10 strange things about being a VC

by OpenView

As an expansion-stage venture capitalist for 11 years, I still find it strange when I explain to people how a VC firm is different from a typical business.  Here are some of the stranger differences:

1. Our target customer segment is very small

2. We want to meet all the potential customers in our target segment, but we need to turn away most of the potential customers

3. We only want a few new customers each year

4. We pay our customers a lot of money to start the relationship

5. We want our customers to grow their business much, much more than we want to grow ours

6. If our customers don’t grow their businesses, then we will go out of business

7. If we are lucky, our customers end the relationship and pay us a lot of money to end it

8. We need to constantly rebuild our customer base, since 100% of our customers leave us

9. We want our customers to be taken away by a large company

10. Even better, we want our customers to be taken away by a really large, swarming mob!

I am sure that there are a lot of other strange things about being a VC.  What did I miss?

Isaac Garcia – Taking Down Microsoft

by OpenView

In the interview below, Isaac Garcia, Co-Founder and CEO of Central Desktop, former Co-Founder of Upgradebase, discusses what it feels like to be in Microsoft’s crosshairs.

You can watch the video below or on YouTube here.

Value Prop Twitter Style: Central Desktop is: “a cloud-based social collaboration platform for businesses”

6) Isaac, why does the world need Central Desktop?
“Collaboration is really hard. From day one of the Internet, we were promised the dream to connect with people all over the world…and it would revolutionize everything. Fast forward twenty years, it’s still difficult.
Teams within large, small, medium sized companies need collaboration tools that are easy to use, fast to setup and accessible from anywhere and everywhere.”

5) Central Desktop recently transitioned from a startup to a growth oriented company that is clearly here to stay. What did you find most difficult about this transition and what do you wish you had handled differently?
“Two things stand out. One, I wish someone had told me it will take longer than you think. Also, we should have segmented our customers sooner and narrowed our market segment (earlier).”

4) Central Desktop is in a crowded, confusing market, yet you have successfully stayed above the fray – you seem to be in every analysts’ super-duper special quadrant. What have you done to so successfully differentiate Central Desktop?
“The first three years, we spent all of our time on the phone with our customers, even when we were a two-person company. Other companies in our space made it difficult to reach them on the phone.
Analysts are very similar to investors in that they need to be nurtured – you need to have an ongoing dialog with them – it’s about staying on their radar. You can stay in touch with them on a weekly, monthly or a quarterly basis with a simple, analyst-based newsletter that goes just to them so they feel exclusive – like they are part of your inner circle.”

3) Most great companies have inspiring Origin Stories. I am curious to hear how you and your Co-Founder Arnulf Hsu came up with the idea for Central Desktop.
“We were at CNet and I did a very large deal with Microsoft. I would fly up to Redmond twice a week and we would all sit around a really large conference table – it was the largest (advertising) project Microsoft had ever done, a $100M advertising campaign.
At the end of every meeting… we were sharing a USB stick that we passed around the conference table. At one point I asked, ‘Why aren’t we using Sharepoint?’ They patted me on the head, smiled and said, ‘Oh Isaac, we don’t have the resources to do that.’
That’s when it sunk in that there was a really big problem here. If Microsoft, who built collaboration software, couldn’t do it, then how could a small to medium size company do it? So we set out to create something that was, in some ways, anti-Microsoft. How do you make something as useful as SharePoint available to the masses?”

2) The term “online collaboration” is like a Jackson Pollack painting. It means something slightly different to each beholder. Do you think the meaning of this term will coalesce in the next five years, and, if so, what will it mean to most people?

“Today, web-collaboration means everything from web-meetings, to video conferencing, to Skype, etc. Collaboration has become almost synonymous with the word ‘work’. We are seeing more and more focus on what kind of work. We are using the word ‘collaboration’ less and less.
It’s a maturing thing in the industry. The definition will continue to change, which is why we see opportunity.”

1) You recently released SocialBridge, a collaboration solution geared to marketing agencies. Can you tell us about the strategy behind going after this particular segment? Also, do you have general advice for entrepreneurs who are trying to decide if they should stay broad or attack specific verticals?

“We look at our existing customers, close to 3,000 companies using our products, and looked for clusters within that user base – common industries and common uses. We also looked outside, what are the markets that are big and broad and fragmented.
Marketing agencies, creative agencies, we already had a lot of those customers using our product, but they weren’t using us to the full extent they want. They wanted more extensive functionality that we were able to drill into… and then ended up building SocialBridge.
As far as looking at the market, there is no large, established huge leader who owns the marketing creative, project management space. We saw high fragmentation which is an opportunity to create our own wedge and build it out from there.
The third thing we looked at was which industry is going to be highly viral. The marketing, creative agencies are naturally inviting folks in and there’s a lot of insider-speak between the industry that make it a very viral market.

Central Desktop was founded in 2005 to provide an easy-to-use, SaaS collaboration solution to the SMB market. The company initially focused on self-serve users who purchased the solution online, competing with the likes of Basecamp and GoPlan. However, over the past several years, Central Desktop has increased its functionality such that it is now a credible competitor to Microsoft’s SharePoint.

ExactTarget Study Shows Brands need Social Media Strategy for Twitter

by OpenView

More than half of Twitter users stopped following brands because of ‘repetitive or boring messages’, according to a study conducted by ExactTarget and CoTweet. The Social Break-Up, a report on online behaviour, found that 52% of people stopped following a brand due to a lack of strategy when using the medium.

Additionally, 41% said their Twitter stream had become ‘too crowded with marketing messages’, 39% indicated that companies posted too frequently, and 21% said tweets were ‘too promotional’.

“As brands can use Twitter to respond to customers in real-time, Twitter is frequently accepted as more interactive than Facebook or email. But no other social media channel has such a polarising effect than Twitter—you either love it or hate it,” said Lee Hawksley, senior director at Exact Target Australia.

“This is why it’s just that little bit harder to provide users with genuinely relevant content. However, it’s important to remember that the users who are active on Twitter are the most active and involved online.”

The Social Break-Up also found:

  • 17% of online consumers have created a Twitter account, yet only 9% are currently active.
  • 71% of people who follow brands on Twitter expect to receive marketing messages from companies through the medium.
  • 48% of active Twitter users check Twitter several times a day and 64% check Twitter at least once a day.

The study further revealed that almost half of all Twitter profiles are inactive, with 47% of those who had created a profile no longer considered active users.

More than half (52%) of the Twitter quitters found the platform ‘pointless’, with 38% saying it ‘got boring’. Almost a quarter quit when they found the social medium ‘too chaotic’.

The Social Break-Up report can be downloaded at www.ExactTarget.com/sff.

Flush with VC cash, young companies in no rush to hit IPO trail

by OpenView

Just as Wall Street imploded three years ago, Scott Dorsey needed cash to grow his company into a big business.

But after the stock market fell, the Indianapolis entrepreneur canceled plans to sell $86 million in stock on the open market. Instead of going public, ExactTarget stayed private.

What happened next shows how a new economy slowly is taking shape on 2008’s ruins, financed partly by nearly $400 million flowing in from out-of-state investors.

Indiana banks pared loans in the recession. Public stock offerings stalled in a U.S. economy marred by slow job growth. Yet, Dorsey raised $175 million from investors, including a $30 million infusion last month.

Using the cash, ExactTarget in two years has bought three companies, opened sites in Australia and the United Kingdom and doubled its head count. The company, which helps clients connect with their customers through email, now employs 1,000, including about 600 people in Indianapolis.

Going public means selling ownership in the company. Stockholders expect higher profits each three-month quarter. By staying private, and drawing cash from Boston-area tech investor Battery Ventures, ExactTarget plowed quarterly profits into future growth.

“It’s pretty safe to say we wouldn’t have had the kind of organic growth we’ve had in the last year or two if we’d gone public,” Dorsey said.

And it’s not just ExactTarget that is benefiting from investors.

Venture firms put $69 million into Indiana companies in the first quarter, one of the state’s five best periods, according to investment tracker PriceWaterhouse Coopers.

Eight firms — based in Indianapolis or Carmel — landed all the cash in the last quarter, including consumer adviser Angie’s List, search engine ChaCha, automotive financier Dealer Services, and sleep products researcher Dormir, according to PriceWaterhouseCoopers.

“We brought in a round of financing just to build the business,” said William Oesterle, chief executive officer of 550-employee Angie’s List, which secured $53.6 million from ExactTarget’s financier Battery Ventures.

The $69 million to Indiana companies is only a cash trickle compared to California’s Silicon Valley, which hauled in $2.4 billion in first-quarter venture capital. But in the industrial Midwest, Indiana stands out.

In the first quarter, more venture capital flowed into the state than Michigan, Ohio and Wisconsin combined.

“I wouldn’t draw any conclusions from one quarter,” said Indianapolis lawyer Chuck Schalliol, a director of four local investment funds. “But I do think Indiana is increasingly a destination for venture capital looking to invest in both the health-care and technology space.”

On the ladder of finance, entrepreneurs start with seed money, usually loans and their own savings. Once sales volume grows, some can expand and develop products or services by securing venture capital. To pay back the capital, entrepreneurs often rely on private equity investors, who provide money in return for a share of ownership.

When a company stages an initial public offering — an IPO in which a company sells shares of ownership on the public stock market — often it is raising money not only to finance growth but also repay the private equity investors.

With the U.S. economy recovering, IPOs raised more than $1.4 billon in the first quarter.

And just last week, the digital career networking site LinkedIn went public at about $45 per share, and soon shot up to $94.

But there isn’t a huge clamor to go public. In spite of LinkedIn’s coup, Angie’s List’s CEO said he’s comfortable with private financing right now.

“We had very good success in finding private equity investors,” Oesterle said.

Angie’s List in 2005 secured an investment by BV Capital, a San Francisco firm that grew out of Bertelsmann Ventures, a 1990s Internet financier. BV invests in digital companies, including Groupon, the online shopping coupon distributor. BV introduced Oesterle to Battery Ventures.

Battery Ventures put cash in Angie’s List, bringing the value of its investments in three Indianapolis companies to nearly $150 million. In addition to ExactTarget, Battery Ventures invested in Consona, the tech firm formerly known as Made2Manage.

“It’s almost an extraordinary concentration to have that much invested here by one firm,” Oesterle said. “They’re top-notch, one of the finest venture funds in the world.”

In the 1990s, Battery Ventures sought IPOs for fully 40 percent of the companies it invested in. These days, going public is tough for an array of reasons, including the demise of midsize Wall Street firms that underwrote stock issues. Only about 20 percent of Battery Venture’s investments currently go public, said Dave Tabors, a general partner in the Boston investor.

“A lot of companies that would have been interested in going public are now interested in doing a transaction with us where we’re buying into the company,” Tabors said.

Battery Ventures now invests knowing a likely outcome is a sale of the business, or recapitalizing it with the sale of bonds to other investors.

At ExactTarget, Dorsey doesn’t mind the shift in outlook away from IPOs.

“We’ll continue to speak to the investment bankers (about going public), but it’s not something we feel we have to do,” Dorsey said. “We’ve had no trouble raising money privately.”

Jeff Sutherland: The 21st Century Will Be The Century of Scrum

by OpenView

I have written in an earlier post about the outstanding contributions to management thinking and practice that Jeff Sutherland and others have made with the invention of Scrum.

Jeff Sutherland talked recently with Rini van Solingen in Delft, Netherlands, about Scrum and radical management. Here are some excerpts.

Rini: [0.45] Scrum is picking up around the world. I would like to talk to you today about Scrum beyond software development…

Jeff: A few years ago, I started working with a venture capital group [OpenView Venture Partners in Boston] and they immediately saw that Scrum made things go twice as fast for anything. So they implemented Scrum throughout the firm, for the investors, for the search team, for all the teams supporting our investments, That caused some of our companies not only to look at Scrum in the software development area, but outside that. So we have a number of companies that now have senior management Scrums. The CEO is meeting every day with his team. And every department has their own Scrum team. So the whole company is doing Scrum.

The way this sometimes happens. Scrum is introduced in the software development teams and that starts working well. So the CEO starts saying: “Before it was software development that was broken. But now they are working well and it’s everything else that is slowing things down. We need to fix that. Why don’t we do Scrum everywhere?”

–oo0oo–

Rini: [5.00] In a recent post on Forbes, Steve Denning proposed that if there would be a Nobel Prize for management, he said it would be deserved by Jeff Sutherland and all the other people in the Agile field. To what extent do you know his book on radical management and the way in which he uses and reuses Scrum to bring it to the corporate level?

Jeff: Steve is an interesting guy. He came to my Scrum training. He really got Scrum at a deep level. He told me coming out of that class he was going to write a book on it. That book is: The Leader’s Guide to Radical Management.  The interesting thing about the book is that he doesn’t say this is Scrum other than one or two times.[i]

It’s all about what do managers need to do to come into the 21st Century. I think it’s brilliant. Of course, it’s flattering to say that we ought to get the Noble Prize, but in reality, there is no Nobel Prize for management. But Scrum is changing the world. That is happening. That’s why he is saying that. So I feel really good about that.

One of the primary goals of my company right now is to move Scrum into the management. There are a lot of good engineers out there who know how to do Scrum. To take it the next step, the management has to change and move into a 21st Century type of management that Denning is talking about.

Rini: So to conclude: the 21st Century will be the Century of Scrum?

Jeff: It’s looking that way. Let’s see what happens.

–o0o–

Rini: [7.00] Soon after we have introduced Scrum into software development teams, we often get a question to also look at the other teams, in sales, in marketing, and even the management team itself. So Scrum is moving beyond software development, as expressed by Steve Denning’s book on radical management where he uses the Scrum principles for the general management field.

He promotes the idea of value prioritization, where you make sure you deliver value as soon as possible. And where you establish flow through an organization so that the idea from concept to cash is as short as possible. And continuous improvement is the heartbeat of an organization. And putting self-steering [or self-organization] into the teams. So this will really change the way we organize ourselves.

When people ask me: “Should we look at Scrum? Should we look at radical management?” I say: you are not obliged to look at Scrum and radical management. But it’s a matter of “survival of the fittest”. We are not “obliged” to survive.

Other related posts:

What on earth is Scrum?

Scrum is a major management discovery

Major management insights from the Scrum Global Gathering


ExactTarget Named ‘Best Place to Work’ for Recent College Graduates

by OpenView

Global interactive marketing solutions provider ExactTarget announced today that it has been named one of the nation’s Best Places to Work for Recent Grads.

“We work hard to be an ‘employer of choice’ by creating an environment that presents team members with unparalleled opportunity for growth, award-winning amenities and a chance to work with the best brands and marketers in the world”

Experience, Inc., the nation’s leading provider of career services for college students and alumni, selected ExactTarget for the honor based on its hiring and retention practices, benefits, training programs, growth opportunities and starting salary.

“We work hard to be an ‘employer of choice’ by creating an environment that presents team members with unparalleled opportunity for growth, award-winning amenities and a chance to work with the best brands and marketers in the world,” said Scott Dorsey, ExactTarget’s chief executive officer and cofounder. “I am proud to accept this honor, as it’s further evidence of the passion of our team and their genuine love for helping marketers leverage technology to serve our clients.”

Experience’s Best Places to Work for Recent Grads was conducted in conjunction with Salary.com, and additional winning companies included Accenture, Capital One, Dick’s Sporting Goods, and Liberty Mutual.

“The next generation workforce delivers a fresh perspective that’s sorely needed to help organizations thrive in a competitive market,” said Jenny Floren, founder and CEO, Experience. “Companies like ExactTarget understand that — and they are finding ways to empower entry-level candidates by providing the right opportunities and career paths, while also keeping a sharp focus on the business goals.”

News of the award comes just two weeks after ExactTarget was named a finalist for Company of the Year and two of its executives were named finalists in the 2011 American Business Awards “Stevie® Awards.” In the past year, ExactTarget has garnered a host of awards and accolades including:

ExactTarget posted annual revenue of more than $134 million in 2010, a 41 percent year-over-year growth from 2009 totals.

About ExactTarget

ExactTarget is a leading global provider of on-demand email marketing and interactive marketing solutions. The company’s Interactive Marketing Hub TM technology provides organizations a single solution to connect with customers via email, integrated text messaging, landing pages and social media. Supported by collaborative global services teams, ExactTarget’s technology integrates with more sales and marketing information systems than any other in the industry, including Salesforce.com, Microsoft Dynamics CRM, Omniture and WebTrends among many others. ExactTarget powers permission-based multichannel communications for thousands of organizations around the world including Expedia.com, Best Buy, Aurora Fashions, Papa John’s, CareerBuilder.com, Gannett Co., Inc., The Leukemia & Lymphoma Society, The Home Depot and Wellpoint, Inc. For more information, visit www.exacttarget.com or call 1-866-EMAILET.

Interactive Marketing Provider One of 20 National Companies to Receive Top Honor

by OpenView

Global interactive marketing solutions provider ExactTarget announced today that it has been named one of the nation’s Best Places to Work for Recent Grads.

Experience, Inc., the nation’s leading provider of career services for college students and alumni, selected ExactTarget for the honor based on its hiring and retention practices, benefits, training programs, growth opportunities and starting salary.

“We work hard to be an ‘employer of choice’ by creating an environment that presents team members with unparalleled opportunity for growth, award-winning amenities and a chance to work with the best brands and marketers in the world,” said Scott Dorsey, ExactTarget’s chief executive officer and cofounder. “I am proud to accept this honor, as it’s further evidence of the passion of our team and their genuine love for helping marketers leverage technology to serve our clients.”

Experience’s Best Places to Work for Recent Grads was conducted in conjunction with Salary.com, and additional winning companies included Accenture, Capital One, Dick’s Sporting Goods, and Liberty Mutual.

“The next generation workforce delivers a fresh perspective that’s sorely needed to help organizations thrive in a competitive market,” said Jenny Floren, founder and CEO, Experience. “Companies like ExactTarget understand that — and they are finding ways to empower entry-level candidates by providing the right opportunities and career paths, while also keeping a sharp focus on the business goals.”

News of the award comes just two weeks after ExactTarget was named a finalist for Company of the Year and two of its executives were named finalists in the 2011 American Business Awards “Stevie® Awards.” In the past year, ExactTarget has garnered a host of awards and accolades including:

ExactTarget posted annual revenue of more than $134 million in 2010, a 41 percent year-over-year growth from 2009 totals.

About ExactTarget

ExactTarget is a leading global provider of on-demand email marketing and interactive marketing solutions. The company’s Interactive Marketing Hub TM technology provides organizations a single solution to connect with customers via email, integrated text messaging, landing pages and social media. Supported by collaborative global services teams, ExactTarget’s technology integrates with more sales and marketing information systems than any other in the industry, including Salesforce.com, Microsoft Dynamics CRM, Omniture and WebTrends among many others. ExactTarget powers permission-based multichannel communications for thousands of organizations around the world including Expedia.com, Best Buy, Aurora Fashions, Papa John’s, CareerBuilder.com, Gannett Co., Inc., The Leukemia & Lymphoma Society, The Home Depot and Wellpoint, Inc. For more information, visit www.exacttarget.com or call 1-866-EMAILET.

Skytap Reports Increased Customer Demand for Hybrid Clouds

by OpenView

Skytap, a provider of self-service cloud automation solutions, announced the company has achieved increased customer adoption of its self-service hybrid cloud offering, signing many enterprise customers including Wolters Kluwer, Purdue University and Trek Bicycles.

Skytap also announced the availability of new security features including IP access limits, browser validation and user email verification. When combined with existing features such as granular role-based access control, groups, project roles, configurable password policies and self-service hybrid cloud capabilities, Skytap offers a security policy and cloud control solution for IT organizations.

“Our business required the ability to manage cloud environments with the security and control of our IT policies while benefiting from the scale and flexibility provided by a cloud solution,” said David Anderson, director of software quality assurance at Wolters Kluwer Financial Services. “Skytap allowed us to securely connect our in-house environments to the cloud. We now have on-demand, self-service access to our cloud environments and realized a substantial reduction in set-up time, operational costs and increased our testing agility to bring new releases to market faster.”

Most enterprise customers are choosing to implement hybrid cloud architectures so they can reap the benefits of connecting cloud instances to corporate data centers quickly and securely. Skytap’s hybrid cloud offering, unveiled in February 2011, has enabled these customers to accelerate cloud integration with in-house systems and reduce the IT support burden for managing cloud environments. Application developers can now develop and test advanced enterprise applications using Skytap Cloud and connect to corporate databases and file systems securely.

While the cloud model changes the way dynamic IT environments are deployed and managed, it must provide the same security and policy controls used by in-house IT to protect sensitive applications and data. To meet these requirements, Skytap is introducing the following security and control features: -IP Access Limits: IT administrators can now limit user access to the Skytap Cloud based on known IP ranges. Similar to Salesforce.com, this new feature will block users from accessing Skytap cloud resources from locations not considered to be secure. IP Access Limits can be configured for all users. The IT administrator can also configure additional password requirements, granular access controls and role-based privileges using Skytap’s friendly self-service interface.

  • Browser Validation: This security feature can be configured to require users to authorize the specific browsers that may be used with the account. User access will be required to validate that particular web browser through a special security link. Unauthorized browsers will be blocked from accessing the Skytap environments.
  • Email Validation: This feature requires users to validate the email address provided as a part of their account profile. With this added control capability, Skytap users can be assured that secure notifications and alerts from the system will only reach the emails that have been approved and provided by the user and IT administrator.

“The use of public and private cloud technologies raises security and management challenges, but none that are impossible to meet. In order to effectively and efficiently secure the use of cloud computing, enterprises need to match threats and business demands with the right management security approach. Public, private and hybrid cloud technologies will also present opportunities to develop new architectures and processes that will advance security and management capabilities in ways that were not possible with physical computing restrictions.”* “Enterprises are seeking stronger security policy management, access controls and role based permission management as they adopt the cloud model,” said Sundar Raghavan, chief product and marketing officer at Skytap. “With this release, Skytap is enabling IT organizations to implement access control policies in the cloud that will give them the same visibility and access control they get in in-house systems.”

More Information: www.skytap.com