Calendaring

I see relatively little value in having meeting planning inside Sevanta Dealflow in the form of a calendar. What I mean is that the fact that I had a meeting at 4pm on Thursday at the St Regis with the CEO of XYZ is not very meaningful inside Dealflow; you don’t lose much by having it in Outlook or wherever else instead, and there are some great tools, both new and old, for group calendaring–so I think reinventing this wheel would be a mistake.

What I really value is that the content of that meeting gets recorded in Dealflow after the fact… so when the meeting ends, you add a quick note of what was discussed into the ongoing diary of the deal. And by making that action as simple as emailing a quick line into the system, you can do that before you even get to a computer, from your Blackberry or iPhone, while it’s still fresh in your mind… and now it’s in the shared workspace where all of your colleagues can see it in near real time. That’s powerful.

Tasks

I view Tasks as quite a different case from calendaring. Task managers are generally quite rudimentary (esp. Outlook and Gmail) so reinventing this wheel is not hard. And in this case, it’s very helpful for a deal’s pending tasks to be immediately visible when you pull up a deal–and to potentially have pending tasks listed as part of your weekly pipeline discussion. Plus, our system helps facilitate the communication of those tasks by sending notifications when tasks are assigned to other people, and notifying the task creator when the task is marked completed.

By comparison with sophisticated project planning systems like Microsoft Project our system is very basic, but I don’t think I’ve ever seen an investment firm use anything like that–you see Gantt charts in software engineering all the time, but rarely in private equity. So because Tasks are tightly coupled to deal management and our simple task manager meets all the needs of our clientele, we decided it would be a logical and powerful addition to the Sevanta Dealflow platform.

Contacts

Contact management sits kind of in the middle. I have yet to see a real-world fool-proof contact management solution. To begin with, people aren’t even very good at adding contacts to their own personal contact manager, let alone a shared system for the group. Most of your regular email contacts stay marooned in your email (I, for one, search my email for contact information more often than searching my contacts). At best you periodically have your admin staff scan the business cards you get and otherwise manually maintain your contacts, but it’s never perfect, even with well-written software dedicated to the purpose.

In this case, however, Sevanta Dealflow needed to provide a home for data about deal contacts (especially for special cases where the same people have connections with lots of different deals) but realistically I don’t expect our clients to use it religiously. I don’t believe there’s a magic solution here, and I’d be very skeptical if anybody pitches their system as such. We have some clever ideas for capturing contact info better, but we don’t fool ourselves into thinking it’s a panacea.

If you have any thoughts or feedback on any of this, I’d love to continue the discussion with you.

Of course this is an intentional problem to maximize customer stickiness, and assuming the system continues to work for your firm, you don’t really care too much. But in the long run, there will be a problem. Maybe they go bankrupt. Maybe they get bought by another company, which discontinues the service (see DabbleDB, who gave just 60 days’ notice of closure). Maybe they stop investing in developing the platform. For better or for worse, few complex services exist in the same form they did 10 years ago. So what are you going to do 10 years from now?

All of this has always been a concern for hosted enterprise services, but this newer generation of apps is even more problematic because of the data schema complexity. Migrating email platforms is enough of a pain in the neck, but at least there are standards, so porting the data is straightforward, if time-consuming. But these new services are quite heterogeneous in terms of the kinds of data stored; an open standard might cover, for example, contact records, but what about how contacts relate to all the other data in the schema?

Assuming the service provides you with good export tools, which is by no means guaranteed, most alternative services don’t provide import tools, at least not ones that can absorb entire complex schemas. And surely some data would get lost in translation due to functional differences between platforms. There’s no simple/cheap solution to all of this.

This is a valid concern with any cloud or SaaS provider, including, admittedly, Sevanta Dealflow. The main difference is that we’re really a boutique consultancy, not a large-scale software shop, so we offer a lot more stability and a lot more assistance in the event that you need it. Sure, it costs a little bit more than some freemium system, but after all, you do get what you pay for. Our assumption is that there is a middle ground: freemium is too cheap for business, but it is possible to get good service well short of a multi-million dollar IBM contract.

Sevanta addresses this concern in a couple of technical ways also: each of our clients runs on their own copy of the server (ie- it’s not “multi-tenant”). This somewhat limits our ability to easily scale to serve thousands of clients, but it insulates our clients from instability: your system only changes when you want it to change–not due to architecture changes compelled by our internal development agenda; not due to changes required by some other client. If you want to receive updates, you can; if you don’t, then your code base will never change. You’re in control.

We’ve also intentionally kept our data schema very simple. Thus, we don’t embrace shiny new features as frequently as some other providers might, but the dataset you can export is relatively simple in case you want to recycle it elsewhere. I’d like to think we offer the best of both worlds.

What do you think?

Contact: Daniel Lopez
Tel.: 888-727-9644
dealflow [at] sevanta [dot] com
mydealflow.com

MIAMI, FL, March 18, 2011 – Miami-based Sevanta Systems Corp., which provides customized solutions for venture capital and private equity deal management, announced the release of the newest version of their flagship product.

Sevanta Dealflow 4.0 makes it even easier for investment professionals to pull information from disparate sources into a shared workspace where they can organize and collaborate on deal evaluation and portfolio management with their colleagues.

“Our users can now send emails directly into Sevanta Dealflow, as though it were simply another member of the team,” stated Daniel Lopez, Sevanta’s founder and president. The new email bridge automatically matches incoming emails to the correct deals and is capable of appending, extracting, and archiving new comments and file attachments. It was architected to work with any email platform, in recognition of the growing use of web-based email, Apple Mac computers, and smart mobile devices like the iPhone, in addition to Microsoft Outlook.

The new version also features improved task management, cashflow tracking, and a venue for investment committees to rate prospective deals. This latter feature allows deal sponsors to receive early feedback for their deals, helping them prioritize and navigate the challenges to getting their deals approved.

Sevanta Dealflow’s file repository can now synchronize with Dropbox.com, a powerful file management platform that has become increasingly popular in the investment community. “Dropbox users can continue to enjoy the benefits of the tools they already know and love while using Sevanta Dealflow to provide the structure for collaborative deal management and analytics,” Lopez added.

Sevanta Dealflow has been working with venture capital and private equity firms around the world since 2005, providing powerful tools and expert advice to improve firms’ operating efficiency and investment decision-making.

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For more information about Sevanta Dealflow, please contact Daniel Lopez at 888-727-9644 or dealflow [at] sevanta [dot] com.

A ton of the inner workings of our system have been updated to make it easier to customize the platform for each of our clients, but most of that is completely transparent to our clients, except for the ability to execute on customization requests more quickly (and at lower cost) than ever before.

But there are also a number of truly valuable features that are a result of great feedback from our clients:

1. Email integration: You can now email notes and files directly into Sevanta Dealflow as though it were simply another member of your team. Some CRM systems use Outlook plugins to accomplish this, but it was important to us to offer a robust email bridge that would work regardless of your email client, whether it’s Outlook, Mac Mail, webmail services like Gmail, or mobile platforms like the iPhone and Blackberry. Our system automatically figures out what deal your email pertains to, processes the contents of the email (such as appending new comments and extracting attachments), and then archives the whole email for future reference. Like everything else in our system, it can be highly customized to suit your particular requirements.
2. Dropbox integration: Our hosted file repository can now synchronize with Dropbox, opening up major new capabilities:
   1. Recover deleted files and earlier revisions (we didn’t have to reinvent the wheel–Dropbox does a great job with this)
   2. Access files on your local PC or LAN so that you can edit documents directly and have your changes automatically reflected in the cloud (through a standard web interface, you’d otherwise have to download the file, save changes locally, and then re-upload–cut out the extra steps!). Your changes are updated in the cloud shockingly quickly.
   3. Keep files on your laptop for offline access, such as on flights. Since archived emails are also stored in the file repository, you’ll have offline access to those too!
3. Task management: Easily create tasks for yourself or assign tasks to colleagues. Deal team members can automatically be notified when tasks are created and completed.
4. Cashflow tracking: There’s often an artificial divide between front-office and back-office functions in investment firms, even though front-office professionals create the core investment information that feeds into back-office systems, and even though front-office staff need frequent access to authoritative investment figures. While we are not attempting to replace your formal accounting systems, we know from our own experience that some simple tools built into the dealflow platform would not only address the needs of front-office staff for this information, but would also enable Sevanta Dealflow to generate key top-line reports that are useful in communications with limited partners. If you keep your cashflow data up-to-date, such investment summary reports can be generated at a moment’s notice without having to call on your accountant or CFO.
5. IC Ratings: Every prospective deal under consideration can be rated by the members of your investment committee (IC). A special pipeline report then sorts the deals in order of their average rating. We love this feature because it allows deal sponsors to get early feedback from IC members, and it provides an easy way to promote the deals that have more support and pass on the deals that are going to be uphill battles. (Of course, if this workflow isn’t applicable to your group, it can be easily disabled.)

Even more goodies are hidden under the hood. If it’s been a while since you’ve gotten a demo, drop us a line to get a quick walk-through. We’re sure you’ll be impressed!

My clients and prospective clients perceive CRM systems as heavy and burdensome. Worst of all, they believe CRM systems want you to put a lot of useful information into them and give relatively little value back to you in return. Large, hierarchical organizations can try to push such systems onto employees so that managers can perform “quality control” and monitor employee performance, but VC firms don’t work that way. Nobody can make a VC partner do something they don’t want to do, so any system a VC uses needs to prove its worth every single day.

By targeting only venture capital firms, we’ve certainly limited our addressable market, but we can serve that market with a highly-tailored, lightweight system that’s quick and easy to use, that’s structured in the way that VCs already think, and that genuinely helps VCs do their jobs better and faster.

Part of what a CRM system does–and that Sevanta Dealflow does, too–is create institutional memory that can be referred to by the whole team or data-mined to provide strategic intelligence. But daily workflow tools need to be helpful during each interaction that a user has with it. This has been a fundamental goal in the design and development of Sevanta Dealflow. Is that true for CRM in general? Hmm.

Perhaps most fatally, CRM systems are also associated with painful, lengthy, and expensive implementations. In our case, while we recognize the uniqueness of every client, we already know the fundamentals of how they operate. Sevanta Dealflow provides a great starting point, and we don’t need to be educated in order to understand how you work. As a result, our implementations are easy, fast, and economical.

So don’t be afraid–Sevanta Dealflow is not a CRM system.

Of particular relevance to Sevanta Dealflow is my article on Demystifying Venture Capital. In it I talk about the rare use of hard metrics by VCs for internal operational planning and assessment. I give as an example a quarterly effort my old firm, IDG Ventures, engaged in to calculate our “dealflow market share”–an incredibly useful exercise and something that to this day I still haven’t heard of any other firms doing (correct me here if you do!). And I talked about how mastery of metrics like those can be helpful for maintaining the confidence of limited partners in the years before they know how your investment choices will impact ROI.

I’ve branched out into a lot of different areas since 2002, but it’s neat to re-read some of the thoughts I had way back then that I’m still bringing to life through Sevanta Dealflow. I’ll explore these issues in more detail in the next few posts.

But in this inaugural post I’d like to take the opportunity to thank my mentor in my first venture job. Pat Kenealy left PC WORLD as CEO to found IDG Ventures in 1996, and it wasn’t long afterward that he hired me straight out of Harvard College.

Pat is a grandmaster of operational metrics. He was great at grilling entrepreneurs to make sure they knew their business metrics inside and out, and I’m sure he was able to make some of his greatest picks based on finding startup managers with a similar viselike grip on their numbers.

I also respected how he ran IDG Ventures the same way. We knew more about our own dealflow and operations than any other firm I knew at the time or have seen since. We did this partly to help manage our relationship with our limited partners, but I think it was a deeply ingrained part of his personality and how he learned to run businesses in the publishing sector.

I’m grateful to have had that example early in my career, and I appreciate that his general approach to using metrics to understand where you are and where you’re going has had a great impact on all my work since then. Thanks, Pat!

Published in New Media Age
By Daniel Lopez

When I first moved to London from the US back in 2000, I was inundated – in conferences and articles and corporate presentations – by apologies for the poor Internet penetration in Europe. These apologies were always immediately followed by exclamations of the incredible mobile phone penetration in Europe. I wasn’t impressed.

Europe and the US will achieve saturation of both mobile and Internet technologies in just a few years, so the short-term statistics aren’t that interesting to me. The reason I was disappointed was the seemingly shallow understanding of the directions the two technology platforms would take.

An incontrovertible reality of the mobile space is that a small number of mobile network operators act as gatekeepers for content and applications aimed at mobile users. This is unlikely to change very much with the arrival of 3G. The limited interface of mobile devices will probably always create a bias for user interfaces with multiple choices and walled gardens. Additionally, natural barriers make it nearly impossible for alternative carriers to arise, and the few operators that do exist will always have an incentive to maintain tight control over the user experience.

The result is that the mobile sector is a stifling place for content and application developers. Compared to the Internet, where in a single afternoon I myself could create a fairly complex application that is accessible the world over, it takes a lot of coordination between many different parties in order to deliver a very simple mobile application that is accessible through only a single operator. This costs money and time, and thus the mobile sector cannot possibly be as vibrant, diverse, or fast moving as the Internet.

To make matters worse, the ongoing economics are for the most part worse in the mobile world. If my little Internet site were to charge money for its services, it would have to pay a few percent to a credit card company for processing. It’s not unusual for a mobile service to “share” 50% of its revenues with a mobile operator that provides little more “value add” than pipes to end users. Mobile services will swallow this because they have no choice, but these economics will cause debilitating damage to the industry as whole if they continue for long.

The characteristics of mobile applications that distinguish them from Internet applications – such as knowledge of the user’s exact location and links with operators’ billing systems – require tight integration with complex systems that were not designed with the Internet’s famous flexibility, scalability, and open standards. These integrations are likely to become easier as newer systems are put in place, but for the time being, technology seems to be a limiter rather than an enabler. If your experience deploying mobile applications has been notably better from what I’ve been outlining above, I’d love to hear your story.

Despite appearances, I am not, however, announcing the demise of the mobile applications space. On the contrary, it has great potential, but comparing it to the Internet belittles the great accomplishments that allowed the web to grow explosively in the 10 very short years since its birth. Lest we forget, let’s take a quiet moment to reflect on what unique and fertile ground the Internet offers content and application providers.

Shazam, one of my firm’s portfolio companies, is accessed through the same 4-digit code across all 4 UK operators: 2580. Somehow, this achievement—which should be comparable to registering a domain on the Internet—is considered a tremendous feat because of how difficult this is to do. This simple fact speaks volumes about the difference between the mobile and Internet spaces.

[This copy was edited for length for print publication.]

VC’s are constantly asked what they look for in companies, and the answer typically boils down to strong management and a big market opportunity. Ultimately, these are just different ways of saying focus and vision.

Entrepreneurs need several different kinds of focus to navigate a company on a day-to-day basis. Developing only those products that customers will find immediately valuable, carefully watching every penny of expenses, and dexterous delegation are diverse variations on the theme. The first involves consistently making the company be customer-facing. The second involves personal diligence on cashflow issues. And the last involves knowing what to do yourself and what to give to others.

There is a cacophony of noises distracting managers from the important issues. The major pitfalls are fairly well known, but often repeated. Most famous among them in our sector is the pursuit of cool technology for its own sake—instead of trying to provide solutions that people will pay for. During the dotcom boom in particular, many companies who had no business in the Internet pursued ambitious Internet strategies. Open-mindedness and well thought-out experimentation are good; lack of focus is bad.

Attention to detail is critical if a CEO is going to be able to make payroll every month, and personal determination will get them through hard times. In today’s difficult environment, VC’s have a heightened appreciation for an entrepreneur’s focus on the short-term survival of the company. Investors have to know that the company is in a safe pair of hands that can be trusted in the stretches of time between board meetings. This trust frees managers to manage—and investors to provide strategic guidance with only occasional tactical support.

A person with focus can run a very successful coffee shop, but that clearly isn’t enough to attract the attention of investors. Add some vision—perhaps enough to imagine the growth of the coffee shop into a ubiquitous global chain of high-end coffee shops—and suddenly the venture capitalists come running.

VC’s need to believe that a start-up is pursuing a BIG opportunity. A venture fund may have a given target return—say, for example, 40%—but that doesn’t mean it will invest in companies with an expected growth rate of 40%. Since most companies in their portfolio are bound to be complete failures, the successful bets have to bring the average up to 40%–so they have to aim for 300-400% across the board. Some firms aim even higher.

Visions of grandeur provide the rocket fuel for entrepreneurs: it’s what gets them up in the morning and keeps them working late into the night. Vision is also what lets entrepreneurs blaze new trails by identifying an opportunity before it gets big. Vision enables a CEO to change the course of a successful company while it’s still successful. And vision is what gives good entrepreneurs the contagious enthusiasm that motivates their teams and converts their customers. Vision is ego, energy, courage, and leadership all wrapped together.

Entrepreneurs with vision but no focus are great evangelists but usually very bad CEO’s. Those with focus but no vision are solid managers—and can make fair CEO’s—but are probably going to have limited lifespans leading companies in dynamic markets.

When you talk of the truly great CEO’s who have been able to grow extremely successful companies over a long period of time—the Jack Welch’s and Bill Gates’s of the world—they inevitably have both vision and focus in abundance. But this is a very exclusive group, and while all CEO’s should try to have a bit of both, the reality is that few people are suited to lead a company in all of its stages of growth. Even Welch and Gates couldn’t lead forever.

Venture capital decision-making has always had an air of black magic about it.

When a firm chooses one company to invest in out of over 100 companies seen, the decision is going to be by its very nature a little arbitrary. Once the 100 prospects are narrowed to the ten truly credible opportunities, mental acrobatics can defend any one of the remaining candidates.

After being ruthlessly efficient in moving beyond the weaker 90, however, a venture capitalist builds a great deal of momentum and skill for finding weaknesses in a company’s business model or prospects, and it is in fact very easy to become pessimistic about the remaining opportunities. There are always good reasons to believe a business will fail, but our jobs require that we see realistic paths to success. Making intrepid short-term decisions while thriving over the long term requires an interesting balance between science and religion… between reason and faith.

The religious aspect of venture capital is the major source of the industry’s mystique; faith in their instincts imparts risk-seeking personalities with the strength to become the champions of unproven industries. First, a VC has to be the champion of the company within his or her own firm as the deal works its way through the investment committee approval process. After the investment, a committed VC has to turn his advocacy towards other VC firms, the press, and the world at large. Without faith, investors are lemmings—or worse—paralysed into inactivity.

During the good times, faith and courage may have been enough to be successful, but a dose of scientific rigor can vaccinate against the down cycles a long-term investor will inevitably experience.

what hard metrics do venture firms have about their own performance and their own industry?

Venture capitalists are known for pestering the companies they evaluate for reams of data, from market share analyses to growth forecasts to detailed budgets. But what hard metrics do venture firms have about their own performance and their own industry? A number of research firms make a business of collecting ROI data for the venture industry, but that kind of data is so long term that it is of minimal use for operational planning and assessment.

Like any other industry, venture capital firms compete in a market. One market is for money seeking investment opportunities, and venture firms are competing against many alternatives, including public stocks, property, bonds, and of course, other venture firms. Ultimately, the investors into venture funds are atheists and are only interested in the real ROI figures.

The other market venture firms compete in is the set of the hottest startups that will provide superior returns for their investors. Very few venture firms, however, have any real idea of how they’re performing in this “dealflow market” relative to their peers.

On a quarterly basis, my firm compares the list of companies we considered investing in to the full list of all deals funded in our sector space and geography during the previous quarter, using venture databases such as VentureOne and Venturexpert. As a result, we can tell what percentage of fundings we knew about beforehand, and thus what fraction we had the opportunity to participate in. We call this ratio our “market share.”

While a high market share is not automatically a positive indicator, it does give a sense of the extent and quality of connections with other firms and with the entrepreneurial community. It also provides reassurance that you have a finger on the pulse of the sector and know about what’s hot before it appears in the venture newswires a few months later.

This kind of information is useful not only for self-assessment over time but also for demonstrating to a VC fund’s investors that, despite a market slowdown, you’re still ahead of the curve and learning lessons that will prove useful on the road ahead.

During these times when many venture funds are closing down or contracting, increased confidence from VC fund investors can make the difference between the VC going home and staying in the game until the tide turns around. And when it does, we can dust off our faith and start again with the well-grounded confidence of knowing the playing field inside and out.

[This copy was edited for length for print publication.]