of management from its founding in 2007, said co-founder Sean Lindsay. The company is backed by North Bridge Venture Partners and Sigma Partners.

“You set the whole organization up to rapidly re-evaluate where you’re at, figure out the next strategic direction you need to take, and make sure all your resources are marshalled in that direction,” he said.

David Vidoni, director of product management at Pegasystems Inc. (Nasdaq: PEGA), said the method is drawing interest from outside software-related industries: Pharmaceutical and insurance clients are seeking Pegasystems consultants’ help using scrum to restructure such units as call centers.

At OpenView Labs, portfolio companies can opt in for services by paying a quarterly fee of $25,000 to the firm — an arrangement that is unusual among venture capital firms, to say the least.

Intronis Inc. CEO Sam Gutmann says it’s worth it. Intronis, which makes online data storage for small and midsize businesses, took a typical investment from OpenView in 2007 — $5 million in an unsyndicated round — and moved to Boston from the company’s original New Jersey location. Like all OpenView investments, it was generating steady revenue and growth.

Gutmann wouldn’t share revenue numbers, but said Intronis’ sales have grown 50 percent yearly since OpenView’s investment. Currently, OpenView Labs is using the scrum approach to incubate a telesales unit for Intronis — developing scripts, hiring sales staff and managers, and training them.

Rather than linking portfolio companies to a network of potential executive hires, OpenView Managing Director Scott Maxwell believes in keeping it under one roof. “It’s not just the person, it’s the overall process and refining the process,” he said. “There are people out there. They’re just really hard to find. They’re easier to create.”

Maxwell, who left Insight Venture Partners to form OpenView in 2006, is now shifting some staff away from working with portfolio companies on operations, and toward sourcing new investments. In the summer, OpenView hired a new principal, former Battery Ventures associate Adam Marcus, boosting its investing team to five.

Leading up to this year, “we had just made a lot of investments,” Maxwell said. “We had a lot of work to do with the portfolio companies. With the recession and reduced resources, the pipeline got leaner. It just feels like a great time right now to find some investments as the economy starts to recover.”