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 year...in 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.)

Same Story, Ten Years Later?

Some historical parallelism struck me this morning as I was thinking about yesterday's acquisition of Maven Networks by Yahoo, for $160 million.

Almost ten years ago, Maven founder and CEO Hilmi Ozguc sold an earlier company, Narrative Communications, to @home Corp. Narrative harnessed new technologies, like animated and interactive banners, to make ads more compelling; Maven focuses on delivering video, and integrating advertising into it.

The purchase price of Narrative was $89 million (in stock).

Around that time, the Web portal Excite was in play, and the two suitors were Yahoo and @home. (Running Excite at the time was George Bell, now a partner with General Catalyst, the Cambridge venture capital firm that originally backed Maven.) @home, which had just bought Narrative, prevailed, and the merger took place in early 1999. It's now widely considered one of the worst combinations of the dot-com era. The newly-renamed Excite@Home saw its stock plummet, and declared bankruptcy in October 2001.

Kind of interesting, don't you think, that the latest acquirer of a Hilmi Ozguc start-up, Yahoo, is also in the thick of some merger discussions of it's own...

Behind Yahoo's $160M Acquisition of Maven: Maven CEO and Board Member Discuss

What do you ask for in February 2008, when you sell a company to Yahoo?

Cash, baby.

Yahoo paid $160 million for Cambridge-based Maven Networks -- almost all of it in greenbacks, not Yahoo stock. (Here's the AP story...and the official press release.)

"There's no way to arbitrage Yahoo's stock price when Microsoft may be buying them, or may not be buying them," says Woody Benson, managing general partner at Prism VentureWorks, which invested in Maven's most recent round of financing. (Yahoo rebuffed Microsoft's $44 billion purchase attempt on Saturday.)

Benson told me this morning that there was more than one company interested in owning Maven, but acknowledged that he was a bit anxious about whether the deal would go ahead once Microsoft started to make a run at Yahoo: "Anxious would be one word for it," he said.

Benson said that Maven and Yahoo signed a letter of intent around Thanksgiving, and that due diligence proceeded until Microsoft made its unsolicited offer to acquire Yahoo on February 1st. Benson says that the Microsoft offer didn't necessarily cause Yahoo execs to slow down or speed up the final negotiations in the Maven deal; I'd earlier speculated that it could hang in the air for a while. The final papers were signed on Sunday.

"There's a reason why they're buying us," Maven CEO Hilmi Ozquc said, when I suggested that Yahoo (and Microsoft) had missed the boat on the online video explosion. "The tech innovation has been happening at start-ups to date. But as the giants jump in, the fastest way to get there is through acquisition."

Ozguc and Benson both say that Yahoo's big advertising salesforce will help Maven vault ahead of other video players, like Brightcove (and perhaps even put it on an even footing with YouTube, which has been slow to integrate ads with videos.)

My last question for Ozguc was whether he'd be surprised if Microsoft now bought Brightcove: "I would not be surprised," he said. "But if they're going to buy Yahoo and get Maven for free, why?"

Update: Will Richmond has a longer Q&A with Ozguc on his site, Videonuze.

The NY Times Bits blog offers a critical take on the purchase...and here's the Globe coverage of the deal.

IDG's Jeff Bussgang on the Exit Window

I was wondering back in November about some of the things that could make the Web 2.0 investing bubble go 'pop.'

Jeff Bussgang at IDG Ventures looks at that question again, in light of a possible combination of Microsoft and Yahoo. What'll be the impact on venture-backed start-ups, which are more often bought than taken public?

(I have to wonder whether the Microsoft take-over offer is already stalling one possible Web 2.0 deal -- Yahoo's rumored acquisition of Maven Networks.)

Will Yahoo buy Maven?

(This is in danger of turning into the all-General-Catalyst-all-the-time blog...)

But the buzz yesterday was that Yahoo was on the verge of a deal to buy Cambridge's Maven Networks for about $150 million.

Wonder how that deal will be affected by Microsoft's unsolicited offer to buy Yahoo for $44 billion?

I suspect if the ink isn't yet dry on the Maven acquisition, CEO Hilmi Ozguc and his investors (which include GC, Prism VentureWorks, and Accel) may be biting their nails for a little while...

(A few months back, I wrote about the rivalry between Maven and Brightcove, Cambridge's two video delivery start-ups.)

Sunday's Globe column: Brightcove and Maven, duking it out

Today's Globe column is about the competition -- and many connections -- between Brightcove and Maven Networks, two Cambridge companies angling to become the dominant tool for media companies that publish video on the Net. (Their offices are a stone's throw from one another in Kendall Square.) From the column:

The story of Maven Networks and Brightcove, two companies that have helped shape the way media firms distribute video online, is one of unbridled competitiveness: two entrepreneurs who were once on the same team now duking it out.

Brightcove, by virtue of having raised $82 million in funding, is one of the highest-profile tech start-ups in Boston (Maven has banked $27 million). The big question is which one will wind up with the sweetest finish - either an acquisition by a big player like Microsoft or Google, or a public offering.

I actually had included Adobe in that list, as a potential acquirer, but it got snipped during editing. (Macromedia, now part of Adobe, acquired the first company that Brightcove founder Jeremy Allaire started, Allaire Corp.)

A few other interesting notes on possible exits: when Comcast bought thePlatform last year, they paid between $100 and $125 million, according to several sources. So that's the one valuation we know about in the enterprise video-publishing space. On the consumer side, we know about YouTube ($1.65 billion), and Sony's acquisition of Grouper ($65 million). (We sort of know about Vimeo, a video publishing site started as part of CollegeHumor, which Barry Diller's IAC acquired last year for a reported $20 million.)

YouTube received a grand total of $11.5 million in venture funding before it was acquired by Google. It starts to make it look as though Brightcove's backers ($82 million) may find it tough to make a 3x, 4x, 5x return. But we'll see. One intriguing possibility would be combining the two companies, since Accel Partners and General Catalyst are investors in both. Of course, they'd then confront Sophie's Choice, since I'm sure that Maven CEO Hilmi Ozguc and Allaire would never work together.

John Simon, the General Catalyst partner who sits on the board of Maven (his firm is also an investor in Brightcove), wouldn't talk to me by phone. But he sort of answered a couple questions via e-mail. I asked what he thought the benefit was of being an investor in both companies. He wrote that the "two companies ... show every sign of delighting customers, employees, and stakeholders and being very significant venture capital winners at this point," adding, "[T]hese are two companies we can really be proud of."

Here's this week's video.... an interview with Jeremy Allaire, published using (what else) Brightcove.