In 2009, I was introduced to Scott Maxwell and George Roberts when their firm, OpenView Venture Partners led the $7 million Series C round of Boise-based Balihoo, a company that we’ve been invested in since 2007. From the very beginning, it was clear to me that OpenView was a different firm. Based in Boston, they have one of the most unique, truly value-add models for expansion-stage capital for software and technology-enabled businesses that I’ve ever seen in my career in venture, and they’re willing to travel anywhere to help build great companies. They’re very excited about the momentum in the rocky mountain region and I think it’s worthwhile for the tech community here to get to know them better. I sat down with them last week in Boise when they were in town for a Balihoo’s board meeting and annual strategic planning meeting.
Scott, what’s the story behind how OpenView Venture Partners was started?
I joined my friend, Jeff Horing, at Insight Venture Partners in early 2000. Jeff had co-founded Insight Venture Partners five years earlier as a software-focused venture capital firm and wanted to “institutionalize” his firm. At that point, I had spent the 1980s in technology as a mechanical engineer focused on automated systems (mostly robotics) and the 1990s focused on building financial institutions (Strategy Consulting, Wall Street, followed by “buy side” asset management).
At Insight, we spent a lot of time developing and executing a unique strategy. The approach was to focus on expansion-stage software, internet, and technology enabled businesses and to set up the expertise internally to both find the companies that fit the model and to set up the firm and the network to add the most value to these companies. The approach proved to be successful, but over time the core of the Insight team wanted to move into investing in larger companies while the Boston office team, led by myself, wanted to continue to focus on investing and growing companies starting from investing in expansion stage companies. After evaluating a lot of options, the Boston office eventually spun out of Insight Venture Partners to create OpenView Venture Partners, that formed as an independent firm in 2006.
George, why is OpenView so unique?
Our strong belief is that venture capital success comes from helping to build great companies, that are created from solid strategy, focus, and execution. Also, a venture firm can help their portfolio companies by providing access to resources with deep market and operational experience. Finally, the best way that a firm can add significant value to its portfolio companies is to sharply focus on market sector and stage, as the focus helps develop experience and expertise that are transferable to and between companies.
With that as a backdrop, OpenView’s uniqueness comes from:
A sharp focus on:
- Market sector of software, internet, and technology enabled businesses (essentially highly technology leveraged companies)
- A stage focus on expansion stage (companies with a product and customers that is ready to go through a meaningful expansion in customers, scale up operations, and build organizationally. Generally this means companies with quarterly sales in the range of $500k to $5 million per quarter)
- A geographic focus on helping companies develop their North American product markets while expanding into other global markets (OpenView will invest in companies in any geographic region globally as long as they have a strategy of building their North American business)
An approach of proactively finding the companies that best fit its focal points. This involves a lot of sector research and talking to a lot of entrepreneurs and their advisors. A team and network that is set up specifically to help the best fit companies. This means:
- An investment team with significant software/internet experience building companies
- An internal consulting group, OpenView Labs, of approximately 15 people, that is dedicated to helping OpenView’s portfolio companies succeed. They have experience and expertise in all aspects of company building.
- A set of senior advisors that spend real time working with OpenView’s portfolio companies
- A network of operating executives and specialists that OpenView can utilize to help the companies.
OpenView Labs is unlike any offering in a venture fund that I’ve ever seen. Tell us more.
The general idea is that most operating executives experience the expansion stage once or twice in their careers and each time is somewhat different. The more operating experience a person has taking companies through the expansion stage, the more expertise accumulates that is directly applicable to other similar companies. OpenView Labs was set up to gather, create, store, and disseminate best practices in all the important functional areas. OpenView has set up three teams within OpenView Labs:
- The Product Development team focuses on helping companies with product development principles and practices. This includes Market Strategy, Product Management, and Development areas. OpenView also has two of the leading experts in Product Management and Agile Development and a network of outside experts and third party development groups available to work with its portfolio companies.
- The Go-To-Market team focuses on helping companies develop and execute sales and marketing strategies to better penetrate product markets. The OpenView team has a large internal group and many outside experts who work with its portfolio companies.
- The Organizational and Operational development team focuses on helping companies develop their teams and processes around Finance, Legal, HR, Administration, and IT. Again, the OpenView team has staff experts, advisors and a network available to work with its portfolio companies.
OpenView also has a dedicated internal executive recruiter and a network of outside recruiters that specialize in building organizations. OpenView Labs delivers its capabilities through ongoing coaching, short and long-term consulting assignments, quarterly forums for the OpenView Portfolio companies and through ongoing workshops that it delivers directly to its portfolio companies.
What type of companies and what stage does OpenView look for?
OpenView invests in software, internet, and technology enabled business models at the expansion stage that have the aspirations to develop into large companies. The team looks for companies with differentiated products, reasonably sized markets, and a core team that can be the basis for building a large dominant player in the product market. Typically, this means investing in companies that have reached $500k to $5 million in quarterly sales at the point of the investment.
Geographically, where will OpenView invest?
OpenView invests in companies located anywhere in the world, as long as there is a strong North American product market strategy.
George, you’re here in the region a lot. What about the rocky mountain region excites you as investors?
The region has many great entrepreneurs, a solid technology ecosystem, a significant number of larger anchor-tenant tech companies as well as university & government labs that produce a skilled labor pool and is well located geographically to build North American product markets.
Scott, what areas do you think will be the most active in M&A this year?
We will know at the end of the year, but our general belief is that differentiated companies in solid product markets that are building solid businesses are always attractive M&A targets.
George, we’re on the board of Balihoo together. Why do you think Balihoo is such an important company?
Balihoo is important because it is attacking a really difficult and important problem, local marketing, in an extremely large product market. Also, Balihoo’s solution to the problem adds significant value to its customers, is extremely sophisticated, and is very difficult for competitors to replicate. Finally, the team at Balihoo is capable and the company is well developed and well run. Of course, we also think that the market, solution, team, and advisors are exciting and we enjoy working with them!
Okay, Scott. Here’s the last and most important question. Which is the next Boston sports team to win a national championship?
That’s easy Mark. Whichever season ends next. We expect all our teams to win the championship every year!