VC in the OC is the largest venture capital, high growth, and innovation conference in Southern California.  The event is expecting over 700 attendees, comprising 100′s of companies and dozens of investors.  The session CGP is contributing to will examine when private equity ...Read More]]> We will be attending and contributing to OCTANe’s VC in the OC event on May 22, 2013 in Irvine, CA (http://www.vcintheoc2013.com/main.html).  Come by and say hello and Chicago Growth Partners will be participating on a panel at 2pm PT.

VC in the OC is the largest venture capital, high growth, and innovation conference in Southern California.  The event is expecting over 700 attendees, comprising 100′s of companies and dozens of investors.  The session CGP is contributing to will examine when private equity investors might consider early stage investments and what early stage companies need to know when considering private equity investments.  CGP will be joined by individuals from both The Riverside Company and General Atlantic.

• What kind of of a mobile application should we develop?
• On which platform should develop?
• Should we develop the application internally, or outsource?

If you do not have any experience building mobile applications, ...Read More]]> Like everyone else, we have seen phenomenal interest in mobile applications within our portfolio over the past several years.    Mobile applications have evolved from niche efforts into full-scale members of the technology ecosystem even for mid-sized technology and service companies.   Yet  our companies still struggle with three major questions:

• What kind of of a mobile application should we develop?
• On which platform should develop?
• Should we develop the application internally, or outsource?

If you do not have any experience building mobile applications, we always advise our companies to start small and to focus on an internal application — something that your own staff can use.  Pundits often say that you only have one chance to “delight” your customers, so it is very risky to deploy your first mobile application to customers.   We have portfolio companies that have done so very successfully, such as SchoolMessenger, with their iPhone app – but it is always better to start small with mobile.  In fact, the simplest approach for many companies is to create a mobile-optimized version of their web site using Cascading Style Sheets.  It’s a good way to start getting familiar with mobile.  Apple’s iPhone and iPad product lines have been the impetus for many of our companies to “go mobile”, but Apple is not the only game in town.

Should you develop for iOS, Android or both?  If you have been reading our other posts, you’ll know the answer:  it depends.

Your web server logs will tell you which platforms your users are running when they hit your web site (iOS, Android, etc.)  So this is often a good starting point.   However, there are lots of variations in the Android platform, due in part to the number of different Android versions in play and due to the fact that the hardware vendors make their own tweaks to Android to the benefit of their own devices.   To wit, the Amazon Kindle is an Android device, but you cannot simply run any Android application that you wish on the Kindle.  Given the confusion in the market, our companies have tended to follow a strategy of developing for iOS (iPhone/iPad) first and then porting the application to a select set of Android devices.

Because Apple owns the software and the hardware, iOS provides a consistent experience across a range of devices.  Apple also provides a strong set of user experience guidelines that you can follow when building your mobile application — guidelines which are also loosely applicable to the Android platform as well.  If this sounds too complicated then you have several other choices.  You can use a third-party application generation platform such as Red Foundry to build your iOS/Android application, or you can choose to develop entirely in HTML5, the newest version of the venerable browser language.

HTML5 will likely get you onto the mobile platform faster and cheaper, but it can be more difficult to implement features such as auto-location, camera-control or local storage with HTML5.  Last, but certainly not least, we would suggest that you get some help when developing your first mobile application — particularly if you are going the “native” route.   If you have a complete product specification, then you can comfortably submit your project out to bid.  However, if you are taking a very agile approach and want to tackle your project in smaller increments, then we’d suggest partnering with outsourced vendors such as Big Nerd Ranch, or Sourcebits where we have had good success.

Fast-forward to 2012 and many of our companies are taking a hard look at using a NoSQL database for new applications. ...Read More]]> Most of our portfolio companies develop applications both for internal use and as customer-facing platforms.  There is always a lively debate within the development teams over the appropriate language and tech platform.   Yet there was almost always agreement that the database would be a relational database, either Microsoft SQL Server or mySQL, both good choices for mid-market companies.

Fast-forward to 2012 and many of our companies are taking a hard look at using a NoSQL database for new applications.   It can be a difficult decision as NoSQL databases come in a variety of flavors, each of which offers its own set of advantages and disadvantages.   Some NoSQL databases are designed as document style databases (MongoDB), which work well for large-scale applications where much of the data is not shared.  Other NoSQL databases are implemented as key/value stores such as Tokyo Cabinet.   There are even hybrids built from several different schemes, such as Cassandra (spun-out of Facebook) which has been described as BigTable crossed with Amazon Dynamo.

In any event, companies have a lot to choose from when they elect to go with a non-relational database.   The biggest advantage of building a solution using a NoSQL database is that these databases tend to map directly to object-oriented programming languages without the need for a complicated translation layer.   Thus, programmers find it much easier to build applications with NoSQL engines.  The main disadvantage is that each NoSQL database has very unique operating capabilities which are very different when compared to traditional relational databases.  In many cases they don’t support transaction management, or record locking and there are very few end-user report writing tools that work directly with these engines.

Our mission when working with our portfolio company CTOs and development teams is to find the best choice for the job at hand.  We strongly believe that there are many technical solutions to every technology challenge and we enjoy the debate.  When we view the equation through our lens — return-on-investment and the right tool for the right job — some of those solutions become more clear and we help our teams implement the right platforms quickly and cost-effectively.

Over the past several years we’ve made significant inroads moving most of our portfolio companies to use agile principles in software development.  Agile is an alternative way of developing software, but it can be used for decidedly non-technical projects as well.  Agile is a way to develop in a collaborative, iterative and incremental way versus traditional software projects that tend to follow a serial or waterfall process. ...Read More]]> Agile development principles aren’t just for startups.  Learn it, live it, love it.

Over the past several years we’ve made significant inroads moving most of our portfolio companies to use agile principles in software development.  Agile is an alternative way of developing software, but it can be used for decidedly non-technical projects as well.  Agile is a way to develop in a collaborative, iterative and incremental way versus traditional software projects that tend to follow a serial or waterfall process.   In traditional development environments, project managers interview users and develop lots of written specifications.  Programmers take those specifications and build software, ostensibly to meet the needs of the users.  Invariably, the finished product fails to meet those needs.

And why is this true?  It’s a lot like the telephone game you played in kindergarten. You know the game where one person whispers a secret into another person’s ear and that person repeats it to the next person and so on around the circle.  By the time the last person repeats the secret aloud, it never matches the original message.   It’s the same thing with these antiquated development practices.   The specification writers rarely understand just exactly what the users really need and the users often have trouble expressing their exact requirements.  The programmers begin diligently designing databases, building screens and writing business logic code based on imperfect specifications.  Meanwhile, time passes and the user’s needs change and the business change.  By the time that the development team has something ready for the users, we’ve got a real mess on our hands.  The software does not match the business needs and the development team has poured months of effort into a code-base that is difficult to change.  Sound familiar?

This is not a problem that is unique to software development companies.   Any company that writes any kind of code (even for internal use) or is in the process of trying to implement an Enterprise Resource Planning application, or an Electronic Health Records platform can suffer from the “waterfall” problem.  The solution is agile.   In simple terms, agile breaks projects down into very small increments.   Success is measured by demonstrating working software, not written documentation.  Agile principles encourage business people and software developers to work together on a daily basis throughout the life of the project, iterating their way to a solution.

As we have implemented agile methods across our portfolio, we have seen great successes in building products that address the customers’ needs, that make it to market quickly and with less re-work required.  It has allowed us to build a innovation engine so we can keep ahead of the competition and to introduce more products (and more revenue) more predictably.

If you think you can benefit from making the switch but are not sure where to start, it’s good to get some outside help first.   Try out Collab.Net’s certification course as a simple and painless way to get started using agile.

While almost every CGP portfolio company runs something in the cloud, we are constantly answering questions and strategizing about how we can smartly choose between cloud-based applications and more traditional licensed software.

If you remove all of the rhetoric that surrounds cloud computing, you can boil “the cloud” down to a very simple definition that isn’t really all that new.  The cloud ...Read More]]> As a small growth company, you have to ask “Is the cloud right for us?”  Our answer: “It depends.”

While almost every CGP portfolio company runs something in the cloud, we are constantly answering questions and strategizing about how we can smartly choose between cloud-based applications and more traditional licensed software.

If you remove all of the rhetoric that surrounds cloud computing, you can boil “the cloud” down to a very simple definition that isn’t really all that new.  The cloud is nothing more (or less) than software applications running on a shared set of computing platforms across the Internet.  So, we’re back to time-share computing!  Most companies of any size have their computers and storage running in an offsite data center.  That’s an offsite data center, not the cloud.   In a cloud environment you don’t own the servers, you rent them and there are often other clients running on the same servers as you.

Salesforce.com and Basecamp are two good examples of cloud-based applications, commonly called Software-as-a-Service (SaaS).  If you want to use either Salesforce.com or Basecamp (and we use both extensively throughout the portfolio), then you must run them remotely on their servers.  You cannot install them on your premises or in your data center because neither Salesforce.com nor Basecamp make their software available for you as installable applications.  They only “run” in your web browser or on your mobile device.  This makes getting started relatively easy because you just create an account and jump in; no messy installs, no hardware to buy.   SaaS vendors handle all of the maintenance tasks for you, such as backups, upgrades and performance tuning.   You pay a monthly fee (typically on a per-user basis) and they generally require a minimum contract term.  Over the short term, SaaS solutions are typically less expensive compared to buying and installing applications in your own data center.   Over the longer term they may be more expensive because you are paying monthly fees for as long as you use the software.   In many cases you won’t have a choice because many SaaS companies only “rent” their products.

In other cases, you do have a choice.  For example, Microsoft offers a Salesforce.com competitor called Microsoft Dynamics CRM.   You have the choice of installing Dynamics CRM on your own servers in your own data center, or you can run it as a SaaS application running on Microsoft’s servers.   Why choose a SaaS-based version of an application over a licensed version?  Cost, skills and speed.

Let’s start with costs.  Most vendors with which we work prefer we do not disclose pricing so let’s use a fictional software product called BigCo CRM as our example case and let’s assume our portfolio company requires 10 users.  BigCo provides a SaaS-based version of their application at a price of $100 per-user per-month or $1,200 per year.   The installed version of the software costs $3,000 per user and requires an annual maintenance contract at 18.0%.  Total cost for 10 users for the first year on the SaaS version of BigCo CRM is $12,000 and the installed edition would cost $35,400 ($30,000 in license costs plus $5,400 in first-year maintenance).  However, with the installed edition you would also have to buy your own server and maybe even a database (such as Oracle or Microsoft SQL Server) to run with the BigCo CRM software.  Add $5,000 for the server and $2,500 for the database, bringing the grand total to $42,900 for the installed version of BigCo.

You can see that the installed version of BigCO is far more expensive — to the tune of $30,900 more.   In year two, the SaaS edition would cost you another $12,000 while the installed edition would cost you $5,400 in maintenance — a difference of $6,600 in favor of the installed edition of BigCo.   However, at this rate it will take you almost five years to make up the difference in price between the SaaS version of BigCo and the installed version.  That makes it an easy decision, correct?  In our simple, fictional case yes.  In reality, you need to look carefully at the annualized cost of the SaaS version versus the licensed cost of the installed version.   The closer the price, the shorter the payback of the licensed edition and the more likely it will be that skills and timing play a more pivotal role in your decision.

Let’s now look at skills.  If you already have the technical skills in-house to manage the software then you might be better off buying the licensed edition of BigCo CRM.  Also ask yourself how much of the internal IT resources this application will require to set-up and maintain and is the need worth the resource cost?  If the answer to any of these questions is “no” then the SaaS edition is likely to be the better choice.

When it comes to speed, the time-to-production in most SaaS versions is much faster than the installed versions because you can simply create an account and get started.  Licensed software applications will usually take longer to get running and they may take much longer if you are relying on outside resources to install and configure the product.  This doesn’t mean that SaaS applications are not just as complex as installed applications.  For example, Salesforce.com can become very cumbersome as there are countless add-ons and options that need to be managed tightly from the outset.

We definitely recommend getting your feet wet with SaaS applications at your company.  The inevitable future of computing will be a mix of cloud-based and on-premise solutions.  Many of our portfolio companies have started with Basecamp (for project management) and Salesforce.com (CRM) as their first foray into the cloud with great success.

We execute an industry-driven investment approach focused on growth companies in four dynamic sectors where we have extensive investment experience – Education, Healthcare, Tech-Enabled Service and Industrial Growth. We have a long track record of partnering with management teams to build leading companies for which strategic and financial acquirers will often pay attractive multiples upon exit.

Across these sectors, we look for common characteristics to find companies that best suit ...Read More]]> Our investment process starts with two basic criteria — industry and growth.

We execute an industry-driven investment approach focused on growth companies in four dynamic sectors where we have extensive investment experience – Education, Healthcare, Tech-Enabled Service and Industrial Growth. We have a long track record of partnering with management teams to build leading companies for which strategic and financial acquirers will often pay attractive multiples upon exit.

Across these sectors, we look for common characteristics to find companies that best suit our style.

• Differentiated product or service.
• Stable, highly visible, or recurring revenue.
• Low or no customer concentration.
• Dynamic market where above average growth can be sustained during and after our ownership period.
• Valuation where we believe we can deliver attractive returns based on conservative assumptions.
• Management team that is excited to partner with us and who values our operational approach to building great growth companies.

While we don’t yet have the answers to these questions, we do hope that over time the audience who finds these posts will appreciate our attempt. With this blog – let’s call it a conversation – we hope to broaden our influences beyond our own walls and to share with you a little bit about how we approach the business of investing and helping companies grow.

At Chicago Growth Partners, ...Read More]]> Why should a private equity fund blog? And why should you care?

While we don’t yet have the answers to these questions, we do hope that over time the audience who finds these posts will appreciate our attempt. With this blog – let’s call it a conversation – we hope to broaden our influences beyond our own walls and to share with you a little bit about how we approach the business of investing and helping companies grow.

At Chicago Growth Partners, we have built our reputation by partnering with entrepreneurs and by being steady hands in managing our limited partners’ capital. Maintaining these relationships requires transparency, trust and a healthy dose of humility. And while we don’t always get it right, we certainly try to learn from our mistakes.

So far, this feedback loop has aided us over the two decades our team has been investing in growth companies. This blog is our small attempt to use our new web site as a platform to expand that feedback loop and make us better at what we do in the process.  Wish us luck and please pass this along to those who might benefit from being part of the conversation.