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Dreamforce15 Reflections

Well, 170,000 people can’t be wrong – can they?  Either way, San Francisco in September is a great time – even when it rains.  DreamForce is a professional event and a branding statement like no other.  There will be thousands of posts, blogs, tweets, and articles about the main show, the speakers, and the glitz, so I will leave that for others.  Salesforce put on a great show and is clearly the center of a huge ecosystem.  Here is the take on Dreamforce15 from one East coast tech investor.

  • San Francisco needs to finish that subway and open up its roads.  Between the construction of the subway, new building development, and trade-show madness, much of the business district was rendered pretty unbearable.  Not as bad as Philly will be with the Pope, but no one expects to conduct an honest day of work when the pontiff is eating cheesesteaks.
  • If I had to guess whose stock was rising and falling inside the Salesforce universe based on presence and buzz, I would say the following:
    • Consulting firms are making a bundle on Salesforce and thus are willing to buy huge booths and staff them fully.  Makes me wonder how seamless all of these disparate Salesforce parts are and whether the “no software” player has become one of the large messy platforms that it set out to unseat
    • Smart players like InsideSales and Mulesoft didn’t have huge booths or big splashes, but they still managed to be in a lot of places and to touch many people.  As an investor, I much prefer dollars being spent that way
    • LinkedIn was practically silent and it was clear that the combination of the fact that they have shut off so many attendees’ APIs and that Salesforce is quickly distancing itself from and is soon to be competing with them was lost on no one
    • I was surprised not to see Veeva, but I may just have missed them; maybe Dreamforce is too horizontal for their focused vertical strategy
    • I saw many companies with booths or kiosks that were very early, some even close to pre-revenue early.  I know because I have seen them in our offices and spoken to them on the phone.  Maybe there is so much buzz about the conference that these companies feel a need to be here, which results in a very expensive case of FOMO that they likely can’t afford.  For me, their stock dropped because they are demonstrating a poor spending discipline that will carry forward to post Series A actions
  • I learned that I better get smart about “quote to cash” because Apttus and Steelbricks both were spending a king’s ransom on letting every one of the 170,000 attendees know that it was important.  Maybe the fact that Salesforce Ventures invested a bundle in each of these competing businesses makes me scratch my head, but round tripping revenue from the corporate venture group back to titanium sponsorships seems a little dotcom like.  To me, a solution that combines “configure-price-quote”, contract management, and revenue management and only requires six months of LiquidHub or Accenture to implement doesn’t seem like an innovation.  Valuable for sure, but haven’t people been doing this for years?
  • Not to pick on Apttus, but they really made themselves a target.  Having raised $41M in February, 2015 followed by $108M just three weeks ago, they were intent on poking everyone at Dreamforce with their unicorn horn.  They had a huge booth and a bunch of smaller booths, multiple store-fronts in and around the Moscone Center taken over for the duration for private events, and were giving away a Tesla.   Hold on Unicorn, money may be your food, but it doesn’t grow on trees.
  • I sat at the end of an aisle of eight-foot booths calculating that at $75k per booth times about 30 booths per aisle, that was $2.25 million of dollars before travel, hotels, food, other sponsorships, and give-aways.  The led me to think that maybe giving away a Tesla is not such a bad idea.  Imagine this – instead of one of our portfolio companies paying for a booth, it rents a suite at the W, which is right across the street.  Then, several months before Dreamforce, the company reaches out to its highest priority targets and offers those prospective customers the right to one of only 50 raffle tickets to win a Tesla if they come and spend an hour with the start-up’s leadership in the suite.  Fifty one-hour sessions with the key people from prospects would be much more productive than scanning the masses on the trade-show floor, while the costs would be similar.  Or if the lottery sounds a little extreme, offer to pay each of their entry fees to Dreamforce if they spent an hour in the suite.
  • is relevant to so many enterprises and to so many other software players who need to operate within the salesforce ecosystem.  It is the 4th largest software company – after Microsoft, Oracle, and SAP – and yet it feels so much more relevant, maybe because it is moving at such a higher speed than the three larger legacy businesses.  It’s hard to know if this is the apex for Salesforce or just a check-in point on the up escalator, but if I had to guess, I would say that there is more room to rise, and increasingly our b2b software investments will need to understand where they fit in the broadening Salesforce ecosystem.  Hopefully they can do this without spending a huge percentage of their annual marketing budget.

Term Debt and Venture Backed Businesses – No Thanks!

Maybe it is because I started out my career as a loan officer at what is now J.P. Morgan Chase, but I really have a hard time with debt.  To be fair, not all debt, and not for all companies – I have a hard time with term debt to small, volatile, cash flow negative companies.  This aversion likely comes from an early lesson in the year-long credit training course I was put through, during which they taught us that term debt was debt that was outstanding typically for longer periods of time and was to be repaid with the cash flow generated by the business.

So why would a lender make loans to small cash-flow negative start-ups?  Well, for starters, it is because they can charge high fees and get equity, and these loans can be really profitable if they get paid back.  Second, they look to the investors (who would sit behind the lender on the balance sheet) to repay the loan should there not be an exit, another funding event, or, in rare circumstances, the company’s ability to generate positive cash flow prior to the repayment of the loan.

Why would an entrepreneur take term debt?  It can sound very attractive because debt is less dilutive than equity, and thus it can be used to bridge to an exit or to lengthen the period before a next round of fund raising, allowing value in the business to grow. 

Why would the investors support term debt?  Frankly, I don’t know.  On the boards I am on, I rarely do.  Many of our companies have AR lines of credit where loans are available against a percentage of eligible receivables.  These work well and are designed to support working capital expansion.  They tend to be inexpensive and are not repaid through operating profits but through receivable collection.  Often, the lenders suggest a second line of credit not supported by accounts receivable and the question I ask is always – what is the source of repayment of these loans?  When a board I am on approves one of these lines of credit, I always push for the caveat that they cannot be used without board approval at the time of drawdown.

Here are some further thoughts on term debt:

  • As a number of well-known economists have pointed out, excessive debt and loose lending practices have been the driver of many economic maladies over the years
  • As positive economic cycles lengthen, banks get used to making money and keep pushing to make more, thus many banks continually loosen their lending practices often until loan losses mount, then they retrench, often to the detriment of those to whom they have lent
  • Banks have proven an inability to self-regulate, and often put short term profit ahead of long term risk management (mortgage crisis, savings and loan crisis, junk bond LBO crisis, Latin America debt crisis – to name a few).  Entrepreneurs and their boards need to be the regulators because the banks can’t and won’t self-regulate, and thus these term debt term sheets show up in many board rooms
  • Investors, especially new investors, hate the use of proceeds in a financing to be debt repayment.  Investors want to fund future growth in the business, not repay the costs of past growth

If you are an entrepreneur, look at the repayment schedule on the debt and ask yourself – if you could not raise additional capital then could you ever make these payments?  And remember one of the first lessons from credit training:  a company without debt cannot go bankrupt.  


Google marketing: Back to the future.  

In late 2000 I sat down with Tim Armstrong, who at the time was head of East Coast sales at Google.  As head of strategy at the time at Verticalnet, I had been tasked by short-tenured CEO Joe Galli with working through a strategic relationship with Google.  These were the days before Adwords or a Google revenue model or an IPO, but it was the period where the act of “Googling” had recently become synonymous with “searching”.   I remember Tim telling me that at the time Google spent less that $25k per year on marketing and that all of their awareness and traction was viral.  Ultimately, Google and their ad words became the marketing engine that no "new economy" head of marketing could do without. 

Recently I saw a new higher touch Google marketing approach.  A slick white "Apple-like" box with Google subtly embossed on the cover was shipped to a VP of Marketing.  Inside was a classy computer sleeve and a very formal invitation and offer.  “Agree to have a meeting to discuss your advertising needs and we will bring a brand new Chromebook to the meeting to fill the sleeve we just sent you.”

And it worked.  The meeting happened and the Chromebook was delivered.

So Google – one of the most sophisticated companies in the world and the foremost source of lead generation solutions had tossed aside the new-economy marketing playbook for a very old-economy campaign.  Is this a bad thing?  Is this back to the future?

My takeaway from this is that Google continues to prove what a smart company it is.  Just because there are many new marketing plays in the playbook, it doesn’t mean the old plays are dead.  How do you cut through the noise of thousands of emails a week that reach a CMO and get a meeting?  How about sending them mail (snail mail, not email, which does in fact still exist) or better yet – a package.  The funny thing is, when you talk to executives they often remark on how little real mail they get and how they now actually read most of it because it is so rare.  Clearly Google recognized the opportunity this presented.

Maybe marketers need to put high touch strategies back on the list of activities to try and see where the ROI stacks up with other approaches.  For some companies, it may make a big difference.  And that may be the real “new-economy” lesson Google continues to teach; almost any idea, even one that might seem outdated, is worth testing to measure the ROI and expanding if the data is compelling.


Hiring of Direct Reports: Responses from CEOs

Osage Venture Partners recently published a CEO survey focused on hiring and recruiting.  After reading the initial results, I reached out to a group of CEOs whose hiring practices I respect to get a sense of the process they go through to hire a direct report.  I asked each of 15 CEOS “How much time do you spend with a hire who will be a direct report to you before you make an offer?”.  These CEOs included portfolio company leaders and others in my network, all of whom run B2B technology companies.  Company sizes range from over $100M down to some of our newest investments.  Here are the quotes in no particular order.  They do not need any analysis as they speak for themselves but a couple things of note. 


  • Hiring a senior executive is a lengthy process involving multiple meetings and many team members
  • Very often candidates are seen in different social settings and with different mixes of people – restaurants, drinks, with significant others.  All with the goal of getting to know the person at a deeper level
  • The CEO owns this process – hiring a direct report cannot be delegated



“I spent a lot of time with the two most recent hires out of the office.  Head of engineering’s company was acquired and I had to convince him to walk away from his earn out.  He turned down our first offer but reached back out with interest a month later.  He came into the office 2 times to meet with the team.  We met 5 times out of the office for dinner/beers.  VP of Sales came to the office 2 times to meet the team.  We met 1 on 1 three times out of the office for dinner/beers.  We had ~2 hours of phone calls.  He spoke with 2 members of the board.”

“It has varied:  Folks I "knew from the industry" I have met at least a dozen times and have had dinners/coffees - have even met their spouses – before the formal process which is several meetings and long phone calls plus at least 2-3 visits at the office with the rest of the team.  For CFO who was part of a normal recruiting process, I had 2 interviews and several calls to winnow down my list, then I had him come meet the team and had a separate lunch meeting with him.  Then in his case I had him meet with three directors too, before presenting the recommendation to the Comp Committee “

“We spec the job and write a detailed job description and key requirements.  I review first, usually 90 minutes, broken into two 45 minute periods.  I ask questions for 45 minutes, then the candidate asks questions for 45 minutes.  At the end they are told that if they pass the rest of the interview process there will be one final interview by me.  This is followed by interviews by every member of my direct reports.  If it is not confidential, also will do an interview with a couple of employees.  Then candidate is told that the final interview will be a discussion about their 90 day plan.  They are also offered a phone session with me to get answers to any questions they may have to help prepare.  Final interview, review of 90 day plan, digging deeper into the things that were left over from the first interview and items others raised.”

“Process is pretty loose. At least 2-3 meetings and one meal for sure.”

“Great question. I can’t say that I have a defined process for this...probably should. Almost always there would be 4-5 one-on-one sessions; typically a mix of in-office and “social”, at least one breakfast/ lunch (typically earlier in the process) and one dinner (later in the process).  The initial get together may be 60-90 minutes; follow on sessions would be 2-3 hours.  Having said all that, I still am a bit hesitant to rely on these face-to-face sessions and try hard to find a reference that either I (or a colleague) know or has been sourced independent of the candidate.”

“I was more successful when I recruited, going after someone I knew or who was known by others on the team.  I wanted to know as much as possible before a first call.  Candidates had at least 3 interviews followed by a meal.  First meeting one on one. Next, individual meetings with peers.  Each would discuss their impressions with me one on one.  If everyone unanimously approved, the next step was meetings with outside Board members.  Final meeting one on one to discuss our offer.  Also I often had at least three 20 - 30 minute one on one calls during the process.”

“I probably have spent anywhere from 2-3 hours with them.  Always a meal.  I have a direct report of mine interview with a good percentage of our senior team leads.  We also try to focus at first on can this person be successful and not do we like them.  We measure against 7 cultural fit elements, and I have my own three filters.  Always try for multiple meetings.  One thing I have found helpful at the end was a dinner with spouses. Always seems to provide some additional perspective, especially if relocating. “

“First interview with me following headhunter or network recommendation.  Then with my other directs on phone and one in person.  Phone interviews with key investors.  If successful, dinner with me and directs.  Finally business case, expectations and contract discussion with me.”

“Spend 8-10 hours of time with me.  Usually split over three meetings, a company hour and finally a dinner with significant others.  Process is for me to meet first, then introduce to direct reports for interviews (I interview again as well), then do company gathering like a happy hour to get a sense of culture fit, then dinner with me and significant others and finally negotiate terms.”

“Initial phone call 30-45 min make sure like person generally and sell them story.  In office meeting with me about hour and a half.  If like them.... In office meeting with team about 3 hours (usually meeting with other DR's), 5-10 min close out with them thanking them, seeing if any major concerns, and telling them will discuss with team and be in touch.  If team liked them.  Phone call with me catching up about concerns/thoughts on both sides and creating agenda/deliverables for next meeting (they bring some work, they do an analysis of some sort, i produce financials, i deliver product roadmap, etc).  Reference checking.  In office meeting with me about hour and a half reviewing items from #4 (this may also include meeting some of the more junior members that would be reporting to or working with them).  If we're bought in.  Next social event - dinner and drinks - usually with one other person from team.  Last decision.  This would usually happen over 3-4 weeks. “

“At least 3-4 meetings.   Always have a meal. Also do a working session or two. “

“Skype / video interview filter first with me.  Then, interview on site with select team second.  And me again that round.  Get down to two finalists.  Then Skype with board member.   Two finalists in office back to back for a 3 hour 'working' session where we explore real scenarios to get a feel for working together.  Me, one other executive.  It is a simple filter.  If in a 3 hour working session you don't learn anything or if the candidate reverts constantly back to 'I'd need to get in and take stock of the situation' without ever getting specific or giving examples of what has or hasn't worked for them before?  Wrong person.  The right one will educate, challenge, and surprise you.” 

“Hours of phone calls, multiple in office meetings with me and with team.  Sometimes a coffee but usually not a dinner or alcohol event.  I actually think the best way to hire a direct report of mine is doing it over a long period of time, because I find that you really can understand where they are coming from and how much of a fit especially a financial fit you have.”


What is your process? – Let us know, we are interested.

One Note:  We did not ask for the whole process – do you use a recruiter?   How many candidates do you commonly look at?  Are references done?   The question was time spent in the hiring of a direct report and how that time was spent.   Knowing many of these companies, questions on other parts of the process would have yielded similarly thoughtful responses.



Congratulations to 2015 PACT Enterprise Award Winner Sidecar and Finalists SevOne, InstaMed, and Halfpenny Technologies

Last week, PACT – the Philadelphia Alliance for Capital and Technologies – held the 2015 Enterprise Awards, their annual black-tie awards gala. This year the event was held in Philadelphia in the newest wing of the convention center and was well attended by the broader venture community.

Each year top regional technology companies and life science companies are nominated for categories corresponding to different stages of business maturity. The event highlights three finalists in each category and then announces the winners. Osage Venture Partners is pleased to have four finalists and one ultimate winner in our investment portfolio including:

  • Sidecar – Winner – Early Stage Technology Company
  • InstaMed – Technology Innovator Finalist
  • Halfpenny Technologies – Life Science Growth Company Finalist
  • SevOne CEO Jack Sweeney – CEO of the Year Finalist

Congratulations to all four companies for being recognized as leaders in their categories and a special call out to Andre Golsorkhi and the entire Sidecar team on a well-deserved win.  Osage invested in Sidecar in mid-2014 and has been extremely pleased with the company’s leadership, vision, and execution.  SevOne, InstaMed, and Halfpenny have been perennial guests at the Enterprise Awards with each having been named either finalists or winners in three previous categories as each of these companies have progressed from start-ups to more mature growth businesses. 

Congratulations also to all the other well deserving winners and finalists across all the categories.

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