Venture Capital Investment Criteria: Is Location a Factor?
OpenView is located in Boston, and I’ve often noticed an assumption that we therefore prefer to invest in companies based locally. While the Boston area is undoubtedly a breeding ground for awesome enterprise tech companies, the majority of our portfolio companies are located elsewhere in places as diverse as Boise, Irvine, Munich, and Salt Lake City.
In this post, I hope to communicate what location-related factors matter to OpenView’s investment team while evaluating a potential investment and why being located down the street from us (though that would be great come BOD season!) simply isn’t one of them.
Addressing the Elephant in the Room: Is Location Really Part of a Venture Capitalist’s Investment Criteria?
As I alluded to above, there seems to be a misconception that VC firms only like to invest in companies based in Boston, New York, Silicon Valley, and maybe a few other select markets depending on the firm’s location.
Founders often ask me if we are open to investing in their region (whatever it may be) before they agree to have a conversation, and every time I can’t help but be surprised. I can’t speak for other firms, but I do know that if a company is compelling to us based on their history of acquiring and retaining customers and on the market to which they sell, OpenView does not care at all where they are based.
In a given day, I might speak with a CEO in any part of the US, Canada, Europe, Australia, etc. If the management team speaks English and the company is a good fit for OpenView, location is simply not a factor.
Location as Strategy
We don’t care where your company is located, but we do care where your customers are located. It is important to us that the companies in which we invest either have customers or plan to have customers in North America. The experts at OpenView Labs and our senior leadership have gained the majority of their expertise working with companies that play in the North American market, and we feel that we would not be prepared to be as helpful as a partner for companies that do not have a strategy to acquire customers here.
Additionally, if the solution offered does not apply to potential clients in North America due to regulatory factors or otherwise, the market opportunity might not be big enough for us to consider the investment opportunity attractive.
Attracting and Retaining Great Talent
If a company is located in a very remote location far from other tech companies and/or universities, it might be challenge for them to attract top-tier technical, sales, and management-level talent. Conversely, if a company is located in a tech bubble, they may have trouble retaining talent due to fierce competition and salary wars. Both of these scenarios have been overcome by plenty of companies, and they are not deal-breakers but rather question areas that we will address when speaking with companies in these types of locales.
Overall, Location Doesn’t Matter
Between email, the phone, and hoping on a plane, there are plenty of resources available that make us indifferent to a company’s location. Overall, our goal is to help build great companies, and we are open to working with any best fit partner wherever they may be.