Thursday, September 25, 2008

Secrets of the Serial Entrepreneurs

We had a great dinner gathering last night at Henrietta's Table... the discussion was titled "Secrets of the Serial Entrepreneurs," and it was a sort of warm-up to the annual Future Forward conference later this fall.

I asked each of the entrepreneurs to share the best piece of advice they'd ever gotten.

Sonia Khademi of Proxilliant Systems said, "Cash flow positive equals happiness." When you're cash flow positive, or even cash flow neutral, you don't get pressured into doing bad deals.

Don Bulens, most recently CEO of EqualLogic, said, "Don't love something that doesn't love you back." A lot of times salespeople, engineers, or CEOs get too enamored of a deal or a technology or a strategy that just isn't working out -- but they have a hard time letting go.

Hilmi Ozguc, most recently CEO of Maven Networks, said, "Pigs get fat; hogs get slaughtered." What he meant was that a lot of times when start-ups are negotiating to be acquired, they hold out for irrational terms -- and the deal winds up fizzling. Ozguc sold his latest start-up to Yahoo in January for $160 million cash. Just under $30 million went in. And the acquisition didn't require him to stick around for a fact, he mentioned that he left Maven two weeks ago.

Cheng Wu, currently chairman of Azuki Systems, said, "A company is bought -- not sold."

(You can tell that we wound up talking a lot about M&A... Bulens mentioned that his company was getting ready to go public when they got a $1.4 billion all-cash offer from Dell last year. I asked him if there was much debate about what to do, and he said there was. They looked at the market cap of a competitor, Riverbed, that had recently gone public and was doing well. But ultimately the cash in hand was too alluring. Inevitably, that led to some discussions about why New England start-ups seem to sell rather than remaining independent. VCs and entrepreneurs got about equal blame from the folks I spoke with over dinner...)

Vinit Nijhawan offered up a nifty metaphor from the peanut gallery... finding the right business model for a start-up, he said, is like "hunting around for the radio station before you turn up the volume." You don't want to accelerate spending until you know that the business model works.

One nice story that Jay Batson shared.... at last year's pre-Future Forward dinner, people were griping (as usual) about how risk-averse VCs are. But Batson met an investor there from Sigma who ended up funding his company.

Invites for the 2008 Future Forward gathering, coming up on Nov. 19th, just went out by mail. If you're not already on the list, you can request one here. (As an FYI: the audience consists entirely of entrepreneurs, CIOs, CTOs, and investors.)

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Wednesday, November 21, 2007

Tight-Lipped Tango Looks to McKinsey as a Model

I had a conversation earlier this week with Jo Tango, founder of the early-stage venture firm Kepha Partners and an alumnus of Highland Capital Partners. The entire conversation was off-the-record, though. Tango says he wants to let the companies in which he invests do the talking. The comparison he used was McKinsey & Company, which never even divulges the names of clients it serves.

I acknowledge that VCs can often hog the spotlight, subtly trying to make themselves look like the geniuses, rather than the entrepreneurs they choose to back.

But Boston needs a new generation of high-profile VCs, and I had been hoping that Tango would be part of that group.

VCs ought to be a presence at public events (Tango usually turns down speaking invites, and doesn’t go to gatherings like Web Innovators Group or OpenCoffee), and they ought to blog/write/podcast/vlog about what’s on their minds and what they’re seeing.

That sends a message that:

    A. They’re approachable, even if you’re not a done-it-before entrepreneur, and
    B. It communicates that there is a vibrant, plugged-in VC community here that’s interested in new stuff, and brainstorming about it in public.

Unlike McKinsey, Tango does at least have a Web site listing the investments he has made so far. (He also lists a number of investments he made while at Highland.) Kepha’s two investments so far, AutoVirt and Peermeta, have both been made alongside Sigma Partners, another ultra-quiet local firm. Peermeta was a $6 million first round; AutoVirt’s wasn’t disclosed. Peermeta was founded by Cheng Wu, the successful serial entrepreneur who has been with Cisco, ArrowPoint, and Cascade.

The same day I spoke with Tango, CEO Evan Schumacher asked who I thought were the next-gen VC firms in Boston… the firms that are worth watching because of their new approach to investing. Off the cuff, I listed Spark Capital, IDG Ventures, .406 Ventures, Longworth, and General Catalyst. (Old school firms trying to reinvent themselves include Prism VentureWorks and Polaris.) While some of them don’t have dazzling track records yet, they are communicating with -- and presumably working with -- entrepreneurs in new ways.

Tango, I worry, is doing things the old “Waltham way."

(Am I being too cranky on the day before Thanksgiving? Maybe. So I'll note that Tango gets very high marks on, mostly for his work while at Highland. Also, I compare Kepha with other new early-stage venture firms here.)

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