Just two months before I was expected to have an answer for that pressing question, I was in private equity – far from rampaging bovine. I left that job to join a company in the regenerative agriculture space. As the CFO, I thought I’d be building spreadsheets, forecasting cash flow, and optimizing KPIs. Instead, I spent most of my time managing vendor relationships, handling HR issues, and performing real-world “risk management.” Which, in this case, involved deciding how to handle some loose bison. Not what I’d anticipated.

Long story short, after three years getting my butt kicked in the real world, I returned to Norwest with a newfound appreciation for just how hard it is to run a high-growth business. I also gained a deep respect for the value that a strong board can bring to a company… if it applies the appropriate perspective.

Norwest’s Invited Guest Approach

Today, I work on the Norwest Growth Equity team. We primarily invest in founder-led, profitable, growing businesses. These companies were successful before partnering with Norwest. They’d likely be successful without us. They choose to accept our investments because they believe we can help significantly increase the value of their businesses. This starts with honoring the legacy of what has worked while offering insights, resources, and a broad network of experts to assist in a handful of strategic areas.

We call this the Invited Guest Approach. Let me break it down from the perspective of someone who has been on both the operator and investor sides.

The Invited Guest Approach is not:

• Just being a friendly voice in the boardroom without any substance
• Being overly hands on and in the weeds; we trust the operators to understand what drives the financial performance of their business
• Applying a rigid playbook to every company

The Invited Guest Approach is:

• Being abundantly available, not just in board meetings…
• … while acknowledging that the founder and operators know the company infinitely better than an investor board member possibly can
• Being reactive to your needs while proactively thinking about how to add value
• Providing an extensive network of experts and advisors who have navigated growing pains that the company will inevitably experience as it reaches new milestones
• Focusing our efforts on increasing Enterprise Value through initiatives that will lead to valuation multiple expansion

Admittedly, “increasing Enterprise Value through initiatives that will lead to valuation multiple expansion” sounds like the kind of board speak that my former ranching colleagues might roll their eyes at. Here’s a framework I use to further define the concept:

Founders “hire” Norwest to help increase the value of their businesses. In simplest terms, this comes from:

1. growing financial metrics (i.e. revenue, EBITDA, cash flow)
2. increasing the multiple on those financial metrics, which a potential acquirer might use to value the business in the future

The Invited Guest Approach aims to provide insights and strategy that will maximize valuation multiple while leaving operators the space to focus on executing plans that will achieve that outcome.

Invited Guest in Practice

In reality, operators and investors are both part of the same team. We work on strategy and tactics together. Norwest can certainly provide operational insights, such as an effective M&A playbook, managing working capital, and launching new advertising channels. However, we’re most effective identifying specific strategies that will increase the valuation an investor or acquirer might pay for the business. We do this by focusing on activities like:

1. Being acutely aware of similar transactions in the market and what factors contributed to the valuations paid by acquirers
2. Identifying and mitigating existential risks to the business
3. Finding the optimal balance between growth and profitability
4. Making key business development introductions
5. Helping operators understand what metrics are important for driving enterprise value (e.g., a 10% growth acceleration should lead to X increase in multiple)
6. Introducing operating advisors and independent board members who have scaled businesses through the phase of growth that our portfolio company is about to experience
7. Leveraging our Talent & People team to make key executive hires and design appropriate compensation structures (e.g., understanding a typical fixed vs. variable compensation split for sales executives)
8. Increasing the visibility of our companies in financial markets

You may be thinking, “This all sounds great in theory but can you give me some specific examples?”

I’m glad you asked. We’re proud to have delivered Enterprise Value to many portfolio companies over the years by applying the Invited Guest Approach, including:

• Providing best-in-class benchmarks for specific value-driving financial metrics and ratios (i.e. gross margin, LTV/CAC, revenue per sales team member)
• Helping MAËLYS fortify its relationship with key retailers by making executive-level introductions
• Aligning on a product expansion strategy with MTN OPS that focuses on growing segments of the supplements sector
• Partnering with SmartSign management to execute a verticalization strategy
• Narrowing Forum Brands’ acquisition strategy
• Sourcing and vetting talent for Vuori’s management team as the company scaled
• Sourcing and executing on selective M&A to expand Cority’s product portfolio and TAM
• Helping Supplier.io conduct strategic market research into a new industry to evaluate benefits and risks of entering it

The above list is certainly not comprehensive. We aim to be a true thought partner for our founders and operators across all aspects of the business. Then, importantly, we allow the team to go execute!

Now you may be thinking, “The Invited Guest approach resonates with me. When and how does Norwest get involved?”

We thrive working with founders and operators seeking a partner that follows this Invited Guest mentality. We’re often investing in companies at an important inflection point: shifting from pure financial growth to increasing Enterprise Value. We’re comfortable investing in either a minority or majority position. If you’re interested in learning more, please reach out. We’d love to elaborate!

I know you’ve been wondering, “So… what happened to the bison?!”

After a full-day exhaustive search, the ranch hands intercepted the missing bison, corralled them from horseback, and ushered them back to safety. Crisis averted.

The post The Invited Guest Approach: What Operating Experience Taught Me as a Board Member appeared first on Norwest Venture Partners.

In recent years, more and more product leaders have made the jump to entrepreneurship. We explored this path from CPO to founder/CEO with a virtual panel discussion with:

• • Sanish Mondkar, founder and CEO of Legion, which provides labor-management solutions for companies with large numbers of hourly workers. Prior to starting Legion, Sanish was chief product officer at SAP, where he oversaw procurement and supply-chain products. Before that, he was CPO at Ariba until its acquisition by SAP.
  • Elliot Shmukler, co-founder and CEO of Anomalo, which identifies and helps prevent issues that can negatively impact the quality of mission-critical data used by a business. Previously, he was chief growth offer at Instacart, and before that ran product teams at eBay and LinkedIn.
  • Donna Boyer, CPO of Teladoc, a leading provider of virtual healthcare services. Previously, she led product development at Stitch Fix and the host platform of Airbnb.

You can see the full discussion on YouTube with the following highlights from the discussion.

Most companies have what I call the founding myth – some catalyst that led the founder to step away from a big job and venture out to start a company. What inspired each of you to make that move?

(6:40 on the recording)

Elliot: My co-founder Jeremy Stanley and I worked together at Instacart, which is an intensely data-driven company. Even though they had all the best tools and all the best people, we were surprised by the number of episodes where the quality of data impacted our work. So, the inspiration was to develop a tool that would instantly spot problems with data and alert the user.

Sanish: After I left SAP, I spent six months doing nothing, which was great. During that time, I took a drive across country. During that trip, I noticed “for-hire” signs everywhere. At the same time, we were hearing about workers not making enough money to have a basic livelihood. So, if people are looking for workers and if workers can’t find enough work to make a decent living, there’s a broken picture. It turns out that a lot of these businesses operate on very thin margins, and they don’t have the sophisticated tools to schedule employees optimally in a way that employees are going to be happy with the flexibility and the number of hours. This was the problem: employees wanted flexibility and a better experience; employers were struggling with efficiency, productivity, and turnover. I thought that technology could be applied to improve the experience of businesses and the lives of workers. This was the dominant factor that led to the founding of Legion.

Donna: I decided to change jobs in the summer of 2020, which was a really dark time with the pandemic raging. It was obvious that health equity was a significant problem. There had been moments in my life where I’d wanted to get into healthcare, and I finally decided, if not now, when? But before I founded a company, I wanted to make sure I understood all the ins and outs, which would allow me to have the biggest impact possible. So, I joined Teladoc. I absolutely made the right decision to be able to impact things at scale and to give many more people access to healthcare. To make the system less scary and more accessible was really what motivated me. So, whether you’re founding a company or leading product in a larger company, it’s that passion and curiosity for solving the problem that drives you.

One of the common themes here is that product is a great stepping stone into the role of founder and CEO. It prepares you extremely well. But at the same time, running a company has a much broader set of responsibilities. How did you learn to manage all the functions beyond product and what experiences in your previous career have been most valuable in being effective in the CEO role?

(19:30 on the recording)

Sanish: The key word in what you just said is “learn.” It is important to approach the CEO role with the mindset there is a lot to learn. One thing product leaders will attest to is that the learning never stops. As a product leader, you are responsible for seeing around the corner, so product leaders are already tuned into forward-looking learning. Just the ability to learn at that scale translates well. And I have always surrounded myself with people who are subject-matter experts. I partner with them on the product vision and company strategy.

Elliot: I agree with Sanish that you must continue to learn and surround yourself with great people. I got some great exposure in my previous roles, largely because product touches so many pieces within an organization. At Instacart, we would be in meetings with the CFO talking about the detailed accounting of our profitability on every order. I would go on sales calls to grocery retailers. I would read the contract we were about to sign and be on the call with the lawyers analyzing what was going on because often it had impact on product. It was committing us to certain SLAs and certain feature developments in the future. So, it gives you some great exposure for when you have to manage those functions as CEO.

Donna: I try to connect with both customers and people in the organization. What are the gaps? What are the needs on the sales side? When I initially did B2B, it was hard for me to be a step away from the product. You need customer feedback to understand whether your product is good or not; whether you have a good market fit. To know what makes it possible for your sales team to sell, you must think about the product holistically. So, I make a concerted effort to have empathy both for the sales team and for the customer.

It is important to approach the CEO role with the mindset there is a lot to learn. As a product leader, you are responsible for seeing around the corner, so product leaders are already tuned into forward-looking learning. -Elliot Shmukler

One of the commonalities between C-level roles is that typically there’s no one else at the company who’s an expert in what you do. So as a CPO, you may go to the CEO for general advice and coaching, but they’re not going to tell you how to run products. Donna, what sort of coaching or mentorship do you seek out as CPO?

(32:15 on the recording)

Donna: One of the best things about being CPO is that I have peers I can reach out to. There are a lot of product people who are now CEOs, GMs, or CPOs. You can ask them how they have dealt with situations like the one you’re facing or can suggest a resource that can help. It’s important to make sure that you are continuously learning; that you’re open to what the next evolution in product might be. Reaching out to others has helped me quite a bit.

Let’s address a question from the audience, Donna. It’s about disagreements between C-level executives and how the CEO makes decisions when there’s dissent among the leadership team.

(51:45  on the recording)

Donna: One of the most important things is the relationship with your CEO. There are going to be CEOs that are more product-focused and ones that are less product-focused, and it’s important to know that going in, so you understand the nature of the change you need to lead. At some point, most founders will get pressure from the board about company growth, and there’s a danger that you’ll lose that initial founder vision. The CPO’s role, then, is to carry that vision forward and chart the next horizon. It’s very much an influence role. CEOs can’t just direct people to do things; there has to be a level of buy-in for things to be carried out with conviction and commitment. If you’re bringing in the right data, if you’re bringing in the right customer focus, the decision will usually make itself. I could count on one hand in 30-some years how many times the CEO has said, “Sorry, I gotta make this call.” Usually, if you do it well, it’s not about committee; it’s about synthesis. And good synthesis leads to great product decisions.

If you’re bringing in the right data, if you’re bringing in the right customer focus, the decision will usually make itself. -Donna Boyer

A lot of product leaders daydream about founding a company. It’s only natural. Now that you’re a couple years into the role of founder/CEO, what’s been the best part and what’s been your least favorite part?

(27:45 on the recording)

Elliot: I think my best part and worst part are the same. The best part is that you get to be a part of everything. Something that always annoyed me in various product roles was that although my exposure was very broad, I didn’t get to make decisions in other areas where I would sometimes disagree with the decision that was made. What’s great about the CEO role is that you can make all the decisions, or you can set up things where you’re involved. But that’s also the worst part. Because if something is broken, it’s ultimately up to you to fix it. You can only complain to yourself about things that are not going well. It puts the onus on you to fix things that are broken and keep an eye out for them.

Sanish: As a product leader, there were many things under my control, but also things where I was a couple layers away. As a founder, it’s been very satisfying to be able to put the picture together the way you think it needs to be. There are downsides, of course, because sometimes things will not work out and then you take the blame. One thing that was challenging for me early on was to appreciate how long things take. At a large company like SAP, there were a lot of resources available. Big companies may not always move fast, but when they do act, they can have a large impact. When you start from scratch, you have to build those resources, and for a period of time that was very challenging for me. But looking back, I would do the same things I did. So, it’s more of a matter of awareness rather than a hindrance in any way.

Every aspiring founder has an idea for a company, but they’re only able to pursue it if they can raise money. And that initial round of funding is often really intimidating. What was the seed-round process like for you?

(34:50 on the recording)

Sanish: The most important part was talking to a lot of prospective customers and employees. My conviction level was pretty high, and I had already hired a couple of people to start building the product. One advantage that product leaders starting companies have is that it’s generally not as issue whether they can build products. I didn’t have to spend much time convincing people that I can build products. The questions were all about the viability of the idea: is there a market for it; is the timing right? I was fortunate to have a lot of early-stage interest from companies, so I was able to partner with a couple of firms to get the seed round. My advice to new founders is to be aware of what your strengths and weaknesses are, and what objections you might face. Do some work to show that you have thought about this and that you have a perspective you believe in.

Every time I would meet someone, I would ask them who else should I meet? And generally, folks are very helpful. That’s how I met my first customers. It’s important in the early stages to build a network of people who one day might use your product or join your company or maybe invest. That is a super-productive way to spend your time.

Elliot: My story was similar. We had a great conception of the problem we were trying to solve because we had faced it ourselves. And we had a demo of how we were going to solve it. Then it was exactly as Sunish described: we went to our network. This is why it’s helpful throughout your career to meet people, go to events, and participate in the community We were very fortunate that we were experienced. Anyone we touched in the VC community through our network took the meeting. They didn’t always understand what we were talking about or what our product did, but they almost always gave us feedback. Very often, they introduced us to potential customers that were either portfolio companies or folks who gave us an opportunity to refine our pitch. Our problem statement stayed the same, but we learned to also answer the question of how big a business this was going to be.

My advice to new founders is to be aware of what your strengths and weaknesses are, and what objections you might face. Do some work to show that you have thought about this and that you have a perspective you believe in. -Sanish Mondkar

Can you share something meaningful that happened recently in your role as a founder/CEO.

(43:25 on the recording)

Elliot: I’ve been really pleased at some of the executive hires we’ve made recently. Every day I see how the executives are pushing ahead, knocking over obstacles, and making things happen. I can compare that to some executives that we may have mis-hired in the past that weren’t doing that and I had to get very involved in what they were doing. We’ve had some new executives start in the last few months, and it’s been amazing to see them ramp up and push their area forward.

Any advice you have for the heads of product that are interested in becoming founders?

(57:50 on the recording)

Elliot: If you want to start a company, I would say just do it. Especially if you’re in Silicon Valley or connected to the tech community. It’s pretty risk-free, right? If it doesn’t work out in a couple of years, you can get something like your old job back. Meanwhile, you’re going to have a great adventure and you’re going learn a ton. And if you end up coming back to a regular job, you’re going to come back better. As we have pointed out before, there’s such a huge support network in the technology community that even if you feel you don’t know something, there are people who will help you.

Sanish: I completely support what Elliot said. Just take the first few steps. Don’t worry about what comes after that. No founder journey is exactly the same. It’s essentially problem-solving and making progress. So, if you’re passionate about something, don’t worry that you don’t know sales or marketing or any of the things that you haven’t been a part of before. There is a support system out there that can guide you. And if at some point you don’t like what you’re doing, if it’s not for you, it’s easy to go back to where you were with a ton of new experience, which will make you a better product leader.

Watch the full discussion below

The post The Path from CPO to CEO appeared first on Norwest Venture Partners.

It takes a lot of work to recruit great sellers; often, that is the CEO’s focus at this stage. However, recruiting is only part of the equation. A common mistake we often see is a lack of focus on sales enablement.

Here is a common scenario:

A historically high-performing, new seller has been just been recruited from a tier-one B2B SaaS company (e.g., Salesforce, DocuSign, Slack, etc.). At their prior company, they had an extensive onboarding process. This process likely included messaging training, role-play scenarios, buddy and mentoring assignments, and many shadowing opportunities. All the sales support materials were ready and proven for the seller to leverage. The seller arrives at the founder’s company, and there is no formal training. The value proposition messaging is in the founder’s head. The objection handling is in the founder’s head. There will likely be no tested and proven presentations, prospecting emails, or lead-generation support. If they don’t get discouraged, the new seller loses valuable time building all those sales enablement tools when they should be focused on prospecting and winning new clients.

How do you solve for this scenario? Before you set out to buy software or leverage sales enablement tools, you should document any sales curriculum—then you can leverage the many great sales enablement platforms (check out Norwest portfolio company MindTickle) out there. Documenting your sales curriculum will help you generate the content to populate whatever sales enablement solution you use and actually make the training effective.

I recommend that early-stage leaders write a “sales playbook” to get down their initial thoughts and harness all their learnings to date. Of course, the playbook will evolve over time, but it at least gives your organization something to start selling from.

The Benefits of Writing a Sales Playbook

A few of the top line benefits of creating a documented sales playbook:

• • The more repeatable your process is, the more consistent (and predictable) your sales conversations are. Your strategies, sales plays and background materials should live in a documented format that can be easily accessed by others on your team. The goal is to make your playbook as repeatable as possible.
  • Documentation helps expedite the onboarding process. When you welcome new hires to the team, they’re going to dig through your existing materials to set themselves up for success. With a playbook in hand, they’ll be able to ramp up within a few weeks and start generating revenue faster than if they had to gather all the information themselves.
  • Outlines your strategy for if and when you need to change course. As your company matures, the market evolves or industry changes, you’ll be able to evaluate your sales strategy and adapt accordingly. It’s easier to acknowledge when messages or pitches need to change if you have a clearly documented plan to refer back to.

To get started with a playbook, it can be as simple as documenting the below in a Google Doc or Slides format.

At a Minimum, Your Sales Playbook Should Have the Following Sections:

• • Industry Overview. This section describes the industry you compete in and sell into, the major players, and trends. This should include commonly used terms, economic models, and trends.
  • Ideal Client Profile and Buyer Personas. This section should cover your Ideal Client Profile (ICP). Your ICP should be the company traits of the ideal buyer of your solution. It may be characteristics like employee count or industry vertical, and it can also be more psychographic traits (e.g., a recognized top employer designation). A Buyer Persona is information about the people in those ideal companies that you are actually selling to. They are often designated by department and level as well as other traits, the most important being common pain points and their personal wins.
  • Qualifying Criteria. Time is one of your seller’s most valuable resources. To help them, you will want to provide your qualification critters for them to evaluate leads. A part of these criteria may be the traditional BANT (budget, authority, needs, and timing) and criteria that align with your ICP and Buyer Persona. For example, if you are focused on companies between 1,000 and 10,000 employees based on your solution, a seller working on a very small or very large prospect won’t be a great use of their time.
  • Your Value Proposition. This should be a crisp articulation of your solution’s value to your ICP and Buyer Persona and proof points that support its credibility. Ideally, your value proposition will have quantifiable data to communicate economic value, especially if you are selling in a recessionary environment.
  • Common Objections. Prospects likely have given you many reasons why they won’t move forward with your solution. All of these objections should be written down, and you should have the ideal response messaging for your sellers to leverage to overcome the objections.
  • Frequently Asked Questions. Prospects have also likely asked you dozens of questions about your solution’s value, features, and implementation. Writing these down and giving sellers the answers will not only build credibility with the prospect but also shorten sales cycle time if sellers don’t have to chase down answers all over your company.
  • Competitor Battlecards. This section details your competition, their value proposition, and how to position yourself to come out on top. Competitors can include a client’s in-house solutions, and the client doing nothing is also a competitor. Messaging to help your sellers convince buyers of the risks of inaction is often just as important as out-positioning a competitor company.
  • Your Sales Process. You may not have a formal selling methodology at this point in your company’s lifecycle. You should, at minimum, have a basic sales process* that your deals typically follow and that your new sellers can track against. This is critical to help develop financial forecasts, implementation plans, and your overall resource needs.
  • Data Hygiene and Pipeline Management Data Obligations. It is never too early to build a strong data foundation! In this section, you will want to tell your sellers their obligations for maintaining data in whatever systems you utilize. My company has strict obligations around contact, company, and opportunity data (especially opportunity data). Building this muscle inside your company is much easier at the start than re-engineering behaviors when you cross that $100M ARR threshold!

You may also want to develop a “certification” process your new sellers must go through to start selling your solutions. Role-playing various scenarios is one of the best tools I use to help sellers practice. We always record these over Zoom so we can “break down the tape” and the sellers can identify improvement areas.

Your sales playbook, in many respects, is simply capturing all the learning and best thinking of your company’s journey to date. This document will evolve, and you can leverage this solution across any sales enablement or learning management platforms you may one day implement as you scale your sales team.

Happy selling!

*What is a sales process? B2B sales process refers to the steps that a business takes to sell its products or services to another business. It usually involves identifying potential customers, qualifying their needs and budget, presenting and demonstrating the products or services, addressing any concerns or objections, negotiating terms, and closing the deal. B2B sales can be complex and involve multiple decision-makers, so building relationships and trust with the customer is critical. After the sale, it’s important to follow up and provide ongoing support to ensure customer satisfaction and retention. The ultimate goal of the B2B sales process is to create a mutually beneficial partnership that drives revenue and growth for both businesses.

The post Writing Your First Sales Playbook appeared first on Norwest Venture Partners.

It’s gratifying to know that we’ve already accomplished things that just a few years ago, smart people from our industry told me were impossible. We’ve barely scratched the surface of all Noyo can do and that’s a really exciting place to be — particularly when I reflect on the career path that led me here.

For you fellow entrepreneurs who have an idea germinating for your first business, here are a few of the lessons I’ve learned on my journey from product manager to CEO.

1. If The Product You Need Doesn’t Exist, Build It

The spark of the idea that eventually became Noyo happened while I was a product manager at Zenefits, the HR tech startup. I had joined right after the product caught fire in the market and the company was entering a period of hypergrowth. During that time, I got to work closely with the company’s incredible founding team, which provided many opportunities to observe what it takes to bring new products to life while building a company at the same time.

By the end of my tenure there, I was eager to go even earlier stage and help a startup find its footing. But as I shortlisted product ideas I’d enjoy working on – which included drones and farmtech, among other things – I kept wondering what it might be like to start something myself. I cycled through many different ideas, but couldn’t ignore a persistent need I saw in the benefits space — the industry’s lack of trusted, structured data. I had the domain expertise, the relationships, and the founding team to pursue it, and ultimately, the timing was right. So we took the plunge.

2. Funding Isn’t Just About Raising Capital

It’s been our experience that investors and funding isn’t just about the capital, it’s a dynamic relationship that can provide valuable support as you grow your idea into a business.

When we started Noyo, I was not well connected in the venture world, but I did have friends who were experienced and who were gracious enough to help coach me through the process. For the first several months, we did not take any investment because we wanted to nail down what we were going to build and the direction for the company.

Throughout this period, we got to know a few people who told us they would be ready to invest when we were ready. At a certain point, they actually called me and said: “Enough waiting around, you’re ready. Get some funding and go after this idea the right way. It’s too big to wait.” That important vote of confidence gave me the push to start the process.

We raised a small pre-seed round after a quick series of meetings with some small funds and got some incredible investors on our team through that process. They became our support network and helped us navigate the seed process that came a few months later. That really underscored the value of having the right partners before we raised our Series A and B.

3. Wearing Many Hats Early On Is Key to Managing Them Later

Most founders don’t wake up one day suddenly in charge of a 20-person sales team, and that’s a good thing. You perform many functions in the formative days of your business, which gives you enough grounding to later manage them. For example, I sold our first several deals, built our first financial models, and designed our first website. These were invaluable experiences as I grew in my role as CEO.

There are so many great resources out there with best practices and tactical advice from others who have gone through it before. I consulted those liberally, but there’s no substitute for rolling up your sleeves and doing the work. When you’re able to hire, you’ll have a foundation to draw on when selecting and managing people with much more experience in their fields.

I also lean on a network of mentors and friends who have done it before and can give me in-the-moment advice.

You perform many functions in the formative days of your business, which gives you enough grounding to later manage them.

4. Every Career Experience Has Transferable Skills

This might be a contrarian take, but I learned a lot from my time as a management consultant in my early career that helped me make the transition to startup founder. While the two jobs are quite different – as an analyst at a consulting firm, I created analysis that informed or supported executive decisions at very large, Fortune 500 companies, which is very far removed from execution and accountability. But I learned valuable lessons:

• What it takes to produce extremely high-quality work.
• How to break down large and abstract problems into tangible and manageable pieces.
• How to communicate well to people at all levels.

These were essential as we defined the value of Noyo in those early years.

My time as a management consultant also helped me deeply understand the power of shipping fast, because it can take a very long time to get things done in that type of environment. In contrast, startups let you build and ship all the time — a great environment for people who love to bring ideas to life at a pace most big companies can’t imagine.

5. Know When to Hand Off Areas of the Business

Product is my passion and I love collaborating with Noyo’s product managers, designers, and engineers. But I always knew that a CEO’s role must evolve as the business grows. So while Noyo’s product was founder-led for the first years, I’m proud to say we now have an incredible product leader in Elaina O’Mahoney. She joined shortly after we raised our Series B, led by Norwest Venture Partners. She’s quickly become a close partner to me and an admired leader across Noyo.

It’s a force multiplier to have someone who shares our product vision, is deeply aligned on our cultural values, and brings a wealth of experience building a high-performing product organization. I also love that I’m learning constantly through working with her and seeing her style and approach.

The same can be said for other department leaders as we’ve hired executives across the different areas of the business.

Final Thoughts: Transitioning from Product to Entrepreneurship

As a founder, being able to build an incredible product that people want is just the start. You also need to know how to market it, price it, and run a sales process — all without the resources you likely had in the company you left to found yours. Product is a great place from which to do this, but you can’t just sit on customer calls. You need to ride along with your favorite sales rep, ask them how they do their job, and take a customer support shift. If you’re in a leadership role, ask another department lead to take you through their challenges and how they navigate through them.

All this together will make you a better product person and a more attuned partner to your internal stakeholders, thereby deepening your relationships within the company. But most importantly, the exposure and understanding of how the whole machine works will be invaluable for getting your new company off the ground when you decide to take that great idea and go for it.

About the Author

Shannon Goggin is the CEO and co-founder of Noyo. Before starting Noyo, she was a product manager, building benefits software that showed off the powerful role technology can play in improving people’s experience with their benefits. Shannon lives in San Francisco, where Noyo is based.

The post From Product Manager to CEO: 5 Lessons Learned Along the Way appeared first on Norwest Venture Partners.

My story is a perfect example. Since my first job in the United States in 1997, every one of my professional experiences have touched what is called “quote-to-cash” (QTC) activities. (QTC is the end-to-end sales process from proposal to revenue recognition.) Within the QTC environment, I have focused on customer success and professional services in enterprise, and B2B markets.

Today, I am a co-founder and CEO of Provus, a company that offers QTC solutions for enterprise and professional-services companies. While many factors determine business outcomes, deep knowledge of the Quote-to-Cash domain has been a major contributor to the success of the company.

Based on my experience, I’d like to share four ways in which domain expertise contributes to – indeed, is essential for – the success of a startup:

• Credibility
• Context
• Confidence
• Criticality

Domain Expertise Lends Credibility

One challenge virtually every startup faces is establishing credibility. If you and your company aren’t yet a recognized name, prospective customers will justifiably be skeptical.

To make a positive first impression, you must give people a reason to give you their time and attention. No potential customer will listen to you if they don’t believe you have something valuable to say.

How best to establish this credibility? In my view, it is to demonstrate a deep knowledge of the customer’s environment:

• the industry and market(s) in which they operate
• the challenges and problems they face
• the core processes of their operating infrastructure

Most startup founders focus on solving a specific problem, so it is important to zero in on how that problem manifests itself in the customer’s environment. How severe is it? What’s been tried in the past to address it? What proposed solutions are currently available, and what are their advantages and drawbacks? Who are the competing solution providers? What relevant technology trends are happening?

These are questions that anyone can research online or through interviews with subject-matter experts. But if the founder already has an intimate knowledge of the field, they have a significant advantage in establishing credibility for themselves and their company. Why? Because they can speak the same language as the customer and find common ground by demonstrating a “been there/done that” empathy.

Domain Expertise Gives Insight into Customer Context

Tailoring a solution for each prospective customer requires intimate knowledge of their goals, challenges, and motivations. To obtain such knowledge, you need to ask good questions based on an understanding of the context in which the customer operates. The more you know about the processes, applications, systems, and markets in which the customer operates – in other words, the greater your domain expertise – the better able you are to ask probing questions.

In B2B enterprise sales, purchase decisions typically require the approval, or at least the buy-in, of disparate stakeholders. This means you must interact with people who have different functions, priorities, buying criteria, and experiences. You’ll be expected to go to the third, fourth and fifth levels of detail; superficiality will be quickly exposed.

Domain expertise will help you in this regard in two ways. First, you’ll know how to tailor your questions to uncover the priority issues unique to various stakeholders, influencers, and decision-makers. Second – returning to the theme of credibility – you’ll have greater standing when you try to engage with these disparate audiences. The result will be deeper understanding, precise fact-finding, and a more persuasive sales proposal.

Domain expertise will help the front-line team of a startup to make the critical transition from “sales gladiator” to “trusted advisor.” A trusted advisor applies all their experience and insight to developing the right solution for the customer. A trusted advisor engages in consultative selling, and while they may not agree with the customer on every point, they will always have the customer’s best interest top of mind.

Domain Expertise Breeds Confidence

To convince a customer to do business with you, they of course must have confidence in you, your company, and your product. But it’s equally important that you and your colleagues have confidence in yourselves.

When founders, product developers, and sales/support teams know the industry and the customer environment, they have greater confidence in the solutions they develop, sell, and support. That starts with listening to customers when they initially describe their problems and priorities. And it extends to processing feedback and rapidly turning it into product improvements.

Developing confidence in our own solutions is one reason that at the end of a four-week onboarding process, all new hires at Provus must deliver a presentation on the company and its solutions. It must be a deep dive, reflecting excellent knowledge not just about our solution, but about the customer environment as well.

Determine Criticality Through Domain Expertise

No customer will buy from you if you don’t solve a pressing need. Customers must perceive that they can’t do without your solution – you must be mission-critical. And you can’t build such a solution unless you understand the customer’s pain-points inside and out. Once again, that comes through domain expertise.

Leadership Teams with Domain Experience Are Set Up for Success

The value of domain expertise does not apply only to founders, of course. The more people in the company with in-depth knowledge of the market, the better able you’ll be to deliver mission-critical solutions to customers.

My two co-founders at Provus also have long experience in the markets we target, although they come from slightly different perspectives than I do. Stawan Kadepurkar, our chief revenue officer, has a background in driving revenue growth in large organizations, so he sees things from the perspective of our large enterprise customers and how they put the quotes together. Ganesh Ramachandran, our chief technical officer, has more than 30 years’ experience in bringing innovative technologies and solutions to market. Thus, the three of us have complementary experience and skills, which adds strength to the leadership team. Each of us can stay in our own lane and move fast without stepping on each other’s toes.

The leaders of all our functional teams also have relevant domain experience, and they in turn have staffed our sales, marketing, and product-development teams with people who know the QTC and professional-services worlds.

Many factors contribute to a successful startup, but in my experience the single most important one is the domain expertise of the founder(s) and their leadership team. Nothing can generate credibility, confidence, and trusted-advisor relationships better than a deep and broad knowledge of the environment, problems, and goals of target customers.

About the Author

Mahesh Baxi is the co-founder and CEO of Provus. As one of the original innovators of Services Quoting (Services CPQ), he is a domain expert in CPQ, CLM, pricing, and quote-to-cash. Mahesh is a proven leader with over 30 years of management experience scaling the IT, product, and services operations for global software companies.

The post Domain Expertise: A Founder’s Greatest Asset appeared first on Norwest Venture Partners.

Part I discussed factors leading to a decision about whether and when options that have fallen underwater should be repriced. This part drills down into the alternatives for repricing options.

What Are the Alternatives for Managing Underwater Options?

Ali: “If you decide you need to make a change to your underwater options, there are several alternative courses of action. There isn’t a one-size-fits-all solution that is best for every company. Often, the right approach will manifest itself in a hybrid solution that contains more than one of the alternatives we’re going to discuss. I don’t want anyone to take away from our conversation that they’re just binary choices, that it’s all or nothing.”

When options are underwater, there are four categories of potential solutions:

1) Do nothing – Wait to see if conditions recover.

As we discussed in Part I, it is a mistake to decide too quickly to reprice options. Things could get better, in which case action wasn’t needed. Or, things could get worse, in which case the action taken could still leave the company and employees in no better position. We saw some of this in the early days of the COVID pandemic, when some companies give cash awards or option grants that in retrospect were either too large or not necessary at all.

Certain Benefits:

• • Avoids cost and effort required for changing options
  • Avoids overreaction to what may be a short-term dip

Certain Disadvantages:

• • Doesn’t address employee retention
  • May lower morale

2) Employee education – Educate team members on the long-term value of options.

Employees should understand that the initial stock options they were granted upon hiring are the primary opportunities for wealth creation and should be considered an asset for the long term. Expectations of a quick hit should be discouraged. That said, managers should also avoid making statements that could be interpreted as a guarantee of gains in the future, either in general or at a specific level.

Certain Benefits:

• • May improve perceptions of the value of options
  • May reduce skepticism
  • May foster patience

Certain Disadvantages:

• • Doesn’t change current economic realities
  • Could raise false hopes about the future value of options

3) Special grants – Issue one-time grants of options and/or cash.

This is a short-term solution that may allow you to target specific employees at risk of leaving, but it could set a dangerous precedent.

Certain Benefits:

• • Simpler, potentially lower-cost alternative (as compared to repricing/exchange)
  • Allows targeting of high-value employees

Certain Disadvantages:

• • May create a dangerous precedent
  • Could be dilutive to share pool
  • Doesn’t change the reality of underwater options

4) Repricing or exchange of options – Reduce the exercise price and/or swap options for new options or other equity.

This is the approach most commonly pursued. Even so, it has several variations, which we’ll discuss below.

Certain Benefits:

• • Removes a source of negative feelings
  • Cleanly restores incentives
  • Creates a new baseline
  • May reduce dilution

Certain Disadvantages:

• • Continued declines could put new options underwater
  • Could be perceived as rewarding optionees who were in charge when things went wrong

How to Select the Right Approach for Your Company

Once a decision has been made to reprice/exchange options, there are several alternatives:

1) Options-for-options exchange – Underwater options are exchanged for new options with new terms

The new exercise price cannot be less than the current fair market value (FMV). New terms may include a new term (usually 10 years), additional vesting conditions, and/or a reduction in the number of shares.

Certain Advantages:

• • Retains the attraction of options
  • May increase retention by establishing new vesting schedule
  • Simple to explain
  • Reduces burn rate, overhang, and dilution

Certain Disadvantages:

• • Consent of option holders required; could mean tender offer
  • ISO status could be impacted
  • New options also could fall underwater.

2) Options-for-RSAs/RSUs exchange – Underwater options are exchanged for a different type of equity

The different type of equity is often either a restricted stock award (RSA) or a restricted stock unit (RSU). RSUs are a common compensation method in public companies, so employees who have never worked in a public company may be confused as to how they work.

Certain Advantages:

• • Less volatile form of compensation; cannot easily fall underwater
  • Potentially more valuable than options
  • Potentially strong retentive value
  • May reduce dilution

Certain Disadvantages:

• • Potentially confusing to employees who are not familiar with RSAs or RSUs
  • Less upside leverage for employees
  • Consent of option holders required; could trigger a tender offer
  • May be interpreted as showing less confidence about the company’s future growth

3) Options-for-cash buyout – Underwater options are purchased for cash

This wipes the slate clean in terms of eliminating the problem of underwater options, but the complications and downsides can be numerous.

Certain Advantages:

• • Biggest reduction to overhang, burn rate and dilution
  • No more underwater options
  • Immediate value to participants

Certain Disadvantages:

• • Cash outlay by the company
  • Accelerates expense into current period
  • No leverage from future growth
  • No alignment of employee and stockholder interests
  • No incentive for long-term retention
  • Taxable event
  • Consent of option holders required; could mean tender offer

4) Simple option repricing – Underwater options are amended to reduce the exercise price to a point no less than the current fair market value (FMV)

A simple option repricing keeps all the terms of the option but for the reduced exercise price. The expiration date of the option stays the same, as does the vesting schedule and the number of shares. This is the most straightforward option for dealing with underwater options other than doing nothing. So, it’s relatively easy to explain to employees. Moreover, if the applicable equity plan permits, it can be done unilaterally by the board, so it can be relatively quick and inexpensive. Unfortunately, from a tax perspective the repriced option is deemed to be a new option grant.

Certain Advantages:

• • Easy to explain
  • Quick and simple to implement (if not a tender offer)

Certain Disadvantages:

• • New options also could fall underwater
  • ISO status could be impacted
  • Least impact on burn rate, overhangs, and dilution

Ali: “If a decision is made to take action on underwater options, #4 is the most commonly adopted approach. It can be done quickly, efficiently and with the least amount of corporate effort and legal expense.”

Whatever approach you decide on, plan carefully how you communicate changes to employees. “We generally try to steer companies away from projections around value because you can create expectations among employees,” Ali advised. “As we all know, it is impossible to predict the future with certainty.”

In Part III, we offer a guide for creating an action plan to reprice/exchange options.

The post What Business Leaders Can Do When Employee Stock Options Are Underwater appeared first on Norwest Venture Partners.

Part I  discussed the factors involved in deciding whether and when options that have fallen underwater should be repriced. Part II covered four approaches for dealing with underwater options, with certain advantages and disadvantages for each. This part walks through the process of options repricing (which, for shorthand throughout this summary, may include an exchange).

How to Reprice Underwater Options

First, we will discuss the issues and decisions relative to implementing a repricing.

Designing the repricing plan

Several factors affect the structure of a repricing program.

• • Option eligibility
    Which underwater options are going to be eligible? This might be an easy decision if all the options have been significantly underwater for an extended period. But what if you have some options that are just a little underwater or were recently granted? It’s not uncommon for companies to exclude options that are underwater by, say, less than 20 percent or were granted relatively recently. That said, this is not as common as including all underwater options. And as we said in Part I, you should not be repricing options that you expect to be above the strike price relatively soon.
  • Participant eligibility
    Will executives and board members be excluded from the repricing? One line of thinking behind this is that executives are most responsible for the company’s trajectory and should not be rewarded for a decline in stock price. Another alternative is that they are included but on different terms than those granted to the options of rank-and-file employees (e.g., reprice to exercise price that is at a premium to the then-current fair market value).
  • Exchange ratio
    Will it be 1:1, or something else (generally fewer shares in a value-for-value exchange)?
  • Vesting schedule
    Are you going to extend the expiration date, or maybe shorten it? New vesting is considered a best practice, but that would trigger tender offer rules. So, this is another case in which the company needs to think about how employees will react.
  • Contractual term
    Will the term of the awards be retained, shortened, or extended? (It is not common to extend the term if there is no new vesting.)
  • Exchange vehicle
    Will an exchange be for options, RSAs, RSUs or cash? If options, will all options be incentive stock options (ISOs) to the maximum extent possible? (Alternatives to options were discussed in Part II.)

Understanding the legal and tax subtleties

Whatever plan you adopt, there will be financial, legal, and tax implications for both option holders and the company. Here are a few of the most common.

ISO status

“The potential benefits of ISO status may be impacted in an option repricing or exchange, for two reasons,” Kristin noted. “The first is that ISOs are subject to what’s called the $100,000 ISO limit. This limit is based on the fair market value of the stock on the grant date. The maximum value of options that can become exercisable in any given calendar year as an ISO is $100,000. If you exceed that limit, the excess will become non-qualified stock options (NSOs), which are taxed very differently.”

“The second reason is the holding period. To fully benefit from ISO status, one of the requirements is that the shares issued must be held for at least two years from the date the option is granted. Any new ISOs granted in exchange for the higher-priced ISOs will cause that two-year holding period from the option grant date to restart.”

Fair market value

For a private company whose shares are not yet publicly traded, the fair market value of stock is generally determined by an independent party – what’s known as a 409A valuation. Kristin observed, for a simple repricing or an option-for-option exchange: “If you’re going to enter into a repricing program, you want to make sure you have a solid valuation in hand. If the valuation shows that the fair market value has gone up, maybe you don’t have as big an issue as you previously thought, and that might help reduce the need do a repricing. In any case, you need to make sure that whatever valuation you have, it’s a good one.”

You need to make sure that whatever valuation you have, it’s a good one.

Rule 701

Rule 701 allows private companies to issue equity to employees without the time and expense of registering securities with the SEC. This saves companies a lot of time and expense. However, among other limitations, Rule 701 limits the amount of equity issued to no more than $10 million in a given 12 month period before robust disclosures need to be delivered (including financial statements, risk factors and a summary equity plan description). So, if options are to be exchanged or repriced and the exchanged or repriced grants, plus the new grants, exceed $10 million for the applicable 12 month period, the company will need to provide robust disclosures in accordance with the Rule 701.

Tender offers

You might have noticed that some of the alternatives referenced in Part II included among the disadvantages, “Consent of option holders required; could mean tender offer.” These are instances where optionees must agree to the proposed changes. When is such consent needed?

Kristin: “It is a fair summary to say that anything that is not obviously to the option-holders’ benefit probably triggers some sort of tender offer process. Why do we care if a tender offer is needed? It’s for two reasons. First, it can be expensive and time-consuming. Second, it requires information – like financial statements and risk factors – that are generally considered sensitive information that private companies prefer to avoid making public.”

Tender offers can be expensive and time-consuming.

“To give you an idea of the costs involved, I’m working with a late-stage private company whose plans involve a tender offer. They got a bid from a third-party provider for $250,000 just to manage the process.”

Ali: “And here’s another complication: a tender offer needs to be left open for 20 business days. And if you’ve got incentive stock options, any offer that’s open for more than 29 days automatically disqualifies your ISOs. So, you need to carefully thread the needle on complying with the tender offer rules, while not inadvertently disqualifying all of your ISOs in the process.”

Tax consequences

Kristin: “A simple repricing sounds like just an amendment to an existing option. Unfortunately, from a tax perspective the repriced option is deemed to be a new option grant. This means there is a greater likelihood of at least some portion of the repriced option becoming an NSO due to application of the $100,000 ISO limit.”

From a tax perspective the repriced option is deemed to be a new option grant.

The Bottom Line:

Ali: “What you should not do is simply conclude that your value clearly is lower than it was based on your last 409A and undertake a repricing without a new 409A evaluation in hand. Doing so will trigger questions from every investor who comes along down the road and will be very messy to fix. So, valuation first and then repricing.”

“You need to be very careful how often you reprice. This is a conversation that Kristin and I have with some frequency because there is no fixed guidance as to how many times is too many. If the IRS deems there is no fixed exercise price on the date of grants, the options will then be deemed to be granted at a discount, thus violating 409A. The advice I give to clients is that the only thing worse than repricing is to reprice more than once.”

The post A Guide to Repricing Underwater Options appeared first on Norwest Venture Partners.

Founders and startup teams are hearing more from investors, customers, and employees about Environmental, Social, and Governance (ESG) performance. But what is ESG, and why does it matter—especially now? When you think ‘ESG,’ think about data security and privacy, employee engagement as remote work becomes the new norm, and all of the governance missteps making news headlines (WeWork, FTX, etc.).

During this time of economic uncertainty, industry leaders continue to suggest that in fact due to slowing growth, investors looking to beat the market must consider ESG factors, including topics like carbon footprint and governance structures. However, many founders and teams are grappling with both understanding what ESG performance means, and the increased pressure to demonstrate excellence in performance across environmental, social, and governance areas.

In this piece, we will share both background on ESG as a concept and actionable advice for fast-growing companies.

What is ESG?

‘ESG’ as a term was first coined in a June 2004 report facilitated by the UN Global Compact and published and endorsed by a group of 20 financial institutions, entitled Who Cares Wins: Connecting Financial Markets to a Changing World. The writers of the report shared that investors should consider environmental, social, and governance factors when making investment decisions, in order to build stronger markets, and contribute to sustainable development that works for everyone, over the short and long term.

Investors should consider environmental, social, and governance factors when making investment decisions, in order to build stronger markets, and contribute to sustainable development that works for everyone, over the short and long term.

Let’s break down what we mean by E, S, and G:

• • Environmental: Company impacts on the environment, and environmental needs and risks. Example topics include water usage, greenhouse gas emissions and climate-related risks.
  • Social: Company impacts on people, including topics such as employee engagement, supply chain resilience, and internal practices related to diversity and inclusion.
  • Governance: Company performance related to fair, accountable and transparent corporate practices and actions.

As the ESG field has evolved, standards and frameworks like ISSB, GRI, TCFD, and others have been developed to provide an avenue for companies to share reliable and comparable information so stakeholders can make better decisions about company ESG performance.

What is ESG Performance?

ESG performance refers to how a company is doing in ESG focus areas. The specific ESG areas a company focuses on should be tailored to their business model, and ultimately drive financial performance and contribute to sustainable growth.

ESG topics can include (not exhaustive):

Investors are assessing performance across E, S, and G dimensions as a way to better understand a company’s ability to create and maintain value.

MSCI shares this objective of ESG integration: “Investing with a systematic and explicit inclusion of ESG risks and opportunities with the intention to enhance long-term risk-adjusted returns.” In practice, this might look like an investor including questions related to carbon emissions, diversity of the board and employees, and responsible product design in their due diligence questionnaire.

The objective of ESG integration is to invest with a systematic and explicit inclusion of ESG risks and opportunities with the intention to enhance long-term risk-adjusted returns.

The integration of ESG factors when determining a company’s potential for positive financial performance has continued to grow.

• • In 2020, 92 percent of S&P 500 companies published a sustainability report, and investors are increasingly developing formal frameworks for assessing ESG performance.
  • A 2021 PwC survey of VC investors with a majority of European respondents revealed 76 percent currently consider ESG in their investment process, and 37 percent have refused an investment because of ESG concerns.

Successful ESG strategies consider relevant environmental, social, and governance risks and opportunities across operations, products, and services.

Consider example outcomes of focusing on relevant ESG focus areas:

Consider example outcomes of neglecting relevant ESG focus areas:

Good governance can help drive long-term growth

Take a look at what Norwest’s portfolio founders and CEOs said are top of mind issues for them and learn how specific governance practices support sustainable growth.

Read the blog >

ESG vs Impact Investing: What’s the Difference?

An important distinction to understand is the difference between ‘impact investing’ and ESG integration into investment decision-making. Impact investors are focused on investing only in companies with a mission to make a positive difference either in peoples’ lives or for the planet, while all investors can integrate ESG considerations as they evaluate and invest in every type of company.

Impact Investing: ‘Impact investing’ is focused on measuring the positive impacts of products or services alongside financial return. Impact investors seek to invest in companies with a purpose to deliver measurable positive social or environmental outcomes. Impact investors might target companies that focus on reducing poverty, increasing educational opportunities for underserved communities, or climate technologies.

ESG Integration: In contrast with impact investing, all investors can choose to integrate ESG performance into investment evaluations. ESG integration means an investor is including relevant ESG factors in analysis and investment decisions, with the intention to enhance risk-adjusted returns. For example, an investor considering whether to invest in an enterprise SaaS company might evaluate how the company protects against cyber attacks, and how the company ensures employee satisfaction.

What Are the Benefits of Developing ESG Strategies?

1. Attracting capital. Both startups and VCs are recognizing they are more likely to secure funding if they implement intelligent ESG strategies.

2. Financially outperforming your peers. Studies continue to suggest companies that prioritize ESG demonstrate financial success. A recent NYU Stern meta-study found 71 percent of studies show companies with strong ESG performance financially outperform their peers or have a neutral result (58 percent positive results, 13 percent neutral, 21 percent mixed, 8 percent negative results).

3. Attracting and retaining high quality employees. At Fiix Software 78 percent of employees stated the company’s sustainability program influenced their decision to join the company, and almost 90 percent stated the program influenced their decision to stay at the company. A majority of startups in a recent WEF survey shared that employees and customers are the main drivers for implementing ESG strategies.

4. Demonstrating sustainability to both consumers and enterprise customers who care. Both large enterprise customers and consumers alike are seeking to manage their own sustainability through who they choose to buy from. For example, Microsoft requires key suppliers to complete a CDP questionnaire. A 2021 PwC survey revealed, “83 percent of consumers think companies should be actively shaping ESG best practices.”

5. Staying ahead of upcoming regulations. Regulators are starting to propose and implement disclosure frameworks related to ESG topics. Even for startups not seeking to exit anytime soon, proposed disclosures will likely impact both private companies in the supply chains of publicly traded companies, and public LPs of venture capital GPs.

Integrating ESG principles early is more effective than attempting to retool later on. For example, it’s easier to establish a culture of scanning for unintended consequences (e.g. mental health impacts of social media filters) using a tool like doteveryone’s Consequence Scanning when the product design team is 10 people versus 100 people. Or on the organizational side, another example—it works better when founders and teams establish inclusive hiring practices when the organization is 20 people, instead of waiting until the company is 400 people.

Take a look at how Norwest approaches ESG and DEI

Read more >

What About ESG Critiques?

It’s useful to consider ESG critiques while building your strategy, as those same critiques can be helpful in developing your approach (take a look at some commentary on corporate sustainability here). For example, make sure to avoid greenwashing by focusing on relevant ESG focus areas for your business, and actually develop strategies to address risks and opportunities—don’t just focus on marketing or communications. In a future piece, we’ll dive into common criticisms and how you can avoid those pitfalls.

‘ESG’ as an umbrella term can be useful, but if you stop at generalized concepts you won’t make progress on the real risks and opportunities that will prevent or drive profit and sustainable development.

Some Relevant ESG Practices to Implement If You’re Just Getting Started:

• • Define your corporate purpose: what you will do for profit that will benefit a broad group of stakeholders, including people and the planet.
  • Develop a diverse board. Ensure independent director(s) are on the board.
  • Do a lightweight materiality assessment and make relevant commitments (e.g. Net Zero targets, implementing responsible supply chain policies—who you will or won’t buy from).
  • Integrate processes into product design and development and business operations that consider key ESG risks and impacts (e.g. implement responsible product design practices and develop inclusive hiring practices).
  • Strengthen governance practices and policies including code of conduct and ethics, anti-harassment, anti-corruption, and whistleblower policies, and board committees.

If You’re Further Along in Your ESG Journey, Consider These Practices:

• • Align with global standards and frameworks, start or continue measuring and managing performance in relevant areas (e.g. employee engagement as a percentage).
  • Develop a process for continuous engagement with internal and external stakeholders about relevant ESG risks and opportunities.
  • Build ESG performance metrics into KPIs for executive team leaders and relevant managers.
  • Develop a more robust ESG data management process and controls.
  • Disclose ESG-related performance information.

If you are looking to learn more about integrating ESG practices, take a look at the ESG Inquiry Tool, developed by Tandem Impact.

Norwest takes pride in the support, mentorship and guidance we provide to portfolio leaders as they build their companies for enduring success. We’re at the ready with the resources you need to start or continue your ESG journey and invite you to get in touch with Portfolio Services to start a conversation about how we can help.

Photo credit: Nathalia Segato

The post What Is ESG Performance and Why Does It Matter? appeared first on Norwest Venture Partners.

My co-founder Mohit Bhende and I started Karat with two goals. We wanted it to be successful, and we wanted it to serve a meaningful purpose.

One of the most important lessons I have learned in the past decade is that those two goals are actually one single goal. Our strong sense of purpose is the driving force behind our success.

Karat is the largest interviewing company in the world. The job interview can be either a bridge or a barrier to opportunity. Our purpose is to make sure it’s a bridge. Here are three lessons we’ve learned about how that purpose and our success are mutually reinforcing.

Make Sure You’re Offering an Impactful Solution That People Need and Want

It feels good to build and ship a product. But does it meet the needs of clients? It’s a simple question, but it’s not always easy to answer.

Consider Karat, an interviewing company. Every company conducts interviews—but as a secondary activity. It’s not what they’re good at, and it distracts from the core work that they are good at, but there’s no way to build a business without it. We felt interviewing is so important that it should be somebody’s primary job, so we made it ours.

Of course, we’re not the only people who noticed this problem. Most solutions in our space were created by engineers, which makes sense because they experience technical interviewing first-hand. Naturally, given their skills, they tend to build tools to automate everything.

Mo and I came at the problem from a different perspective. We talked to hundreds of hiring managers. We talked to thousands of computer science students, software engineers, and recruiters. We wanted to understand the problem before we tried to solve it.

We were confident that getting rid of humans was the wrong approach. Hiring, being hired, work—these are fundamentally human affairs. It wouldn’t work without that element. But, we thought, maybe we could build systems and technology that helped humans do the job better—that carved out a path toward greater opportunity instead of blocking it.

That is why we hire software engineers who are exceptionally good at interviewing and equip them with tools so they can focus on the characteristics that distinguish an excellent hire. They’re called interview engineers, they conduct tens of thousands of interviews a month, and they’re why what we offer our clients is what our clients really need.

Invest Long Term and Make Hard Tradeoffs

When you’re a startup, one of the hardest things is balancing the short and long term. You need some immediate wins because, without them, you might not survive. But if you always optimize for right now, you won’t end up with anything of value that lasts.

So sometimes, as counterintuitive as it may seem, you have to sacrifice the short term. One of the innovations we’re proudest of at Karat is the Redo interview.

You need some immediate wins because, without them, you might not survive. But if you always optimize for right now, you won’t end up with anything of value that lasts.

Our qualitative research showed that one challenge facing underrepresented engineers was a lack of interview practice. In fact, for some, their first job interview was also their first technical interview ever! Anxiety around the interview itself was making many talented candidates underperform.

So we decided to start giving candidates the option to interview a second time if they didn’t feel good about how their first interview went. We believed this would not only help candidates do their best but also help more companies hire more good engineers.

But just because we believed it doesn’t mean our clients did. So we made the very hard decision to pay for the Redo interviews ourselves until we had enough data to show our clients they were working. In the short term, this cost money we didn’t have enough of. But in the long term, it set our business up to offer something truly unique and valuable. So far, companies have hired more than 1,000 engineers through Redos.

Build a Movement, Not Just a Company

We have been very public about what the Redo is, why we do it, and how we do it. We are not proprietary about it. In fact, we hope that companies start doing it for their in-house interviews, too, because it is the right way forward for the industry. In the end, we’ll be more successful as co-sponsors of this movement than we will be as a company that tried to capitalize on what could have been a game-changing innovation by keeping it a secret.

This is an important lesson about communications and marketing in general. You’re the most persuasive when you can show that you truly believe in what you’re saying.

Another example: We have commissioned tons of research (like this and this) that help people understand the ways in which interviews have been a barrier to opportunity. We do this because it informs our own work as a company, yes, but also because it informs the entire sector and hopefully builds momentum toward more ambitious solutions. Ultimately, that big sector- and society-wide ambition is what is going to make us successful.

Editor’s Note: Yet another prime example of Karat’s purpose-driven model is how they’ve used their platform to power Brilliant Black Minds, a remarkable DEI program that is focused on doubling the number of Black software engineers in the US.

About the Author

Jeffrey Spector is the co-founder and President of Karat, the world’s largest interviewing company and pioneer of the Interview Cloud. Previously, Jeff served as chief of staff to Melinda Gates at the Bill & Melinda Gates Foundation, where he played a pivotal role in advancing the foundation’s strategic focus on economic equity for women and girls. He also served as the vice president of customer and market research at Linktone, a Shanghai-based mobile services startup, where he helped guide the company through its NASDAQ IPO.

The post Lessons from Building a Purpose-Driven Company appeared first on Norwest Venture Partners.

Joining me were:

• Ali Murata, a partner in the Compensation & Benefits group at the law firm Cooley
• Kristin O’Hanlon, special counsel in Cooley’s Compensation & Benefits group

Finance and talent leaders from Norwest portfolio companies joined the conversation, posing many insightful questions.

I’ve summarized the conversation in a three-part blog series:

1. 1. Deciding if options need to be repriced
   2. Understanding the alternative methods for repricing
   3. A guide to implementing the chosen approach

This is only a high-level summary of certain salient points discussed—deciding whether to reprice options and, if so, how to structure the repricing requires a detailed facts and circumstances analysis. This analysis should be done in close consultation with your legal, tax and accounting advisors.

First up, how to determine when the time is right for repricing.

Do Your Options Need to Be Repriced?

We all recognize the importance of stock options in attracting and keeping talent. So, when the market value of stock falls below the strike price of an option (a situation called “being underwater”), it’s a concern for almost everyone in the company. Senior management of young companies rightfully may be concerned when options are underwater. Taking care of your people and maintaining morale are critical to the success of any company. But a decision on repricing options is one that must be undertaken thoughtfully, with an appreciation and understanding of: a) the magnitude of the issue, and b) what it is precisely that you’re trying to solve.

The first step is to identify the magnitude of the problem, which involves looking at the issue from several perspectives.

1. 1. How many options are underwater? How many people are impacted? How large are the grants? How far underwater are these awards? Is the exercise price significantly above the current fair market value (FMV) or is it only a little bit above FMV?
   2. How long have these options been underwater? Has this occurred only recently, or has been it several months? How long have these options been outstanding, and how far into the vesting period are they?
   3. What’s been the history of your FMV? Has it always been stable, or have there been fluctuations?
   4. What is the likelihood that FMV might rebound in the next one to two years? This is tough, because it’s an important issue; yet no one can predict this with any certainty, of course. Most public companies assume that at some point in the future their stock price will recover, but that is a judgment harder to make when the company is still private. In that case, you may have to look at the prospects for an entire industry or market segment, not just your own company.
   5. What is the level of concern among employees about the value of their options? Does the company face recurring, long-term concerns about retention of key employees?
   6. How far off is a likely liquidity event? If it was once seen as a near-term event, but now has been put on hold, has that significantly changed employee expectations and attitudes?
   7. When was the last time you had a 409A evaluation (an independent assessment of the stock of a private company)? Are you approaching this decision with a realistic, up-to-date assessment of your company’s value?

Depending on the answers to these questions, you may determine that the problem is—or is not—of a magnitude that requires a solution right now. It’s a mistake to decide prematurely. Things could get better, in which case repricing may not have been warranted. Or they could get worse, in which case options could sink deeper underwater and your action may not be sufficient to change things for the better. One thing is certain: you should not be repricing options that are expected to be back above the strike price relatively soon.

It’s a mistake to decide prematurely. One thing is certain: you should not be repricing options that are expected to be back above the strike price relatively soon.

One reason to consider a repricing is that underwater options can tie up potentially significant portions of an equity plan’s share reserve and thus limit the number of shares available to address retention and recruitment. That means a company might need to increase overall share reserves to grant more awards while these underwater options are outstanding—which results in more dilution. And from an accounting perspective, the company is still required to expense outstanding options, even if they’re underwater.

Ali: “What you should not do is simply conclude that your value clearly is lower than it was based on your last 409A and undertake a repricing without a new 409A evaluation in hand. Why? Because that will trigger questions from every investor who comes along down the road and will be very messy to fix. So, valuation first and then repricing.

“You need to be very careful how often you reprice. This is a conversation that Kristin and I have with some frequency because there is no fixed guidance as to how many times is too many. If the IRS deems there is no fixed exercise price on the date of grants, the options will then be deemed to be granted at a discount, thus violating 409A. The advice I give to clients is that the only thing worse than repricing is to reprice more than once.”

The only thing worse than repricing is to reprice more than once.

In Part II, we drill down into the alternatives for repricing options. In Part III, we walk through the process of options repricing.

The post When Is the Right Time to Reprice Employee Stock Options? appeared first on Norwest Venture Partners.

Why We Sometimes Dread Board Meetings

For one, preparing for board meetings is a lot of work. Even the most seasoned slide jockeys understand the pressure of crafting a compelling story, coupled with data to support it, and just the right talk track. I had a day job, after all, so the hours spent on my board deck took me away from driving the outcomes I was on the hook for in the first place.

Then there’s the anxiety that comes with uncertainty. As marketers, we don’t always know what the board wants to hear. Should we ask them? Should we guess? What if the story I tell fails to hit the right notes or worse, exposes weakness in my org that I should have blown the whistle about months ago?  

“Marketers Always Need Good Ideas From the Board,” Said Nobody Ever

As marketers, we have it even harder than most members of the executive leadership team (ELT) when we walk into board meetings. That’s because everyone fancies themselves a marketer in some way. Here’s the thing: we make hard things look easy, so everyone thinks they can do it. 

I can guarantee you that the CTO and CFO don’t have folks coming to them saying “I have an idea…” So we have the added pressure of knowing that a board member may offer the brilliant marketing idea they had in the shower that day and wonder if we can execute it next week.

If I’m being honest, these are all valid reasons to dread board meetings, but I started to wonder whether we should dread them. 

Are Board Meetings Friend or Foe?

After joining Norwest last year as an operating executive and gaining exposure to so many companies in the growth equity and venture portfolios, I began attending board meetings as an observer. My motivation was simple: to gain a deeper understanding of the businesses I was helping and to provide support to their marketing teams. 

My support spanned from working with marketers on their decks and preparation, to just being the friendly face on the Zoom channeling “Go You!” energy. I also thought I might pick up a few insights along the way that would be worthy of sharing. What a learning experience it was! So much that I ended up culling my insights into a playbook, of sorts, and later socialized it with several CMOs in the portfolio as well as multiple board members. 

Allow me to give a shout out to my top contributors, including Rob Arditi, Co-Head of Growth Equity at Norwest; Scott Beechuk, Partner (Venture) at Norwest; David Garcia, CEO of ScoutLogic and Senior Advisor at Norwest; and Wynn White, independent CMO advisor and former CMO at FloQast.

Enjoy these highlights below and view the slides from my recent webinar on this topic. Take note of the B2B metrics in the “bonus material” portion of the appendix!

Creating a Two-Way Exchange of Value

One of the things that stood out the most during my research was the degree to which most marketers (and extended ELT members) approach board meetings like a reporting session. I get it. The board is technically your boss’s boss, so it’s only natural that you think of them as superior to you. 

But consider this: board members are also people. People that have invested in your company and are motivated to make it successful. They’ve got major skin in the game and have a job to do when they turn up for board meetings. So why let them off the hook when you can turn the meeting into a roll-up-your sleeves working session?

Since you’re likely sending a pre-read of the materials in advance, assume the board has absorbed the details ahead of time. Once you get into the session, you can cover the highlights while leaving plenty of time to have a meaty discussion with the great minds in the room. This is the forum to leverage their experience and knowledge to jointly challenge assumptions, consider alternative paths and together come to the best decisions for the business. 

If we can reframe board meetings from a one-way reporting session to a two-way exchange of value, we’ll go a long way toward making board meetings our friend. Remember, you’re in this together, so put the board to work and hold them accountable. 

Pro Tips for Gaining the Board’s Confidence

Zoom Out

As we prepare for board meetings, we as marketers sometimes feel like we’re guessing what people want to hear, so we compensate by throwing everything but the kitchen sink into our decks. We go into KPI overdrive. Or worse, we share a marketing to-do list. 

One of the ways to combat this is to get clear on what story you want to tell and ask yourself for every slide: is there a “so what” here? It’s easy to get lost in the weeds and before you know it, you’re droning on slide by slide, using your data as a crutch for your talk track instead of telling a crisp story. 

At a high level, your deck should cover:

• Objectives/Strategies
• Progress against them
• What’s working well, what’s not
• Where you need help

A word of caution: resist the temptation to over-rotate on demand gen and pipeline. Even though that’s important, it’s not the only thing. Be prepared to address category, brand, and awareness as drivers of enterprise value.

Finally, don’t conflate board materials with board discussion. You’ll send all your materials in advance, so by the time you get in the room, challenge yourself to distill it down so that the headline on every slide is clear to a lean-back audience.

Be Candid

It goes without saying that honesty rules the day in any professional situation; that’s table stakes. What I mean by being candid is that you’re better off getting ahead of potential roadblocks and surfacing them to the board early and often. Two reasons for this. 

One, nobody likes surprises, especially negative ones. The worst thing that could happen is that challenges get swept under the rug or obscured, only to reveal themselves in the numbers two quarters later. (Gulp). If you hit challenges head-on, the board can provide you with resources and support to help you tackle them before they become major success blockers.

Second, I think candor is also important in the context of presenting a united story across functions in the company. I’ve observed board meetings where the marketer highlights green light statuses on things like SQLs, press coverage, and share of voice while the sales and CS leaders lament flagging close rates and retention. This not only shows a lack of alignment, but it also shows a gap in awareness of the broader business landscape.

Ask for Help

Of all functions in an org, dare I say that marketing is one of the most multifaceted. We wear ten hats on any given day and traverse strategic, visionary thinking with tactical execution. Because of this, it’s sometimes difficult for us to see the forest from the trees. 

This is where the board can help. Remember, they’re not living your reality. While you may have had a challenge rolling around in your head for weeks, they have not. So this makes them uniquely qualified to bring an open mind and a fresh perspective. Not to mention that they likely sit on multiple other boards and therefore have access to strategies, best practices, and data from other companies that can benefit you. 

This isn’t to say you should dump your challenges onto the board and expect them to tell you what to do. But if you come forth with what’s not working, and you present a POV, you’re in a powerful position to seek inputs, ask for resources, and leverage the board’s connections. They might not have all the answers, but they can find someone who does. 

Anticipating Questions: What the Board Might Ask You

As you can imagine, every company is different, every board meeting is different; so it’s impossible to predict specific questions. But, I have found that there are certain high-level themes that tend to pop up time and time again. And these aren’t just themes that I see in board meetings, these are common questions our partners ask of companies they are considering investing in. So, it’s good to think about these things as a marketer, even if you’re not yet getting in front of the board. 

• What are the drivers of growth or underperformance?
• What are the opportunities for improvement/risks?
• Where should we be investing more dollars and what outcomes would that drive?
• What are competitors doing better than we are?
• What’s the plan, timeline, and expected outcomes?

Expanding Your Audience

There’s a certain mystique about board meetings among rank-and-file workers inside of companies. Everyone wants to know what goes on behind closed doors. So even if they don’t ask, your marketing team is dying to know how it went. I recommend making a practice of sharing your deck in a separate session following the board meeting.

Walk your team through the slides, review the narrative, and share the appropriate level of detail about the discussion with the board. This level of transparency will help them understand the bigger picture and how marketing fits into that. They’ll also find inspiration in seeing how the work they do every day contributes to the business. As leaders, we not only answer to the board, we work in service to our teams too. Then everyone wins!

Lisa Ames is Norwest’s CMO and Operating Executive. She leverages her more than 20 years of B2B SaaS marketing experience working shoulder-to-shoulder with portfolio companies to help them thrive.

The post How to Gain the Confidence of Your Board appeared first on Norwest Venture Partners.

Enter Workato. Workato is the operating system for today’s fast-moving business. It is the only intelligent automation platform that enables both business users and IT professionals to easily integrate their apps and automate even the most mission-critical workflows without compromising security and governance. We’re thrilled to have the opportunity to partner with Vijay Tella and his team, and today Norwest is excited to announce our investment in Workato’s Series C round.

Visionary Team with Enterprise Track Record

We have been following the integration platform-as-a-service (iPaaS) space for years when we first met Vijay and his co-founders eighteen months ago.  Immediately we were impressed with the team’s passion for building world-class products, ability to mobilize a highly engaged community and mission to build an iconic company.  Norwest is focused on partnering with talented, authentic founders who have built extraordinary teams, and Vijay and his team, who have a unique blend of integration and B2C experience, at Workato are no exception. Prior to Workato, Vijay served as the CEO of Qik (acquired by Skype) and was a founding SVP of Engineering at TIBCO, which he helped grow from $0 to $350M in revenue. At TIBCO, he met his co-founder and now Head of Product, Gautham Viswanathan, who previously served as VP of Product Management at TIBCO.

Empowering Business Users

Business applications are increasingly enabling nontechnical business users, such as marketing operations and business operations teams, to customize their workflows. Workato offers over 400K public, out-of-the-box integrations, or “recipes”, and has over 2M proprietary recipes. Workato’s ease of use combined with its machine learning capabilities, which helps users determine the most effective recipe by recommending the next set of actions to take, helps companies integrate and automate faster at a fraction of what it would cost to build those same integrations in-house.

Customer Love

In many customer conversations, we’ve heard them express their passion for Workato.  They highlighted several strengths of Workato’s product and company: ease of use; capable of handling complex use cases across a broad base of users; a highly engaged and responsive user community; and a strong management team.

Massive Market Opportunity

The iPaaS market is rapidly expanding and projected to grow at a 40% CAGR in the next few years, according to the analyst firm Gartner Group.  More than 6,000 of the world’s fastest-growing companies use Workato to automate business-critical processes like employee onboarding, order to cash, and lead management. We feel strongly that Workato offers a unique and simple yet powerful solution—and that’s a recipe for success.

We’re thrilled to welcome Vijay, Gautham, and the Workato team to the Norwest family.

The post Workato’s “Recipe” for Success appeared first on Norwest Venture Partners.

Time and again, CEOs like Nooyi tell us the same thing: The life of a CEO is tough. It’s mentally and emotionally demanding on both personal and professional levels, but it’s also incredibly rewarding.

At Norwest, we currently work with and support more than 140 CEOs on a regular basis. To foster connections among them, we’ve kicked off a number of initiatives that cultivate a mutually supportive leadership community. For example, our CEO dinner series gives these talented leaders the opportunity to meet face to face and discuss issues that are top of mind. We also host events and webinars where they share best practices so they can learn from each other. We conduct surveys to better understand the multi-faceted journey a CEO, and offer convenient channels for our leaders to communicate with one another.

Our new 2018 CEO Journey research sheds light on the full life of a CEO, drilling down into common challenges, needs and priorities. From working with executive coaches, to hiring, to driving smarter corporate cultures, CEOs are consistently aiming to reach a sense of balance and focus, and discover ways to maintain motivation. Through their candid answers, they have revealed realities of CEO life that aren’t always discussed.

Gathering information from industry-diverse CEOs

Two hundred CEOs and founders of privately held, venture and growth equity-backed companies chose to contribute their thoughts to our survey. They provided rich details around what makes them tick, what keeps them up at night and what they believe they need to fuel continued success.

Three important insights came into focus after thorough analysis of the responses. Each is a rare “behind-the-curtain” look into the lives of leaders:

1. Leaders find harmony in healthier working and living environments

Society might envision the stereotypical CEO as leading a life dedicated 24/7 to work. However, contemporary founders are hardly all-business, no-nonsense, nose-to-grindstone types. In fact, most indicate a penchant for prioritizing mental and physical health regardless of how hectic their schedules become.

On average, 70 percent of survey participants experience no less than six hours of slumber, 60 percent work out regularly and 48 percent read for pleasure. Plus, 32 percent have executive coaches, more than 30 percent keep appointments with wellness coaches and about a fifth visit therapists. As if this weren’t enough to keep them busy, 93 percent regularly socialize with their industry peers on a monthly basis and some 25 percent of them meet up multiple times per week.

2. Fear of failure keeps CEOs pressing forward

No one wants to fail, especially an individual who has put blood, sweat and tears into one’s company. Is it any wonder, then, that 90 percent of respondents lose sleep over the possibility of not succeeding? From securing funding to making smart onboarding decisions, CEOs have a never-ending list of responsibilities. Accordingly, 49 percent worry about scaling, 49 percent about investor funding and 46 percent about keeping life in balance.

Polishing skills is high on their lists of “must-do” items, with 37 percent of CEOs aiming to improve their public speaking abilities, 37 percent focused on becoming more organized, and 37 percent searching for smarter conflict resolution methods. Of course, improving in the soft skills arena isn’t a CEO’s only goal. More than half want to learn operations or finance, and 37 percent wish they had stronger sales acumen.

In addition to making time to strengthen their expertise in their industries, CEOs work on their lack of soft skills, especially when it comes to  the hiring process. Of course, that can be difficult; 38 percent have a tough time finding sales and customer success leaders, 37 percent think experienced technology and engineering executives are few and far between, and 25 percent expect to spend copious time unearthing operations leaders. Still, CEOs patiently leave nothing to chance. More than 50 percent will make a candidate undergo at least three interview rounds before consideration.

3. CEOs align themselves with experts

Leaders want to put top talent in seats, but their search for allies doesn’t end with in-house executive hires. External relationships are just as important, especially with people who have investing know-how or acumen. A full 79 percent of Norwest 2018 CEO Journey Survey contributors sought outside funding  within the first year of starting their company. To set the stage for meeting future funding goals, they continue to foster deeper connections externally.

What do CEOs want out of an investment partner? Certainly, expertise is a factor, as 47 percent of founders attest. Almost as many sought alignment or the ability for long-term investing. And a third of them look for investors willing to help build their company to new heights by actively playing a role in sales, scaling, networking and other essential initiatives.

The 2018 Norwest Venture Partners CEO Journey Study provided our firm with some  eye-opening insights. Not only does it offer a 360-degree view of the life of a CEO, but it also helps us understand their personal and professional challenges so that we can be more effective in developing and offering the right resources and programs to support them.

For more information, please see our 2018 CEO Journey Study press release.

The post Findings from Our CEO Journey Study appeared first on Norwest Venture Partners.

Today, we’re proud to add Avetta to that list of innovative companies. This morning, the company announced that Welsh, Carson, Anderson & Stowe (WCAS), a leading private equity firm, will acquire a majority equity interest in the company, with TCV participating as a minority investor. Before we talk about what this means for Avetta, its future and how Norwest will continue to be involved, we’d like to take a look back on how we got here.

Avetta (formerly known as PICS Auditing) is the leader in cloud-based supply chain risk management and helps connect the world’s most recognizable enterprises to qualified suppliers on a global basis, which in turn, helps drive their safe and sustainable growth.  Avetta primarily does this across “dirty and dangerous” industries like oil and gas, construction, mining, telecom and many others.

When we first came across Avetta, it was founder-owned, profitable and growing nicely; straight out of central casting for our typical growth equity investment.  However, before we could invest, we had to establish trust with the founders John Moreland and Jared Smith and persuade them that in addition to capital and our deep industry expertise, we could bring real value to their company by assisting with business development, M&A, strategy, hiring and a multitude of other business-building initiatives. As management did not need any capital, we were competing with not only other investment firms, but management’s interest in doing nothing at all.

During our first call with Jared, we shared our thesis around compliance-driven technology  and our philosophy of acting as “invited guests” in Avetta’s business, with the goal of adjusting our approach to their style of management. We discussed how a partnership with Norwest would provide the company with access to a unique set of resources and proprietary business building programs that could not be found elsewhere. We courted John and Jared for nearly two years until they decided to bring Norwest on as a minority shareholder in 2012 where we closed our transaction on December 28, in a 35-day sprint to ensure favorable capital gains treatment.  In the end, Jared Smith said, “One of the reasons we chose NVP was because they understood our vision and believed in us.” John Moreland added, “NVP wanted us to keep doing what made the company great.”

During our first two years as investors, we assisted management with building the company infrastructure that would allow it to scale for the future.  We helped hire key executives, develop KPIs to assess the health of the company, improve the GTM strategy, create a sound product roadmap, reduce extraneous costs and build a benchmark framework for management to achieve best-in-class performance.  We earned so much trust from J&J in that first two years that they thanked us for being such good stewards of their business and offered up the opportunity for us to take a larger stake in the company, as they desired to step back from day-to-day operations.  

We then worked with J&J on finding a new CEO who would continue to drive the company forward with their shared strategic vision. Today, led by CEO John Herr and his world-class management team, Avetta’s software is used by over 50,000 customers in over 100 countries and we’ve only begun to scratch the surface of this $10 billion global opportunity with logos such as Amazon, GE, Exxon, John Deere, Johnson & Johnson, Shell, Sprint and Verizon as current customers.  Our work with John and team has revolved around driving proven SaaS best practices, introducing numerous data, reseller and product partnerships and identifying and recruiting industry luminaries to our advisory board and board of directors.

While we’ve shared in the success of Avetta to date, we at Norwest are such believers in the company’s future, that we’ve decided to roll a very meaningful part of our equity into the deal moving forward with WCAS and TCV. We look forward to working with them on providing continued business-building support for years to come.  We’d like to congratulate and thank John Herr, John Moreland, Jared Smith, and the entire Avetta team on this great outcome and we look forward to our journey ahead. Stealing John Herr’s favorite corporate battle cry, things truly are Mo’ Betta with Avetta!

The post Mo’ Betta, with Avetta! appeared first on Norwest Venture Partners.

Building Visitpay

The story of Visitpay is one of a massive market need being created through the dual forces of government policies and patient demand for consumer friendly solutions. High deductible plans, driven by rising healthcare costs for employers and fueled with Obamacare’s mandates, have driven over half of US employees to a deductible of over $1,000 (from 10 percent in 2006, with many north of $3,000 per household). More than just a deductible increase, however, these structural changes expose the fact that today’s patient responsibility for a hospital bill is often the size of an unplanned mortgage when in days prior it was the size of an extra car payment.

As reported by The Wall Street Journal this week, we led this first institutional investment round with Ascension Ventures. At the time of this investment, the company counts over $30 billion in net patient revenue in the hands of their existing customers, including leading names like St. Luke’s Health System, Intermountain and INOVA, and is looking forward to partnering with a pipeline of entities with more than $100 billion in net patient revenue.

Visitpay’s founders and the leadership team come from backgrounds steeped in consumer finance, healthcare IT, and healthcare operations. The founder and CEO, Kent Ivanoff, led a highly profitable business at CapitalOne before leading revenue cycle management at a leading health system in Idaho, where he conceived of the idea for a better way to improve the consumer and patient experience in managing the financial challenges of healthcare.

The Soaring Cost of Healthcare

Medical bills continue to dominate the short list of causes forcing US households into bankruptcy, compounding their medical pain with financial catastrophe.  We all are familiar with analogies to the challenges that today’s healthcare patient experiences with a hospitalization or needed surgical procedure in today’s world of the high deductible health plan.

• Imagine showing up at a hotel without knowing the room rate, staying there one night, and then getting a mailed bill for $2,500 demanding payment in full a few weeks later with check by mail or phone and without itemized charges.
• Imagine taking a necessary flight for work with no ability to understand the cost in advance and getting a paper bill weeks later asking for $3,000 immediately.

This is where we are today in consumer healthcare finance. As we focus more and more on healthcare quality and cost at the highest levels (with the PPACA), we have forfeited the patient’s financial health through high deductibles, reduced benefits and the lack of systems and processes to help them manage their patient financial responsibilities.

Hospitals fare no better, since historically, patient responsibility was a small fraction of their overall revenue base.  As the portion of health system revenue in the hands of patients shifted more than 10 percentage points in the last 5 years, the yield (percent paid as a function of face claim value) on the part of the revenue dropped from 95 cents on the dollar to 40-50 cents on the dollar. Consider this example:  A health system with $1 billion in net patient revenue and a 5 percent operating margin ($50M) might have had 5 percent of that revenue in the hands of its patients in 2010 ($50M) with a typical yield of 50 percent ($25M yield on $50M patient responsibility face value).

Today, that same $1 billion net patient revenue system has 20 percent of its revenue in the hands of patients. Without a great solution, the incremental $150 million in revenue shift is being paid, without Visitpay, at 50 cents on the dollar. The $75 million loss in revenue paid by the new payor (the consumer) drives the health system’s operating margin negative. Patient financial responsibility trends are unsustainable for both consumers of healthcare services and for the hard working health systems that serve them.

Helping Consumers and Providers Manage Patient Financial Health

It doesn’t have to be that way. The Visitpay team and their sophisticated and elegant solution has already improved the patient financial responsibility problem for their customers, delighting patient consumers with a consumer grade experience and helping providers get properly paid for the life-saving work they have performed. Visitpay is a solution required in today’s world of health payments, making both consumers and health systems more financially healthy than they would be otherwise.

I look forward to a conversation at the upcoming Becker’s Conference in Chicago next week at the CEO and CFO Roundtable on November 14th. As co-chair of the Digital Healthcare innovation Summit, I am also thrilled that we have a panel organized to discuss patient financial health with leaders like Ric Magnuson (CFO Allina Health), Jeff Taylor (SVP and CFO St Luke’s Health System) and Doug Vanderslice (SVP and CFO, Boston Children’s Hospital) on November 30th at the Boston Mandarin Oriental.

We are thrilled to be part of the Visitpay story and look forward to a future steeped in stories of patient delight and health system financial stability.

The post The Rise of the Consumer as the New Strategic Payor appeared first on Norwest Venture Partners.

“Every company is now a software company.” That observation, popular in recent years, captured the essence of a recent panel discussion I moderated at the Cloud Leaders Forum between Box cofounder and CEO Aaron Levie and Jeetu Patel, senior VP of platform and chief strategy officer at Box. Jeetu placed an even sharper point on the proceedings when he predicted that “the next 10 years of software businesses, including ours, will look very different from the past 50 years.”

There’s little argument that software is now crucial to just about every company’s current and future business prospects. It’s critical to what companies do now and it will be critical when the time comes to reinvent themselves. And this urgency spells opportunity for innovative software creators that are stepping into this dynamic landscape. Software startups are well positioned to play the role of go-to source for technology as they rethink processes, especially processes of old-line businesses.

I’ve been involved in the enterprise software world for 17 years, as operator, investor and board member at companies, such as Cornerstone OnDemand (CSOD), WageWorks (WAGE) and Engagio. In this time, I’ve seen a serious shift take place, as next-generation software makers displace legacy vendors, such as Salesforce and Veeva ousting Siebel, Workday ousting PeopleSoft and SAP HR, and Coupa ousting Ariba. It’s hard for incumbent software players to innovate as they need to prioritize customer needs related to their existing legacy products. Meanwhile, the next-gen makers are helping old-line companies leverage software that enables larger market opportunities and more rapid go-to-market efforts.

History is always a good benchmark to underline the difficulties many old companies face in successfully surviving fundamental changes. Take a look at the companies on Fortune 500 list of 16 years ago and you’ll immediately notice that fewer than half (48 percent) are still on the list today. Old-line companies are being challenged by the rise of software, new technology, and need an injection of innovation to prevent being left behind. Think Uber for taxis, Airbnb for hotels.

“The traditional oligopoly of Microsoft, IBM, SAP, Oracle and others has been blasted open,” Levie said. “This has forced these incumbents to think they need to build everything on their own. No one wants to buy products from one or two companies,” he added.

During my discussion with Levie and Patel, I jotted down five points that stood out for me. They’re worth thinking about, especially for software startups that are seeking to live long and prosper in the new era of software.

1) Know your true users. Sometimes the buyer isn’t the user and sometimes feature requirements are prioritized by the buyer even if the user doesn’t need or want them. Don’t assume that more software features mean a better product. Software startups bringing product to market should focus on the majority of the end users, not on the traditional target of “power users,” who often make up only about 5 percent of the total customer base.

2) Remember the “10X rule”. Keep in mind that before customers will make the move to new software, they must believe that the new software is 10X better than their existing solution. Incremental improvements don’t move the dial.

3) Think like a customer. Put yourself in the shoes of your customers and understand what they’re trying to achieve. They’re vying to grow their bottom line quickly to keep up in fast-moving markets.

4) Be transparent. Box’s vision looking ahead is to become embedded in all businesses, so much so that only a small percentage of enterprises actually know they’re running Box.

5) Target reinvention. Companies need to reinvent themselves and this creates opportunities for new players.

The future is bright for software opportunities and now is the time to start thinking hard about the dramatic shifts and changes ahead. A larger software ecosystem is being built, which will benefit both makers and customers and it’s better to be a part of the transforming forces than watch them disrupt your business.

A highlight reel from the event may be viewed below.

Norwest Enterprise Cloud Leaders Forum from Norwest Venture Partners on Vimeo.

The post 5 Lessons from Two Cloud Leaders: Aaron Levie and Jeetu Patel appeared first on Norwest Venture Partners.

It can be lonely at the top, especially for new CEOs building and growing a business. This is why I have always been a strong proponent of appointing experienced independent members to the boards I advise and companies I invest in. Outside leaders bring unparalleled industry background and operational expertise that not only helps create a more effective, dynamic board, but also strengthens the company as a whole from the inside out.

In fact, after 20 years of working with growth companies, I get most excited about investment opportunities when I have the perfect person in mind to add as an independent member of the board. I may pass on an investment if we don’t know the right person — that’s how essential this position is to a company’s future growth and success.

Why Independent Directors Are So Valuable

1. Industry Expertise
I believe you can have diminishing returns from adding too many investors or too many of the same type of leader to a board. When structuring a board, the goal should be to provide maximum benefit to the company, the CEO and board governance.

I often seek to add one or two executives to the board who have never worked at the company. For example, Hayley Barna, co-founder of Birchbox recently joined the board of at-home hair color company, Madison Reed, as an independent member. She is providing valuable expertise on subscription business models and the beauty industry. This is a critical area of knowledge and experience that Madison Reed can lean on as they grow their prestige brand.

2. CEO Experience
No one can communicate with a CEO quite like another CEO. For one-on-one coaching and insider perspective, people with CEO experience make excellent appointments. They can advise entrepreneurs on growing and leading teams, dig into business topics at a detailed level, and identify early indicators of problems, which can be invaluable to a company’s future.

Just a year ago, I invited Catherine Monson, CEO of FastSigns, to join the board of a growing early education company, The Learning Experience, as an independent member. She is a great sounding board for the CEO of The Learning Experience on operational and organizational change and growth. And, her position on the board of the International Franchise Association, additionally provides the company with a broad view on the franchise industry and trends.

3. Meet Changing Needs
As a company grows, a board will often reach a point when they need someone new with a specific skill set to get them to the next level. We were able to fill a strategic planning need by appointing Tom Nolan, former senior vice president of Ralph Lauren Golf, to the Kendra Scott Design board. He is sharing his operational and lifestyle brand expansion best practices to help fulfill the Kendra Scott vision of growing a lifestyle brand. Keep in mind, your strongest board member doesn’t always have to be a former CEO, Presidents and General Managers of divisions of large corporate companies with P&L experience are often running large businesses within larger corporations.

Other well-known brands are appointing board members for specific business needs. Luxury fashion company Coach elected digital expert Stephanie Tilenius, CEO and Founder of Vida Health, to their company board. Coach cited Tilenius’ experience in the consumer internet sector as particularly valuable to them.

Where to Find Independent Board Members

1. Network. Because having the right independent board member in mind can impact an investment opportunity, networking is a proactive part of my day and it should be for any entrepreneur and founder, too. I use my own network and tap my partners’ networks to find board talent. I regularly attend conferences and events to stay current with industry trends and to meet new visionaries. I met Susan Metzger, another outstanding independent board member for women’s apparel brand Bailey44, at an industry lunch.

2. Cold-calling can also work. PCA Skin has two excellent independent board members thanks to cold-calling, including the prior COO of Obagi Skin Care. We identified his experience as ideal, it turned out he lives nearby, he accepted a lunch invitation, and we were able to convince him to join the PCA Skin board.

3. New Online Resources such as theBoardlist – a curated talent marketplace for the technology community – can help you discover highly qualified female leaders. theBoardlist makes a strong business case for more female participation starting early in the lifecycle of companies. I will also ask entrepreneurs who their ideal advisor is and sometimes through the magic of six degrees of separation we can find a way to an introduction. LinkedIn is also a great tool to find mutual connections and request introductions to dream candidates.

Today there is no excuse for not adding diversity and outside experience to boards of all sizes and companies in various stages. Leverage your network, use resources like theBoardlist, and don’t be afraid to ask executives you admire to join your board or to provide introductions, because they might surprise you.

Adding independent board members isn’t a new practice, and is just good board governance. Sometimes it can be forgotten, but it’s a critical tool for maximizing the potential of my investments.

The post Why Every Company Needs An Independent Board Member, and Where to Find Them appeared first on Norwest Venture Partners.

Looking Back

Promod joined Norwest in 1990 while still living in Minneapolis, and moved to Silicon Valley with his family in 1996 to help build out Norwest’s presence in the technology venture sector here in Palo Alto. Since this move, Promod has expanded and diversified our firm by stage, sector, and geography. He was responsible for our global expansion into Israel and India as well as shepherding our thriving growth equity and healthcare practices. Thanks to Promod and the team he has built, we’re proud to have offices in San Francisco and New York, as well as subsidiaries in Mumbai and Bengaluru, India, and Herzelia, Israel.

Promod has an extremely enviable investment track record and is well known in the industry for being a strong and supportive board member. Promod has invested in more than 70 companies since he began his venture career, and his investments have been worth more than $40B in aggregate exit value to date. 25 of his portfolio companies have gone public and 37 have been acquired (or have gone public and been acquired). 2015 marked Promod’s eleventh appearance on the annual Forbes Midas List, including 2004, when he was ranked the #1 venture capitalist based on performance over the previous decade. In 2014, Forbes recognized Promod as a “Hall of Fame” investor.

The successful investments that Promod has made over the years, the multiple funds he has been able to raise, and the gains he has produced over the decades are too long to list. However, these tremendous accomplishments date back to his major wins in such companies as Tivoli, Extreme Networks, Forte, and Cerent, all the way to today, with such significant exits as FireEye, Skybox Imaging, and Virtela.

On behalf of everyone in the Norwest family, we would like to congratulate Promod on his 25 years of leadership and success here, and also thank him for all of his past and ongoing contributions.

Wise Words

We recently sat down with Promod to discuss his favorite moments, achievements, and lessons learned over the past 25 years. Here’s what he had to share with us:

What advice do you have for new venture capital investors?

My top piece of advice is to be patient. Everything is going to take longer than you expect. This applies to everything from finding a niche on the investment team, closing that first deal, or realizing gains on an investment. If you look at companies I’m involved with, it took nine years for FireEye and 14 years for Virtela to come to fruition. Today, the road to an exit or IPO is still a long journey and all parties involved should expect to work long and hard before seeing a potential exit.

I also tell new investors to be prepared for change. Most companies will pivot and change dramatically over time, so make sure to bake that into your decision-making process and expectations of the company. With patience and hard work, you can achieve great things.

My last tip is to make sure the people around the table are individuals with whom you want to work. In venture capital, it’s important to have syndicate partners who are like-minded and also bring multiple perspectives and contacts to the group.

What qualities do you look for in an entrepreneur?

The first things I look for are domain expertise and a successful track record. It’s also important to be open to criticism and have the ability to learn from mistakes. Those who are open to being coached and willing to make changes to improve their business or management style are most likely to be great leaders.

What are a few of your proudest moments at Norwest?

All of my proudest moments have involved helping people follow their passions and reach success. At Norwest, it has always been in our DNA to be hands-on and serve as an extension of each portfolio company’s team. We work so closely with founders and entrepreneurs that when they achieve great success, our job is much more rewarding. Some of my fondest memories include watching companies like FireEye and Cerent grow from start-ups to industry leaders.

Inside Norwest, it has been a privilege to grow the firm and personally coach partners who go on to achieve amazing things in their careers. I’m so grateful for the help and valuable perspectives the Norwest team has provided over the past 25 years. I’m also lucky to have worked with such great portfolio management teams and co-investors who have built successful companies.

None of this would have been possible without my faith and the support of my wife and kids. I thank my family for their love and the sacrifices that they have made to accommodate my crazy schedule. Above all, I’m thankful to the Lord Himself who has orchestrated numerous events in my life and guided me through everything. For more about my journey, please see: http://bit.ly/1oWyq7h

The post Promod Haque looks back: 25 years with Norwest Venture Partners appeared first on Norwest Venture Partners.

Today, I am announcing our investment in TigerText, a company that is at the leading edge of providing next generation secure communications and workflow solutions to the enterprise; with a focus on healthcare and other highly regulated verticals that value team-based secure communications and workflows.

Major shifts in the work of enterprises, especially evident in healthcare, are requiring new forms of peer-to-peer and group based communication and workflow management. TigerText enables rapid improvements in the accuracy, reliability, and efficiency of the coordination of team based work in healthcare. Additionally, TigerText’s new commercial API, TigerConnect allows other businesses to leverage their years of experience in secure communications and workflow by deploying their TigerConnect “Twilio-like” platform as a service.   One TigerConnect customer, PointClickCare, the leading EHR for the LTPAC market, leverages the platform to power their provider communications and improve their customers’ workflows throughout the continuum of care.

I am thrilled to be joining the TigerText team, founders and leaders Brad Brooks and Dr. Andrew Brooks, the Board of Directors, and the TigerText enterprise customer base for the next phase in the story of this company.

Mission Critical Communications

As an emergency physician at a technologically advanced US hospital system, I am constantly reminded of the importance of mission critical communications between myself and my team of providers. From ER length of stay to patient handoffs, critical lab alerts, the coordination of team based care, and the effective leveraging of consulting physicians, secure communications platforms will prove to be a key driver of safety, performance and reliability within US hospitals. Since the 1999 Institute of Medicine’s report “To Err is Human,” communications between providers has been highlighted as a key driver of the unsafe conditions present in the US healthcare system. I am proud of our investment in TigerText and in the TigerText’s team’s goal of making the workflow of healthcare safer, more efficient, and easier.

Brad Brooks and his brother Andrew Brooks, an orthopedic surgeon, founded TigerText five years ago with the goal of improving the ability of people to communicate. Healthcare became the clear focus for the Company as a primary market since their technology dramatically advanced the state of the art. I met these founders three years ago as they were ramping within healthcare, being chosen for both acute care and outpatient facilities for communication between all types of healthcare workers including physicians, nurses, technicians, social workers, administrators and others. Over the last three years since our first meeting, I have witnessed the technology platform advance from a reliable, HIPAA-compliant secure texting solution to an enterprise class secure communications and workflow platform enabling critical process improvement in the last few inches of healthcare —the front lines where work is done to affect patients’ lives. With product and technical leadership from companies like LinkedIn and Salesforce, they have been fortunate in crafting a platform with a strong enterprise product market fit and a consumer-friendly feel in terms of ease of use.

Powering Enterprise Level Healthcare

Today, TigerText powers enterprise level healthcare communications and workflow at over 1,000 US hospitals such as Universal Health Services and Community Health Systems along with leading academic institutions like the University of California System and Boston Children’s Hospital (a Harvard teaching affiliate). TigerText’s platform is also being used in other mission critical enterprise environments where secure communications and workflows are essential. From financial institutions to media and to the governmental and legal sector, other regulated sectors that value secure, reliable, and mobile communications and organize work around people, projects and teams are adopting TigerText. I look forward to being part of the growth story of this enterprise.

The post TigerText Promises to Transform the Workflow of Healthcare appeared first on Norwest Venture Partners.

The concept for HoneyBook came about in a Palo Alto coffee shop in 2013 as four friends (now co-founders) compared notes on the challenges and frustrations of planning their recent weddings. Driven by the need for innovation and frustrated at the event industry’s snail-paced adoption of technological change — with paper contracts, checks, and countless liaisons over email and telephone — the group knew there had to be a better way.

In his own words, HoneyBook co-founder and CEO Oz Alon said, “We saw a need for one simple platform that wedding and other event professionals could actually use to make a positive impact on the business. Our driving vision was to serve as a catalyst for a huge industry that has been relatively limited in terms of available technology. With that in mind, we can empower top event professionals to be more connected, productive and successful with their clients and fellow vendors.”

The HoneyBook founders are creating the first market-specific business management software for the professionals in the event planning business, including wedding and event planners, photographers, florists, DJs, etc. Among other functions, HoneyBook’s cloud-based platform allows these professionals to manage overall communications with clients, send tailored proposals, invoice clients, and collect and track receivables.

In addition, HoneyBook is building city based communities of event professionals based upon shared business relationships, with the ultimate goal of enabling a robust online marketplace among event professionals who often collaborate on specific clients. The company has a virbrant community already in the Bay Area and has recently launched similar communities in Los Angeles and New York.

Backed by this funding, HoneyBook will continue to invest heavily in product development and customer service, and will accelerate their city-by-city rollout of communities to major hubs in the US over the next 12 months.

We invested in HoneyBook because we have been highly impressed by what Oz and his team have accomplished in a very short period of time. They are visionary, energetic, and maniacally focused.   They already have a rabid customer base that is getting great value from their platform. Moreover, they are chasing an enormous opportunity, as the transaction flow in the wedding space alone is over $50B in the US, while the transaction flow in the entire personal events space in the US reaches multiple hundreds of billions of dollars.

Some company is going to create a powerful online marketplace within the personal events space. Norwest is betting on Oz and his colleagues at HoneyBook — and we are excited to be part of the team.

The post HoneyBook is Sweetening the Event Planning Experience appeared first on Norwest Venture Partners.

There is a better way and I’m excited to announce Norwest’s investment in Crossover Health, an innovative, health care provider for the workplace. Crossover provides on-site health-care services while delivering a high quality patient experience through integrated primary and ancillary care supported by engagement and health management technologies. By improving the way healthcare is financed, delivered and experienced, Crossover is lowering costs, increasing quality, and improving health and performance outcomes. I’ve been impressed with the company’s relentless focus on quality care and the patient experience.

As a firm, we have invested in many companies in the health sector, but this is our first U.S. investment in the employer healthcare delivery market. After watching this space for quite some time, we invested in Crossover because of its unique value proposition. We believe the company has reset expectations of the health care experience by rethinking and redesigning every aspect of health care delivery and as a result, is in a unique position to transform the industry.

Member Engagement

Traditional care has historically been about fixing problems. Instead, Crossover partners with employers to build relationships and provide the motivation for employees to improve and sustain their health. It makes perfect sense to us that Crossover refers to their patients as ‘members.’ These members don’t simply visit Crossover when there’s an issue. They join Crossover to start their journey to better health.

Crossover changes the model by creating a culture-specific patient experience that encourages the day-to-day maintenance of health. The company works closely with clients to design benefits and customize services based on a review of a company’s health analytics. The company then engages employees in their own health through communication and care experiences that are inspiring and unique to the employer’s culture to truly motivate employees to live healthier lives.

Several major Silicon Valley companies, and others scattered throughout the U.S., are drawn to this model as they are keenly focused on delivering and sustaining a culture of health, productivity, and wellness. We believe many more leading employers will be seeking to deliver this type of value to their employees. In fact, 45-50% of 5,000+ person employers either have or are actively looking to build on-site care clinics. This is all good news.

Up-Ending the Waiting Room

Another major differentiator is that Crossover has eliminated the ”waiting room” concept and instead welcomes members to a “health and wellness center” that combines an interactive technology-enabled environment with a comfortable lounge setting where a mix of stone, wood and other natural elements are combined with indirect and natural lighting to ensure a calm and relaxing environment.

Crossover’s robust technology platform provides members with unequaled access, convenience, and capabilities in the management of their personal health. In fact, you can sign yourself in for your visit, update your personal Health Portfolio, or surf the web for health information when you arrive. That’s not a typical medical waiting room experience.

The model’s potential is tremendous and the engagement data backs it up with more than 70% of employees using Crossover services stating that the clinic is also where they choose to receive all their primary care. In fact, due to the minimal wait time of less than five minutes at their health centers, employees report 96% satisfaction with their services.

Findings released in a Worksite Medical Clinics report state that 37% of employers with 5,000+ employees offer on-site clinics, with 15% of employers of that size planning to open clinics by 2015. 15% of employers with 500 to 5,000 employees offer on-site clinics, with another 11 percent planning to add them by 2015. More than half of employees use the services in the first year and as high as 74% sign up within two years.

Crossover CEO, Dr. Scott Shreeve, founded the company to put an end to the staggering costs of health care and actually exceed patient expectations. “Traditional health has been about fixing problems as they arise. If we want to achieve true health and wellness, we have to view health as an on-going journey. It’s not about just coming in to see a doctor when you’re sick, it’s about having a trusted advisor to seek advice when you need it,” said Shreeve. “In focusing more on the relationships we build with both employers and employees, we’re able to see higher engagement and accountability into health, which helps to reduce costs because of the behavioral change geared towards overall healthier living.”

We are truly crossing over into a new model of health care—a model that pairs holistic health with meaningful employee engagement.To learn more, visit their site here.

The post Crossing Over to a New Model of Health Care appeared first on Norwest Venture Partners.

EdTech is becoming increasingly relevant to all students, by delivering improved learning outcomes and by increasing students’ digital literacy. Various technologies are being used in educational institutions around the country to deliver blended and individually tailored content, stem dropout rates, improve teacher performance, enforce institutional policy, increase parent engagement and motivate students to learn, among other benefits, all of which are helping to improve learning outcomes.

In addition to the standalone benefit of educational technologies, another large driving force for increased EdTech adoption is the national Common Core State Standards (Common Core). The Common Core, which has so far been met with controversy, was primarily designed to ensure consistent educational quality for our nation’s students. Apart from improving our educational system through standardization in math and English/language arts, the Common Core also has the added benefit of providing creators of EdTech and services a much broader audience for their products.

These factors have driven the pace of investment in the EdTech space to record highs. In 2012 and 2013, investors deployed over $1 billion into EdTech. The pace has quickened this year; in Q1’14 alone, investors deployed $500 million, marking the fastest rate of investment in more than five years.

NVP’s Investments in EdTech

Norwest Venture Partners has a long and consistent history of identifying and backing market-leading EdTech companies:

• PeopleSoft is perhaps our longest-standing direct link to the education space. The company was a key provider of higher education student administration software.
• Embark, an applications and admissions SaaS provider, has powered over 13 million student university and scholarship applications.
• Rafter (formerly BookRenter) is a leading Higher Ed textbook rental and course materials management provider.
• iProf offers content delivery and assessment solutions to the Indian secondary market.
• Lumosity has helped 60 million consumers with ‘brain training’ games and its curriculum is being actively integrated into elementary schools.
• Udemy is pioneering a lifelong learning marketplace for more than 3 million students worldwide.

We are also pleased to announce that we recently closed a significant investment in Turnitin, the world’s most widely-used plagiarism detection and online grading service. Turnitin provides its SaaS platform to both K-12 and higher education institutions. The Company now serves over 10,000 institutions, in 135 countries, by referencing a rapidly growing database of over 45 billion web pages, 350 million student papers and 130 million journal articles.  Turnitin’s SaaS delivery allows instructors to deliver real-time, personalized feedback that fosters critical thinking skills and more original writing in student work.

Emerging Trends in EdTech

As we continue to invest in the EdTech sector, we believe that SaaS/cloud-based companies have a unique role in seizing various opportunities.

Personalized delivery model/mobile learning: At both a national and local level, there is a push towards a 1:1 delivery model (one computing device per student), whether institutionally provided or BYOD. According to the Software & Information Industry Association (SIIA), over 75% of elementary and 85% of secondary schools allow some degree of mobile device usage in classrooms, although most usage is ad hoc. However, SIIA’s data notes that the majority of educators anticipate that mobile devices will be fully integrated into the classroom within five years. Because of their ease of delivery across platforms, SaaS offerings within classroom tools, digital content, assessments, and student/parent administration have experienced a significant increase in demand.

Common Core: The Common Core was designed to ensure consistent educational quality for our nation’s K-12 students. The regulations standardize math and English/language arts, but also indirectly broaden and standardize the target market for new EdTech offerings. The standards are also forcing districts to accelerate replacement cycles for their existing, often legacy, software systems to conform to the standards, creating a window of opportunity for SaaS vendors.

Replacement Cost: SaaS models benefit from a lower cost of entry and replacement.  As institutions consider replacement options for legacy software, the monthly or annual subscription model represents significant cost advantages versus a traditional software license sale. The requisite hardware, large up front licenses, and maintenance packages can be burdensome; Gartner estimates the lifetime cost of installed software to be four times the upfront license cost.

However, many K-12 district officials operate within a ‘use it or lose it’ budgeting process, which has traditionally led to larger, one-time license sales.  To combat this embedded advantage legacy providers have, many SaaS vendors offer long-term, paid-up front contracts.

Flexibility: SaaS platforms can quickly deliver and adapt to updates in curriculum, standards and requirements. Given the ongoing changes to Common Core, E-Rate and other funding and standards, educational institutions are growing increasingly wary of making major purchasing decisions at this time. SaaS solutions allow these institutions to make purchasing decisions safely, knowing that major changes in curriculum and standards will have a minimal impact on their existing software solution, and that updates can easily be made and delivered instantaneously. These new software platforms can accommodate new teaching methodologies, as instructors have flexibility in adapting the delivery of software to fit their curriculum and approach.

Privacy: Given the recent national concerns about privacy after the difficult and botched rollout of inBloom, institutions are increasingly vigilant about the security of student data stored remotely. While both single-tenant and multi-tenant SaaS vendors have implemented industry-leading security protocols, some educators and administrators may still need time to acquiesce to the idea that they have little to no “control” over student data.

Ownership: By subscribing to a cloud-based offering, some institutions believe they effectively lose control of their software and are therefore at the mercy of the software provider. Some educational institutions are still wedded to the idea of “traditional” ownership and remain reticent to embrace the notion of “leasing” software. SaaS companies in education are able to overcome this hurdle in many cases by reassuring educators that software uptime in many cases is greater than 99.9%, and that the tradeoff to not “owning” software is the ability to use software that incorporates the latest developments in technology and teaching methodologies.

Conclusion

The $2 billion annual pace of investment into EdTech is buttressed by a confluence of positive technology, and regulatory and budgeting tailwinds. This investment pace is supporting a growing wave of technology innovation and Norwest Venture Partners remains convinced that the best is yet to come for market-leading companies. We look forward to continuing our support of entrepreneurs looking to affect positive change in the education space.

The post EdTech: An ‘Educated’ Perspective appeared first on Norwest Venture Partners.

We want to express our gratitude to all of the incredible entrepreneurs with whom we work – you inspire us with your vision, passion and drive to succeed.  The tech sector remains the global engine for innovation, job creation and economic growth, and we are excited to continue our 53 year involvement in this ongoing revolution.

From our vantage point, the opportunity to turn innovation into meaningful market impact has never been stronger. This is happening on a global scale with diverse and vibrant emerging technologies in the U.S. and markets abroad.  The advancements we continue to see in cloud and SaaS, the domination of mobile technology, the explosion of online marketplaces across all aspects of the economy and the continued innovation pertaining to cybersecurity threats and countermeasures have created a tidal wave of opportunity across numerous markets.

NVP Portfolio Success

We believe in investing across multiple sectors, stages and geographies. This new fund will build on momentum across our portfolio as more than 11 of NVP’s portfolio companies saw liquidity events in 2013 alone. These events included IPOs and M&A activity–from the IPO of cybersecurity leader, FireEye, one of the most heralded initial public offerings of the year; to the successful IPO of the world’s largest digital coupon destination, RetailMeNot; to the acquisition of cloud-based network services company Virtela by NTT Communications; to the sale of storage management software company ScaleIO to EMC.

Our global fund is based on a team approach that enables our portfolio companies to tap into the breadth and depth of our expertise across our entire firm.  Our team has grown to more than 42 investment professionals and 85 total team members worldwide, and we intend to expand further on both the investment side and our portfolio services team.

We also want to thank our employees for all of their efforts over the years. Raising a new fund can’t be accomplished without the support of the entire Norwest team, including our portfolio services groups, finance staff, general counsel, IT department, administrative staff, reception staff, office management and investment team. Each and every one of our employees plays an important role that is critical to NVP’s overall success.

NVP Milestones

Since the closing of our previous fund, NVP XI, in 2010, we have achieved a number of key milestones including:

• Celebrated our 50th anniversary and surpassed 550 portfolio company investments over the years;
• Saw broad success across NVP’s portfolio with more than 42 liquidity events;
• Fueled the economy with NVP portfolio companies generating more than 100,000 jobs over the past several decades;
• Re-introduced our healthcare practice and invested in 17 growth and venture healthcare investments globally;
• Grew our team and services to portfolio companies. We added more than 40 investment, services and operations professionals to our staff and promoted 11 investment and portfolio services executives to partners/general partners.

What’s Next?

It’s an incredible time to be an investor. Technology is driving major transformations across entire sectors of the global economy. We are excited to continue our work partnering with visionary entrepreneurs who want to change the world. These leaders are the best and the brightest at seeing the future, harnessing technology, and building teams that foster enduring businesses with lasting value.

The post NVP Raises New $1.2B Fund appeared first on Norwest Venture Partners.