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By Jason Green
This past week I was inducted to serve on the board of directors for the National Venture Capital Association (NVCA), the largest and most influential professional organization for the venture capital community whose membership comprises over 90% of professional VC firms in the US. It’s an honor and privilege to have been selected by my peers but also a tremendous responsibility, and one that I thought long and hard about before taking on. It’s a four-year commitment, requiring the same level of attention and caring as any private company board. I wanted to share my thinking on the decision, some initial impressions and also ask for your feedback on what you believe are the most important issues facing the entrepreneurial community that I can address during my tenure.
The NVCA operates out of the limelight, mostly behind the scenes in Washington as a sort of archangel for the venture community and the entrepreneurs we serve. Having just attended my first board meeting, I was blown away with the level of professionalism and insight of the organization in understanding the dynamics in Washington and how to direct efforts in the service of entrepreneurial innovation and job growth—the two tenants of the NVCA and our industry. The organization has built an incredible and trusted brand in Washington by practicing a conscientious, informed and pragmatic approach over many decades, rather than just throwing money at high-paid lobbyists. As a result, the NVCA actually can make a difference.
I liken our entrepreneurial ecosystem to a fragile, diverse and beautiful coral reef. The NVCA acts to protect the reef and its inhabitants from the inevitable unintended consequences of broader legislation and over-regulation. As a small industry, we are rarely given center stage, but we certainly feel the effects of collateral damage. For example, legislation such as Sarbanes-Oxley has had devastating impacts on the ability of young companies to go public over the last decade. An overburdened FDA has drastically reduced the rate of innovation in our health care system. Immigration restrictions have sapped our access to talented human capital required to scale our companies. Together, these and many other issues can create significant deleterious impacts on our entrepreneurial ecosystem and thus stifle the rate of innovation and job growth in our economy. The NVCA tackles these challenges, among many others, and has made significant progress on a number of fronts.
Recently, the organization played center stage in legislation to reduce the negative impact of Sarbanes-Oxley on young, growing companies with the successful passage of the JOBS Act of 2012. This effort was spearheaded by NVCA Board members (notably Kate Mitchell from Scale) and the amazing staff of the NVCA (notably Jennifer Dowling), and it will save young growing companies from spending hundreds of millions of dollars in resources to comply with overly burdensome accounting and regulatory compliance measures designed for much larger companies. I must admit that I was pretty skeptical of getting anything done in Washington, but the passage of this bill gave me great hope. I’m now very optimistic that, with guidance from the staff at NVCA and a determined effort, we really can make a difference.
As an investment firm, making great investments is, of course, paramount to our success. However, supporting a healthy ecosystem that protects and supports entrepreneurship is the most critical component in the longer term. I am excited to have an opportunity to make a difference for the broader entrepreneurial ecosystem and to reduce the friction for great entrepreneurs blazing the trail of innovation. I would love your feedback and thoughts on how to maximize the impact during my tenure.
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By Kevin Spain
Early-stage CEOs need to be good at lots of things. In our view, the most important is setting a vision for the company –- and then translating that vision into tangible objectives for the rest of the team.
For this to be done well, a CEO must be able to simplify all of this in a way that everyone in the company can understand and act on. This is hard work. As DaVinci said, “Simplicity is the ultimate sophistication.”
One tool that we’ve seen CEOs use to make it easier to communicate vision and objectives is Mark Benioff’s V2MOM. In his book Behind the Cloud, Mark tells the story of how he’s used V2MOM since Salesforce.com’s inception to focus the company on what matters. V2MOM requires a company to outline five things (and refresh them periodically as the business evolves):
- Vision – What you want to accomplish
- Values – What’s important about your vision
- Methods – What you need to do to deliver on the vision
- Obstacles – What might stand in the way
- Measurement – How you will know you’ve met your goals
Seems simple enough, right? Well, it’s not always easy to get each of these things boiled down in a way that everyone can agree upon and process. This is where the CEO’s talents come into play.
We’ve seen the V2MOM process work exceptionally well in several of our portfolio companies (both early and growth stage). If you’d like to do a better job of getting your team aligned around your vision –- and equipping them to deliver on it — it’s definitely worth integrating V2MOM into your company.
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By Matt Holleran
Should a small team of developers serve businesses around the world? Business Freemium companies are often global from inception. This is an important part of the story for how the Business Freemium Model is disrupting SaaS and Enterprise Software. We have been studying Global Business Freemium for a couple of years. We would like to share some of what we have learned to help entrepreneurs and executives to create a Going Global Strategy.
Emergence Capital is pleased to be investors in Business Freemium leaders that include Yammer, Box, YouSendIt, and echosign (Adobe). We’ve been actively framing and executing on Emergence Capital’s Business Freemium strategy since 2009. See this presentation for an overview of how the model is disrupting SaaS and Enterprise Software: http://www.youtube.com/watch?v=9MfhXq_KCGg.
One of the recurring themes from our conversations with Business Freemium entrepreneurs and executives was whether and how to service and market to the high percentage of their free users that were actively using their application outside of the United States. These companies often reported strong absolute and relative usage in emerging countries, which traditionally have not been served by SaaS or Enterprise Software because it was not profitable to do so. This made us think of Clayton Christensen’s The Innovator’s Dilemma. He wrote that new leaders with new models generally start by serving markets that were hard for incumbents to service profitably. Less than ten employee companies are hard for SaaS sales organizations to profitably sell to and Business Freemium took root in that segment. Global is another important dimension to the disruption.
The founders and CEOs of the pioneers in the Business Freemium market made courageous decisions to accelerate the growth of their global free and paid users years ahead of when leaders in prior software models had done so and often when the companies were small in terms of revenue and or people. SurveyMonkey’s CEO, Dave Goldberg, and VP International, Minna King, have built an exceptional global business and company in part by investing in a global strategy years ago. http://blog.surveymonkey.com/2011/02/13_languages/. Yammer has a large percentage of their users outside of the US and translated the service into many languages starting in 2010: http://blog.yammer.com/blog/2010/11/yammer-in-translation.html. Last week I spoke with an entrepreneur with millions of users, the majority of which are outside the US. He translated his application into multiple languages when the company had little revenue. LinkedIn, one of the first public Business Freemium companies, reports that 60% of their members are outside of the US as of December 2011 and that 33% of their revenue for the quarter ended September 2011 was outside the US. Their international revenue grew 183% year to year in that quarter, much faster than the rest of the company.
We listened to these leaders and many entrepreneurs and developed a framework for creating and executing a Global Strategy for companies with a Business Freemium Model. We hosted a forum on Going Global for the Emergence portfolio and friends of the firm in 2011. Dave Goldberg, CEO of SurveyMonkey, keynoted the event. There was a lot of discourse, agreement and dissent. The presentations and conversations made it clear that the Business Freemium Going Global Strategy and execution is different than how SaaS and Enterprise Software companies grew around the world.
Our recommendations to Business Freemium entrepreneurs are the following. Choose to be the global leader in your market, or not. Design global into your product from inception even if you expose the capabilities later. Implement languages early. Think carefully about how you will accept and manage global payments, especially in auto-convert businesses. Identify the executive you will send to lead new global markets well before they need to go and do it. Accelerate the auto-convert business in other geographies with an inside sales and or field sales model. Choose venture investors with experience in Global Business Freemium who can help you craft your strategy and execution plan in more detail.
Global Business Freemium is exciting for customers, entrepreneurs, executives, employees, and investors. Business users around the world can access exceptional products that are easy to use years before they might have otherwise. The model opens up new markets in company size and geographies and accelerates global revenue while consuming less capital and time. Companies and investors should consider developing global capabilities and leveraging global resources much earlier in the company lifecycle. Let us know how we can help.
