Image Credit: Posterize / FreeDigitalPhotos.net

Unless you are professional fundraiser of venture capital (which most would rather not be), two words can seem both daunting and mystifying: term sheet.

You’ve built a great company:  a product your customers love, revenue doubling year-over-year, a growing employee base, and a market position that most would envy. But you want more. You don’t want to be that nice little company that people find inspirational. You want to be the company that vendors are petrified to face and people would give their right arm to work for. It’s time to kick things up a notch now that you have made the decision to raise institutional capital.

You know a guy your wife went to high school with that is now a financial adviser and plays an investment banker on TV. He helps you put together a killer PowerPoint: hockey stick growth charts, a table showing the $10 billion market opportunity, and flow charts that would make a McKinsey consultant jealous. You set up meetings with a bunch of VCs. They all eat the story up but only two or three of them seem to have a clue what their talking about. You tell the others to bug off and when you finally sit down to your desk, there it is in your inbox: the term sheet.

Now none of this is rocket science, though laywers and bankers will be the first to tell you just the opposite. It comes down to a few key components that are critical to pay attention to. I thought I would write a little about each of these in an effort to provide some air cover before you head into battle.

Over the next few weeks, I will write about:

1. Types of Securities and the Associated Bells-and-Whistles
2. Provisions, Conversions, and Redemptions
3. The Stock Purchase and Investor Rights Agreements
4. The ROFR and Voting Agreement

The hope here is to take some of the mystery out of the term sheet and set you up for constructive and swift negotiations.

Below I outline the basic data most often needed before even beginning term sheet negotiations:

1. Financial statements: Be prepared to compile financial statements from the last few years, including most recent quarters and projections. These should include a comprehensive P&L with costs broken out by functional area, a recent balance sheet and a recent statement of cash flows. Investors like to have a sense for the financial picture before throwing around pre-money valuations.
2. Sales data: It is good to have at the ready data around salesperson productivity, quotas, bookings, sales methodologies, sales process, channel contribution, and more. This may seem a bit noisome for relatively early stage discussions, however a quality go-to-market strategy and distribution model are what distinguish great businesses from good businesses.
3. Capitalization table: Prior to thinking about the size of the option pool or anti-dilution mechanisms, venture capital firms are going to want to understand the make-up of the current ownership. What do the founders own? What do angels own? What do other VCs own? What warrants are outstanding? Without this, there is no deal.
4. High-level product vision and road map: This is another item that may seem over-the-top for pre-LOI purposes, but it can be critical for technically savvy investors to wrap their head around the product and its competitive advantage. What’s the next bit of functionality? Which OS is the product supporting next? Without this information, there is a gap in the investment thesis that is untenable.
5. Market data: An investor will often request data from reputable market sources to help inform their perspective on a company. Most will want to know what Gartner or 451 Group thinks of Company X and will want help in coming to terms with the addressable market size.

Lastly, depending on the investor’s familiarity with the Company, sector or technology, he or she may request to speak with a few current customers prior to inking an LOI. This serves as a litmus test for the VC before diving headstrong into a due diligence period.

While some venture investors like to look at new subscribers/active users/daily logins, the “consumer” market scares the hell out of me. Call it naïve or out-of-touch, but while I respect my colleagues going all-in on the trend, it isn’t for me.

No… I love companies that began around a pain point: something in response to terrible service, overpriced upgrades, onerous contract terms, or just plain shitty products.  Businesses aren’t running as well as they could be and someone needed to solve it.

Big Boy Software is what one of my colleagues calls it. This is the stuff that makes the world run. This is the company managing petabytes of data for Wall Street, or the business helping service providers get paid, or the Fortune 500 managing millions of documents. This is no frou-frou puppy game (no offense OMGPOP). This is the stuff of 12-month sales cycles, six-month implementations, and seven-digit contracts.

With the market focusing on anything but the enterprise, opportunity abounds. We at OpenView Venture Partners have already found a number of companies that are coming and selling successfully to businesses that need a solution not to boost their Klout, but increase their bottom-line. As Marc Andreessen, founding partner at the venture capital firm Andreessen Horowitz, puts it in his recent article for the Wall Street Journal, “Companies in every industry need to assume that a software revolution is coming.”

Take Prognosis. The Houston-based software company is selling an enterprise solution to rural hospitals across the country. The founders saw an opportunity to come into a market being led by companies from the 1980s that are based on MUMPS, and eat-their-lunch with a web-native solution and straight forward contracts.

Or take AtTask. The Salt Lake City-based business saw an opportunity in a market rife with legacy, on-premise products that were taking up space. With its on-demand solution, AtTask is able provide valuable business intelligence and resource management to companies like Apple and GE with an engaging user interface and lower TCO.

These are just a few of the many companies in our portfolio that are changing the dynamics of their respective marketplaces, by making use of better technology, focusing on more intuitive design, and helping businesses just plain run.

Fast forward to 2011, and the brick phone has long since been replaced several times over. It is more likely to be found in an antique store than an office. 

The mobile world has gone from a nascent nice-to-have to a rapidly maturing need-to-have. We have evolved from the brick/car phone to the Nokia blocks to the Razor to sleek smartphones and tablets. These devices are on the edge of global ubiquity as the price of hardware components continues to decrease, wireless providers look for incremental revenue streams, and platforms such as Android begin to be make the offerings very affordable. This expanding world presence will have a ripple effect across numerous industries.

There are four areas in particular that appear to be on the brink of a mobile device revolution:

Healthcare – Mobile is taking the healthcare industry by storm. I was at HIMSS 2011 last week, the largest healthcare technology conference held annually, and mobile health or mHealth was front and center. The use cases are many. The home health and telehealth industries are taking advantage of user friendly form-factors like the iPhone. Management of diabetes, stroke patients and the elderly can now be handled through robust mobile apps that enable patients to take part in their daily health regimen. Physicians are using iPad-native EMRs to engage with patients at the bedside. Nurses are able to record care administration at the point-of-care allowing for more accurate coding and charge capture. This is only the beginning of the role of mobile in the healthcare arena as these technologies will inevitably spread from the early adopters to the greater community.

e-Commerce and Marketing: Mobile commerce and marketing across devices is in the back of the slingshot: pulled back and when released in the next year will take off like a bat out of hell. Nearly every Fortune 500 company today is looking at how best to leverage a mobile strategy to increase their competitive positioning. 78 percent of smartphone users have made a purchase on their mobile device in the last year. Corporations are expected to spend billions on developing apps over the next 5 years to take advantage of this rising tide. Any company’s content marketing strategy will be heavily influenced by mobile in the years to come.

Education: Three years ago, using remote control-esque clickers in class was advanced. Today, institutions are redesigning curriculum around tablets. Surveys on smartphones enable live participation and feedback in lectures. iPads are the new FiveStar notebook. Learning management systems (a la Blackboard) have no choice but to include several mobile interfaces in order to be adopted.

Government: As the recent events in the EMEA region show, the use of mobile devices is having a transformational impact on how citizens effect change in government. Mobile-enabled platforms such as Twitter and Facebook have combined with widely available news outlets to allow citizen participation/awareness to spread like a wildfire. As the availability of mobile devices increases in the developing world, this effect will grow exponentially. 

As an associate at OpenView Venture Partners, a Boston-based venture capital firm, I continue to see interesting mobile software offerings pop up across these verticals. The world is truly in a transition and we are excited to be a part of it.

As a firm, we are starting to see this trend emerge among a number of sub-sectors across the healthcare spectrum. We invested in Kareo in September, a web-based practice management system that employs an intuitive user interface and robust claims processing capabilities to allow physicians/healthcare providers to easily receive payment. Kareo is coming in and replacing on-premise solutions from the ’90s that lacked integration capabilities and flexibility.

As venture capital investors with a focus on competitive positioning, these types of trends are especially compelling. What other sub-sectors in healthcare IT do you see undergoing the same type of change?

The creation of new concepts is important; however, it is certainly not the whole story. Innovation is only half the battle. You can create all the greatest ideas in the world but they are meaningless until they are turned into actionable items. Execution is the name of the game. Numerous companies have faltered by ineffectively managing new product roll-outs and/or waiting too long to call an experiment a failure.

I am reading about this innovation/execution dilemma in a newly released book called, “The Other Side of Innovation: Solving the Execution Challenge.” The book, which is authored by Tuck School of Business Professors Vijay Govindarajan and Chris Trimble, practices what it preaches. It is not merely an essay on innovative inefficiencies, but a practical guide to managing new products and experiments.

While I am not entirely finished with the book, I noticed several high-level themes I believe are important for growing. Expansion stage businesses need to keep them in mind when thinking about new product development and creating the next big thing:

- Implement a system that tightly manages the innovative process: Google is famous for its “20% rule”, whereby employees are encouraged to spend up to 20% of their time at work on projects not germane to their actual job function. In some companies, this could result in a complete waste of time and eat away at productivity. Google, however, has created a system that effectively manages this experiment. It has led to the creation of Gmail, Google News and many other successes. 

- Involve relevant parties early: Get the people who are necessary to adoption and execution within the Company to buy-in early. Waiting to spring this action on sales or support channels right before a new concept or product is about to be rolled out will most certainly create issues.

- Know when to call it quits: Sometimes a new venture or offering may seem quite promising at the outset; however, for a variety of reasons it may not work out. It’s important to admit defeat and cut your losses on new forays.

At OpenView Venture Partners, we are focused on working with companies to help them ideate and iterate. We love to join forces with companies that are eager to grow and push the boundaries of today’s industry standards.

The provider community represents one of the segments of the market undergoing an interesting transition. Healthcare providers include physicians, nurses, social workers, psychologists and many other specialist positions. However, the physicians are the group most pondered in terms of healthcare technology adoption today.

More than 700,000 physicians exist in the United States alone and they are currently dealing with a number of external factors, forcing them to fundamentally change how they practice medicine. New compliance initiatives are being implemented, Medicare and Medicaid reimbursement rates are in flux, overhead costs are increasing and the government is mandating physicians become meaningful users of an electronic health record. This doesn’t even take into account the potential repercussions of healthcare reform!

This past weekend I spoke about these matters with a family friend who is a physician. Aside from the bemoaning of cost increases and reimbursement decreases, I was most surprised to hear his take on electronic health records.

As the owner of a three doctor practice, he had installed an ambulatory EHR last year and had nothing but negative things to say. He said that even after learning to use the system his work can take him twice as long at times. He also said the EHR offers his practice no ostensible benefits and is more of a pain than it is worth. He even received grant dollars and made money on the purchase before the $40,000+ he has coming next year!

This anecdote is an important one for anyone trying to understand the physician community’s attitude towards technology: Don’t change my workflow! I know how I do things and some days that is tough enough.

This leaves an opportunity for expansion stage healthcare IT companies to come in and change the game. Entrepreneurs should focus on products that increase charge capture, automate workflow in a practice setting, allow for recording of patient data in a non-intrusive manner and put the patient in charge of his/her well-being.

Adoption of technology throughout the healthcare ecosystem, however, has been shallow at best. Most doctors’ offices are still packed with multi-colored, manila folders. Many hospitals rely on interfaces from the 1980s, using MUMPS. Insurers still send millions of paper claims and rely on uncertain data.

We seem to be at an inflection point now though. The government has come out swinging with the HITECH Act, healthcare reform and compliance initiatives relating to HIPAA. The once staid healthcare industry is being forced to rapidly change. How will it react? What companies will be successful at creating competitive advantage and becoming market leaders? Stay tuned next week for provider technologies that are changing the playing field!

Topics covered on the site include:

- whole product management (including process and development)

- customer development (sales and marketing, lead generation services and more!)

- company development (finance, IT, legal and other strategic consulting services)

Be sure to check out the site and submit feedback! We are also always looking for guest columnists. Please don’t hesitate to reach out if you have a topic you would like to write about.

This is all a part of OpenView’s firm strategy: adding meaningful value to the companies we invest in and to the ecosystem at large. Disseminating these best practices process is at the core of what we are about.

Kareo is just one example of emerging expansion stage companies in the healthcare IT space. Government incentives, relaxation of the Stark Laws, and a focus on compliance/audits have all resulted in a number of healthcare companies growing very quickly.

Kareo focuses on the ambulatory or outpatient segment of the market and the relationship between providers and payers (insurance companies). There are three core constituencies in the healthcare technology ecosystem:

- providers
- payers
- patients

Companies focus on different combinations of these stakeholders — some connecting providers and patients, some connecting payers and patients and so on.

This is only the beginning of the healthcare IT revolution and more venture capital investment in the sector is sure to come!

Thought leadership is something that can truly define a company’s presence in the marketplace. Solidifying a reputation as the go-to expert for the industry’s issues, both new and old, will not only give confidence to your current customer base, but also intrigue potential new clients. 

Though establishing thought leadership in your space is a multi-year process that takes dedication and execution, there are a few ways that you and your company can begin to build a space-defining and knowledgeable brand today. Craig Badings, an author and thought leadership expert, wrote Brand Stand, where he details the necessary steps for establishing a thought leadership campaign. I have built my own list for initial steps with the help of Badings’ writings, which you can find below:

1.) Develop a plan of attack: Bring together the members of your organization in a room and hash out what each person believes to be the key issues among the customer/client ecosystem. In addition, plans should be put in place to establish key roles in a thought leadership campaign and key milestones (e.g. guest blogger who is an industry expert once this quarter, twice next and so on; one whitepaper per quarter on a relevant and timely topic).

2.) Deep-dive into industry-wide media: Once a plan is in place, a concerted effort to understand the issues most impacting your sector should be made. This means scouring blogs, social media, industry trade mags, news stories and talking with stakeholders. 

3.) Understand your company’s core competency: Part of building a compelling brand around market awareness and expertise is distilling down all that you do to a small set of core competencies that you believe are best able to define you in the marketplace.

4.) Identify a champion: In order for a thought leadership campaign to be successful, you need to designate someone as “champion” of the effort. That is, who in your organization (CEO, CIO) or outside of your organization (Advisor, Academic, Industry Leader) makes the most sense to have control of the reins. 

5.) Execute, execute, execute: Once a plan is in place, issues identified, roles assigned and tasks identified, it becomes all about execution. Make goals feasible and take small bites. This is a process, not a single action. Begin with relevant blog authorship, press releases and white papers. Expand then into hosting panels, speaking at conferences and leveraging partnerships with larger industry players who will lend credibility to your thoughts.

For expansion stage businesses, this can be a powerful tool. At OpenView Venture Partners, we look to leverage our operational leanings to add meaningful value to our portfolio companies. In addition to establishing thought leadership, we have made efforts to help our portfolio with influence marketing, market segmentation and extraordinary execution.

Whether yours is an enterprise model with three-year deals or a SaaS offering with month-to-month contracts, it is all about the service.

Here a few tips to keep clients coming back for more:

- Be a problem-solver: Create a sense of confidence within your customer base, assuring them that you will be there to handle issues/problems.

- Keep in touch: Send targeted and relevant letters/emails to customers to keep them engaged and make them aware that you are thinking about their success.

- Offer renewal discounts: Give customers a way to save a buck and give your business a cash flow boost by offering a discount on an annual subscription renewal (e.g. rather than $1,200 over 12 months at a $100 ASP, offer customers the full year for $1,000 upfront).

- Innovate: Continue to iterate on your offering based on customer feedback through the product management process. This will let users know that you are listening and improve the offering more generally.

At OpenView Venture Partners, we work with our portfolio companies to refine these customer service best practices and maintain long-term business relationships. In fact, we recently held a Customer Service Forum with Bill Price, author of The Best Service is No Service, to develop a 90 day plan of attack for improving the client experience.

What are some of the ways that you keep your users excited about your product? 

Two companies come to mind that have recently exemplified this ravenous appetite for deals. HP has moved to acquire no less than 4 companies in 4 months, with two of these having over a $1B price tag. On the heels of its $2.7B acquisition of 3Com at the end of 2009, the company has acquired Palm, several venture-backed tech vendors and is currently in the midst of an escalating battle for 3par with rival Dell. 

On the healthcare technology side, Ingenix has been holding its own. A wholly-owned subsidiary of the UnitedHealth Group, Ingenix has announced 3 considerable tech acquisitions in recent months, including Axolotl, QualityMetrics and Picis.

The question becomes, is this recent boon a result of the need for competitive positioning or shareholders looking for value creation from ever-increasing piles of cash (HP with $15B and Ingenix (UHC) with $12B)? It is yet unclear. With Intel’s $8B deal for McAfee and active interest in Infineon’s $2B wireless chip unit, however, the ranks of the acquisitive tech-sphere seem to be swelling.

This is a great sign for expansion stage businesses with an eye towards continued growth and a strategic exit. Venture capital firms can find some comfort in the thawing of the M&A market with the public markets still seeming ice cold.

What’s your pick for the next big deal? My sense is that Oracle and Cisco seem to be awfully quiet and I can’t imagine they will want to be left out of the party for too long…

Two companies come to mind that have recently exemplified this ravenous appetite for deals. HP has moved to acquire no less than 4 companies in 4 months, with two of these having over a $1B price tag. On the heels of its $2.7B acquisition of 3Com at the end of 2009, the company has acquired Palm, several venture-backed tech vendors and is currently in the midst of an escalating battle for 3par with rival Dell. 

On the healthcare technology side, Ingenix has been holding its own. A wholly-owned subsidiary of the UnitedHealth Group, Ingenix has announced 3 considerable tech acquisitions in recent months, including Axolotl, QualityMetrics and Picis.

The question becomes, is this recent boon a result of the need for competitive positioning or shareholders looking for value creation from ever-increasing piles of cash (HP with $15B and Ingenix (UHC) with $12B)? It is yet unclear. With Intel’s $8B deal for McAfee and active interest in Infineon’s $2B wireless chip unit, however, the ranks of the acquisitive tech-sphere seem to be swelling.

This is a great sign for expansion stage businesses with an eye towards continued growth and a strategic exit. Venture capital firms can find some comfort in the thawing of the M&A market with the public markets still seeming ice cold.

What’s your pick for the next big deal? My sense is that Oracle and Cisco seem to be awfully quiet and I can’t imagine they will want to be left out of the party for too long…

A great inside and/or outside sales team that is focused on closing qualified leads can make a good deal of headway in ensuring this backlog is built. With press releases announcing new clients each month and account managers working to upsell the current customer base, some entrepreneurs may think they are exhausting all possible outlets. Many businesses, however, forget to supplement these sales efforts by leveraging a captive marketing asset: their customers.

By taking a systematic approach to referral business, a company can keep its pipeline brimming with prospects. John Jantsch’s recent book, The Referral Engine, offers a nice framework for thinking about creating a system for generating referral leads. Joseph Jaffe’s Flip the Funnel is another great read about making existing customers your most productive salespeople.

Across these books and several web resources, a few overarching themes/tips come through: 

Ask for referrals at least 6 months after a customer signs on: Don’t jump the gun and ask for referrals immediately after signing. Give the customer time to experience the product and/or service. This will make the word-of-mouth reference more substantiated and keep customers from being turned off by referral efforts.

Focus on a customer subset: At least at the beginning of a referral program, focus on your top 25% of loyal customers. Most companies have visibility into their customer base and efforts should be made to leverage those most in love/familiar with the company.

Think about a reasonable rewards program: One way of showing customers appreciation for referral business is to offer them a small reward. Perhaps a month of free service, an upgrade or even a gift card.

Thanking your referral base: Sending a form letter/email with a simple “Thank you” for referring business in the company’s direction can go a long way towards fostering repeat referrals.

Here at OpenView Venture Partners, a Boston-based venture capital firm, we work with our portfolio companies to think creatively about enhancing sales and marketing efforts. Whether B2B or B2C, a referral program can aid a company by adding yet another lead generation tool at little cost to the company.

- The 55-64 year old age group averaged 33% more activity over the ’96-’07 time period than the 20-34 year old age group
- A longitudinal survey of 5,000 companies that began in 2004 showed that 2/3 of founders were between 35 and 54 years old
- The average age of the founders of technology companies in the United States is 39, with twice as many over 50 as under 25

When first reading this, I was taken aback. When I think entrepreneur, I think about 25 year old Stanford grads in a garage, not about my parents!

Stangler argues though that several macro-trends account for this, including:

- the shifting age distribution of the country (Baby Boomers) 

- the concept of a “lifetime job” becoming less and less prominent. This is the idea of the career man or woman who stays with a company for their entire career. Stangler writes that this rate of long-term employment among 35-64 year olds has dropped considerably in the past 50 years.

- people are living longer and healthier lives, allowing them to do more with them. The 70-year old entrepreneur in 2020 may well be a common occurrence. 

- technology has made firm creation much easier in the Internet age. Stangler argues that barriers to entry and transaction costs (i.e. what has historically made it difficult to start a business) have decreased in recent years.

So forget Florida and golfing. It’s time for wealth creation, baby!

I believe firmly that any true economic recovery is going to come from ambitious innovators who dare to try something new. For the Boomer generation, this means taking the significant experience gained from years of work and turning it into a company with compelling business growth strategies. At OpenView Venture Partners, a Boston-based venture capital firm, we have invested in expansion stage companies with founders of all ages and look forward to investing in great ideas across generations for years to come!

I recently read Creating Competitive Advantage: Give Customers a Reason to Choose You Over Your Competitors, by Jaynie Smith and William Flanagan. Smith and Flanagan do a great job of laying out what works and what doesn’t when trying to close a deal with customers. For sales representatives, understanding the company’s tangible competitive advantages is key. You can have the most targeted leads in the world, but if you can’t close them, you don’t get new business.

So how do you capitalize? A few key ways:

Take vague statements and sharpen them.

Which of these would convince you to buy a car?

“We are one of the industry leaders in terms of overall safety.”

Or

“We’ve been J.D. Power’s Top Safety Pick for 5 years straight.”

Which of these would be more likely to cause you to by a piece of software?

“We have a very good reputation in the industry.”

Or

 “50% of new customers are from word-of-mouth and referrals.”

The point is, quantifiable statements that elucidate competitive assets tend to go a lot further than the cliché vanilla claims that tend not to have teeth.

Establish ROI without focusing too much on price

Smith and Flanagan bring up a simple but compelling point: when you start to compete on price, you are admitting that your offering has become commoditized. In order for sales representatives to close a new customer, they need to focus on what the customer is getting with the product that they would not with another company, beyond a cheaper offering.

These include:

- Reliability or minimal downtime
- Top-notch customer service
- Long-term cost savings through the strength of the product
- Adaptability

Underscoring the benefits of the product in terms of longer-term ROI is essential.

Integrate competitive positioning into strategic and operational objectives

Competitive analysis and positioning is not only a sales and marketing issue, it’s a company issue. This is the core of any business. As the great Jack Welch has said, “If you don’t have a competitive advantage, don’t compete.” If you don’t understand why your product or service is better for customers and how to make them aware of that fact, then throw in the towel now.

As an associate at a Boston-based venture capital firm, one of the first things I look to understand from companies is what they view to be their relative strengths and weaknesses. For expansion stage companies, understanding competitive advantage is critical.

For expansion stage software companies, a thoughtful and illuminating UI can make all the difference. Consumer-focused companies are often thought to champion the UI cause with the 800-pound gorilla being Apple. From the iPhone to the iPad, the consumer is driven and drawn in by the company’s laser-like focus on understanding the user. Several other B2C companies, including Gowalla, Pandora and Google, have clearly made UI a focus within their respective product management lifecycles.

UI is just as important for B2B software companies. Often thought of in terms of functional capabilities, B2B companies can benefit from creating an engaging UI that allows the user to navigate an application or product with relative ease.

Jakob Nielsen, dubbed the “king of usability” by Internet Magazine, has worked with large technology companies like Sun Microsystems and IBM to make their large-scale enterprise products more user friendly. He has created a list of ten principles for user interface design that highlight where a company should be focusing its product design and development efforts. 

These include:

- User control and freedom

- Flexibility and efficiency of use, and

- Aesthetic and minimalist design
This focus on the user begins with a navigable and interactive webpage and culminates in the sale of an intuitive and easy-to-use product offering. 

A useful exercise that will allow expansion stage companies to understand how they are doing on the UI front, is to take Nielsen’s list of principles and examine how the company is currently addressing each of them. Areas that are lacking can then be integrated into the product management process and will allow the company to round out its UI efforts. 

The Small Business Jobs Act will increase Small Business Administration (SBA) loan limits, create a Small Business Lending Fund (where the Treasury will invest in community banks with the condition that they lend to small businesses locally), establish the State Small Business Credit Access Fund (states will apply for grants to build small business programs, incubators and venture organizations), encourage investment in capital expenditures through tax incentives, and increase the tax deduction for start-up expenditures.

Whether or not all of the provisions in the Senate bill will become law, no one knows. Politics is a quirky beast. What is critical, is that lawmakers take the time to understand the longer-term ramifications of the bill.

Entrepreneurs have driven the American economy since its inception. Small businesses are the heartbeat of communities from Butte, Montana to Atlanta, Georgia. In order for the United States to continue to thrive in the global economy, small businesses need to be supported and given incentives to grow. College graduates need to be encouraged to take a risk on an idea. States need to support ventures at the local and regional level.

For expansion stage companies, these loans and tax incentives can make a considerable difference. Growth capital from the government in the form of affordable SBA loans and subsidized community bank loans can go a long way in both helping businesses to grow and optimizing their capital structure. 

The Act will serve as a supplement to smart institutional capital from the likes of our firm, OpenView Venture Partners. Affordable credit combined with knowledgeable growth investors is a winning combination for both individual companies and the American economy as a whole.

Take healthcare. Healthcare and technology have always had a strained relationship. Physicians do not want to have the hassle of dealing with computers and in-office servers, no less electronic health records or demographic reporting. Hospitals lose enough money without having to spend more on technological infrastructure. The government, however, changed the game in February of 2009 when the HITECH Act was passed as part of the stimulus package. 

In order to increase the utilization of healthcare information technologies, the government allocated billions of dollars as incentives for those hospitals, systems and physicians that comply with certain standards of “meaningful use.” If a physician adopts a certified EHR by 2011, they will be eligible to receive incentive payments as it relates to their Medicare and Medicaid relationships. In addition, the government will impose penalties beginning in 2015 for Medicare, by decreasing reimbursements by 1% for each year until adoption of the EHR.

In dollar terms, these incentives and disincentives are not huge sums. The rate of new venture capital investment into the healthcare IT space, however, would have you believe the government was giving out million dollar bonus checks to those who comply. It seems that every day a new EHR company announces that they were successful in raising venture capital.

This anecdote is meant to show that when the government announces they will throw dollars at a problem, no matter how seemingly insignificant the amount, new companies and venture capital money will follow. 

As an associate at a Boston-based venture capital firm, I talk with companies in a variety of spaces and the thesis never seems to fail. After both 9/11 and Hurricane Katrina, the government established funding programs to increase the use of technology for disaster response and preparedness. Private equity investment in the space swelled accordingly. 

The government doesn’t even have to announce funding in some instances. By just mentioning the need for reform and making something a priority, investment dollars will follow. Take the Gulf Oil Disaster from several months ago. President Obama last night announced that he will be taking the crisis as a sign that policy measures need to be taken to swiftly pass a bill addressing America’s addiction to oil. Vinod Khosla, well-known cleantech investor, sees the disaster and the government’s response spurring cleantech innovation and investment.

This cause and effect are certainly not a bad thing. Savvy entrepreneurs and investors just need to take a step back and think about how much of the regulatory Kool-Aid they should really be drinking.

I have been a subscriber to Business Week since last year, before the ailing magazine was acquired by Bloomberg for $5M plus liabilities. Prior to being acquired, the weekly periodical was something I read if I had time, but it was not a top priority. The content was dry at times and the design outdated.

Bloomberg’s rebranding and revitalization of the 80-year old Business Week has been a huge success. On the print side, the magazine has a revamped cover style, unique color tabbing based on subject, and an aesthetic approach that the magazine lacked before. The content is relevant, with feature pieces complimented by interesting anecdotal facts and figures. On the digital side, the magazine’s reach (as analyzed by Alexa) has increased 10% in the past three months alone.

As an associate at a Boston-based venture capital firm, I found this story of branding significance resonant. Effective content and brand management allows a business to stand out. Sleek and navigable websites allow a company’s offerings to shine through. When examining business growth strategies, one area that can truly enhance the top-line is effective marketing and brand awareness.

When looking for investors, expansion stage companies should look for a firm capable of adding real value in terms of branding and marketing. At OpenView, we have an in-house team of professionals, several of whom focus on marketing strategy and PR. They help companies to enhance there inbound marketing, content management marketing and competitive positioning. The case of Bloomberg Business Week shows how important such efforts can be.

One of the most profound examples in the series was that of Thomas Edison. In what was one of the first true research and development labs in the United States, Edison worked tirelessly for thousands of hours to develop a lighting source that did not need kerosene and a match. Edison was determined to find a substance that could be lit with the aid of electricity. For the filament, he needed a material that would burn for hours, not seconds. It is said that he tried over 6,000 separate things. He would attach material #1 to the two contact wires and flip the switch. Time after time, the material snapped, burned in moments, or failed to ignite. It was not until trying a piece of carbonated bamboo that Edison was successful.

Think for a moment what would happen if Edison had given up after 4,000 materials. Maybe someone else would have come along and figured out the electric light bulb. But it could have been years without an electric light source.

Edison epitomizes the combination of innovation and motivation that has come to define the American entrepreneur. These are often brilliant individuals who could have been quite comfortable in a more established profession, like medicine or finance. But they defy convention in the name of something greater.

As an associate at a Boston-based growth capital firm, I interact with these types of visionaries often. When looking for investors, founders realize that they need help in order to make their vision a reality. Entrepreneurs engage with OpenView Venture Partners when they see the potential for their product or service and acknowledge that they need both capital and operational leverage to create a much larger company. Humble perseverance and indomitable will to succeed define the 21st century inventor as much as they did Edison.

These competing methods for long-term corporate success are often viewed in silos; however, combining elements of each can result in a highly scalable and well-run organization. 

From the beginning, the business-savvy CEO is thinking about how to effectively turn his vision into a unique product/service, how to better focus the offering, who to sell to, and how to sell more to that constituency. This is an iterative process with product management running in parallel with customer relationship efforts. It is with this disciplined approach and focus on risk mitigation that capital is preserved and meaningful revenue is generated.

Sticking to this lean focus is not always the best strategy. Even the most vigilant park ranger doesn’t keep every match out of his forest. The economy can hit the skids, new competition can enter the marketplace, or the need for a true sales team build-out can come along. Rather than raising venture capital like it is going out of style, a targeted capital raise makes the most sense. Rather than let the fire spread, a controlled burn is in order.

As a venture capital firm focused on expansion stage companies, we are typically looking to invest in situations similar to these. The company has achieved growth relatively efficiently, has taken limited outside funding, and has a go-to-market strategy that is working. With our in-house operations team, we look to accelerate the company’s growth through focusing on best practices around sales and marketing, product development and much more. We have helped companies refine their lead qualification strategy, execute more effectively, and think strategically about financial analysis. 

Deploying capital towards targeted efforts allows a company to not only stay disciplined, but also to win the race.

The salesman is a classic American figure. It epitomizes the pull-yourself-up-by-your-bootstraps mentality that is a mark of the opportunity for the industrious in the US. The sales function, however, is undergoing a significant transformation. 

As an associate at at Boston-based growth equity firm, I talk to a number of entrepreneurs each week. We invest in software and technology companies, and sales are an integral part of the growth of these businesses. Many of these organizations target the enterprise and rely on a costly sales strategy to gain support and traction. Many others, however, target small to medium businesses and have become quite adept at leveraging the virtual ecosystem.

As of late, I have spoken to a number of companies that have come close to perfecting the “low-touch” sales model. These are sales organizations run through interactive web guidance, light telephone operations and easy implementation processes. I have spoken to companies across verticals that have effectively deployed this model, from healthcare to workflow management.

These lower touch models result in higher profitability, leaner teams and more efficient distribution economics. The decreased operating expenses associated with smaller sales teams also allow more time and money to be spent on the product management process and competitive positioning. 

This change is just the beginning. As video interaction moves from high-end boardroom systems to office webcams and virtual demos become commonplace, the role of the “salesman” will continue to evolve. As the internet and virtualization become more widespread, the Oracle-esque feet-on-the-street sales model will suffer.

Leave for a moment the irony in a “stealth” company supposedly shrouded in secrecy, in many cases issuing a press release to a widely-read tech blog to talk about their recent Greylock fundraise, and you are left with a discussion of the merits of such efforts. 

The argument for start-ups to be in stealth mode is that they are able to develop their products outside of the public eye, and more importantly, outside of their competitors’ web of awareness. The degree to which some of these companies have gone to maintain the ultra-secrecy of their businesses is a bit silly. Take the announcement today that Flipboard has raised funding from Kleiner Perkins, one of the better known venture capital investors. No other information was provided. Not even a general industry grouping. The company’s website shows nothing and the company’s Twitter account has a benign post, “Flip. Flip. Flip.” This is a perfect instance of the fruitless nature of the stealth identity. How does a company expect to generate buzz about itself when no one knows what the product is to be, who it is to be used by, or even what sector it is in?!

The fear of stealth entrepreneurs that someone might steal their idea or that public awareness will harm their launch is false. If you are worried about a large technology company or other business hearing/reading about your idea and being able to recreate your efforts, then maybe your idea isn’t so great! 

Society has always been fascinated by imperfect information. Knowing something that not everyone has access to has a certain appeal. Knowledge is power, right? Wrong. This high school-esque desire to keep secrets will in most cases backfire. 

The best defense is a sound offense. Great companies are built by knowing their customer, getting constant feedback from that customer, and refining the offering. Creating competitive positioning is all about targeted marketing, client awareness and effective execution. A great company is one that constantly works to better understand their consumer, innovates accordingly, and uses media efforts to announce how they are crushing their competitors, not how they are hiding behind a blank webpage. 

Innovation is how this idea has manifested itself in terms of business. Since our founding, we have created generation after generation of great minds. From Franklin to Edison to Ford to Gates to Brin, bright people have taken big chances. The doubters were ignored and great companies were created that today employ thousands of American citizens. Venture capital firms have popped up everywhere. These venture capital investors have also taken bets on seemingly crazy ideas and as a result have been instrumental in job creation and strengthening the economy.

One way that we can ensure this innovation and healthy risk-taking continues is for the government to provide incentives for the great minds of this generation to make big bets. Forget entering the corporate world and instead create the next corporate world. Government funding through institutions and academic centers has spurred great research and development. Tax incentives and small business loans have proved highly meaningful as well. There is one bill on the docket now, however, that could truly make the United States the destination of the world’s great entrepreneurs.

This is the Startup Visa Act, which would provide visas to foreign entrepreneurs who have at least $1 million in committed capital to launch a business, and create at least ten jobs in the U.S. This would allow innovators who are able to secure venture capital funding to set up shop on U.S. soil and create jobs for Americans. This would create a legal basis for foreign inventors and business persons to come to this country and add meaningful value to the economy and society. This would increase the competitive positioning of the U.S. in world markets and solidify the notion of America as being the true “land of opportunity.”

While most venture capital firms will support these efforts through funding and board-level guidance, tangible operational support is often lacking. My use of the title phrase stems from the fact that OpenView is quite different. While we offer board guidance and funding, our true value-add comes in the form of the operational leverage that OpenView Labs offers. OpenView Labs is the in-house strategic consulting arm of OpenView Venture Partners. OpenView Labs’ twelve professionals focus on sales and marketing build-outs, financial and legal analysis, and the product management process. They look to serve as a resource and be as hands-on as a portfolio company needs them to be. Labs allows a company to accelerate its growth and scale significantly.

Everyone’s money may be the same, but everyone’s value is another story.

But I believe that when looking for investors, the entrepreneur’s final decision comes down to one thing: personality. The above-mentioned selling points certainly do come into play. However, when a CEO is deciding which group he/she wants to work with, they need to truly trust and understand the firm’s members. At the end of the day, an investment is a marriage of sorts. The company’s management team and the firm’s team are going to be spending a lot of time together over the life of the investment. They are building a company together. No matter the reputation or perceived advantages, having a healthy rapport with and respect for each other trumps all other factors.