5 Things CIOs and VCs Can Learn From Each Other

venture capital

CIOs and venture capitalists, two groups with seemingly different agendas, can often educate each other on how to evaluate tech trends and successfully construct deals.

CIOs and venture capitalists (VCs) sit at different ends of the technology implementation spectrum: VCs are the initial investors and vendor catalysts. CIOs are the buyers when a technology or concept becomes productized. The two groups often come together, however, to discuss possible deals, explore technology trends and seek each other’s expertise.

cio perspectives

From left to right: Vala Afshar, CMO of Extreme Networks; Brook Colangelo, executive vice president and CTO of Houghton Mifflin Harcourt; Michael Skok, partner at North Bridge Venture Partners; Michael Krigsman, CEO of Asuret; and Maryfran Johnson, editor in chief of CIO magazine and events.

One of those exchanges took place at the CIO Perspectives Boston event last week when Michael Skok, a partner at North Bridge Venture Partners, and Brook Colangelo, executive vice president and CTO at Houghton Mifflin Harcourt, connected for CXO Talk, a panel discussion and live Google Hangout, to discuss VC investment trends. The session gave CIOs a fresh perspective on what they should keep in mind when evaluating technology trends, putting together deals, and working with employees and customers. Based on that discussion, here are five things CIOs and VCs can learn from each other.

 1.Think about cloud like a futurist

The cloud is still one of the most important enterprise technologies, but it’s also one of the most hyped, especially given the buzz surrounding the SMAC (social, mobile, analytics and cloud) stack. Skok of North Bridge Venture Partners said the cloud is entering its “second front” and is no longer just a way to host HR or CRM systems. “It’s the one [technology] that enables all the others,” he said. “They’re only all possible because of one particular huge disruption that’s going on that’s a tidal wave. And that’s cloud.”

Skok said the cloud is what enables most modern mobile applications and cites Uber as a prime example. “The services that are available today are location services, payment services and communication services, and what’s born out of that is apps like Uber. [Uber] would be impossible without cloud,” he said. He added that cloud disruption is far from over and has yet to reach its full potential in the enterprise so CIOs should still pay close attention.

2. Enterprises need to deliver easy-to-use technology for employees and customers

Deploying new enterprise technology used to require many hours of implementation and training. But now with the emergence of consumer devices, employees have come to expect that technology at work will be new, easy-to-learn and easy-to-use.

“The CIO/CTO [role] is to change and deliver new technology and new functionality to your customer at least every three months,” said Colangelo of Houghton Mifflin Harcourt. “You can’t do that if you have an 18-month selection, a bid process, all of that.”

Colangelo said he doesn’t always take cues on technology from experts. In one instance, he began exploring storage technologies because his customers were already using them on their own, for free. “If you have to do something [that requires] a day’s training, you’ve already lost,” he said. “Beta testing is happening already in less-controlled environments. If you sit there and be the ‘no’ guy, eventually the powers that be will overthrow you.”

Colangelo urged vendors to roll out new versions of their products as technology evolves and new methods emerge; otherwise they will be left in the dust by users and competitors. “Deliver it quickly (every three months) and iterate and change,” he said. “This is a demand based-economy and that goes for vendors, too.”

 3. CIOs need to put the customer before the technology

Skok said he meets often with CIOs who are trying to figure out the next greatest technology to adopt. While he can advise them on many technologies, he said CIOs should take a step back and consider something else first. “The great companies understand the customer mindset,” he said. “I try to invest in companies with people who particularly understand the business problem of the CIO. The companies that can really understand the customer’s point of view are going to be the best to deal with.”

Colangelo said the new economy is fast, agile and based on demand. He said he looks to work with companies that live by these rules and helps them build iterative organizations. “I’m not signing a five-year deal again,” he said.

From the VC perspective, Skok recommended that CIOs look for companies that don’t just present technology but lay out a plan for how they will build a unique relationship with your company in order to best serve your customers. Once that’s been established, zero in on companies with “fundamentally disruptive technologies, not incrementally disruptive.”

4. VCs shouldn’t think of crowdfunding as a threat

Though it’s a disruptor to VCs, Skok said he doesn’t think crowdfunding will put him out of business. Instead, it's a positive thing for all sides of the technology landscape. “It’s a good collaborative means for people to get access to capital,” he said.

He said VCs are not just about capital but serve as advisers to technology companies. “My resources are my time, energy and commitment to help build a company. Capital is a small piece of that.” However small the capital, Skok said he doesn’t mind the help. “If you could get customers, partners and suppliers to contribute capital, [then] they are putting money where their mouth is,” he said.

5. CIOs shouldn’t ignore open source

When asking how many of the CIOs in the room used open source, only a few hands went up. “For recruiting and retaining talent, open source is critical,” Skok said. “Employees today, when developing any kind of system, whether it’s internal or external, want to be involved in the latest technologies. Gen X and Gen Y care about making a difference, and if you want to retain the best developers, they’re going to want to contribute to open source projects.”

Skok added that showing that you’ve been involved in open source can be a competitive differentiator for companies and a way for developers to create a personal brand. “Many enterprises are now getting kudos for the fact that they’ve contributed to [open source] projects,” he said.

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