OpenView Labs Aims to Prime Portfolio Companies for Big Growth
“We have this idea of providing real value to our portfolio companies. If we’re going to call ourselves partners, we really need to be partners.” he says.
Plenty of venture capitalists say they like to take that partner approach to their investments. But OpenView is backing that statement up with staff and infrastructure dedicated to sales growth and more.
That comes in the form of what the venture firm calls OpenView Labs. At first mention, OpenView Labs sounds like it would be the name for an incubator arm at the firm. But, as my colleague Greg has written, OpenView brands itself as an “expansion-stage” venture firm, eyeing investments in the more complex business-to-business and cloud computing software spaces. Its target companies already have annual sales between $2 million and $20 million, so, no, its Labs aren’t about helping young mobile or consumer software startups develop their technology or roll out a beta version of their product. Instead the unit is focused on helping its startups tackle the more grown up challenges of recruiting and hiring talent, identifying key markets, and generating sales leads.
To that end, the company has four full-time recruiters, who have filled about 100 jobs across OpenView’s portfolio companies in the last few years, says Zimmerman, who oversees the Labs operation. The goal is to fill another 200 this year.
We said the OpenView Labs is past helping startups toy with their technology. But sales and marketing strategy are another story. Startups at the expansion stage need to work in refining exactly which market their targeting as their customer base, says Zimmerman.
“They’ll say, ‘we sell to small businesses.’ That’s not enough,” he says. So Labs has an entire research and analytics team focused honing and refining exactly which sub-markets and customer segments portfolio companies should be targeting. It starts with Internet research and goes all the way through calling and surveying customers in the potential markets, says Zimmerman.
Once the Labs gets the companies primed with staff and a market to go after, it helps them build their marketing message around those customers, and then find specific sales leads. That third component is what Zimmerman calls the Labs’ “go-to-market” team.
Zimmerman puts companies in three categories: startup (figuring out the technology and idea), expansion (building revenue and refining a target market), and growth (preparing for an exit). “We’re focused on everything it takes for an expansion stage company to get to a repeatable model to drive it to growth stage,” he says. The firm typically invests between $5 million and $15 million in its startups, and aims to get them to $100 million in revenues.
OpenView has 18 companies in its portfolio, with seven actively using the Labs. The firm charges their startups a “nominal fee that most of them laugh off” to access the OpenView Labs consulting services, says Zimmerman, noting that if the Labs hires five employees for a portfolio company, it pays for itself.
OpenView will even go so far as to move companies so they can access the best resources. Take one OpenView portfolio company that’s based in San Francisco. (Zimmerman wouldn’t publicly disclose that company’s identity). “It was a hot company that struggled to build a pipeline,” he says. So the Labs has helped hire and put together a part of that startup’s sales team in Boston, an area strong in sales and lead generation talent, says Zimmerman. The company is now looking for permanent office space in the city.
The Labs strategy plays into OpenView’s broader investment outlook, which doesn’t buy into the idea that it’s OK for a chunk of the portfolio to flop if a few companies are blockbusters. “We look at each portfolio company equally—each one of our companies needs to succeed,” says Zimmerman. “We’re not going to throw 10 out there if two become rocket ships and eight die. It’s not our philosophy.”
Erin Kutz is an Associate Editor for Xconomy. You can reach her by e-mail at [email protected] or by phone at (617) 252-0700, or follow her on Twitter at @erkutz.