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Will the enterprise market spend significant IT budget on Windows Vista in 2007?



Venture Profile: Jay Hoag, Technology Crossover Ventures
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>Angel Mehta: I’ve seen plenty of candidates fake a passion for something just to get the offer…

Jay Hoag: Right. You see people with 20 years experience at a large technology company who has failed as CEOs and then you see an individual who doesn’t really have much of a resume, succeed as a CEO. All you have to rely on is gut. Also, my view is, it’s not about pedigree. CEO's are all smart and driven. So what? It’s still kind of qualitative… a gut check on whether this person is a winner. If we ever have any ethical questions about a CEO or any executive, we won’t touch them. Life is too short.

Angel Mehta: Do you ever get concerned about a CEO or executive that is ‘too successful’? In other words, they’ve already had a few financial homeruns… participated in big liquidity events… is it ever a concern that they won’t be as motivated because they don’t need the money?

Jay Hoag: No. I don’t think that a lot of people in my world wake up with money as their primary concern. With success comes financial reward, but I think most good entrepreneurs are driven because they want to build a big business – period. To me, it’s what somebody’s made of – not what their bank account looks like.

Angel Mehta: How much weight does formal business training carry with you? Or business education from a good school? Is it more appealing to have a CEO with an MBA from Harvard or Princeton or whatever? Would it make a difference all those things being equal?

Jay Hoag: I don’t know if I had a Harvard MBA CEO in my last decade of investing. So the answer is no, plain and simple.

Angel Mehta: Let’s talk about some macro-economic issues as they relate to software. Has the growth potential in this market evaporated? A lot of industry ‘outsiders’ – analysts, investment bankers, etc. – seem to think it is and point to the consolidation as a sign of that.

Jay Hoag: Well, when you say ‘evaporated’… I mean, a lot of outsiders, as you call them, will say that kind of thing because you have earnings disappointments from public companies and those outsiders are measuring a specific quarter relative to Wall Street expectations. Wall Street is not necessarily informed about the specific issues of the business, or the software industry at large. So their expectations aren’t necessarily relevant to the fundamental health of the business.

That said, I agree that there are challenges for the industry – particularly for application vendors. Buyers are much tougher and more informed than they were 5 years ago and it doesn’t appear that there’s a massive next-generation wave of products being released to the market, which often can be a growth driver. So overall, yes, I agree that we’re going to have more modest growth over the next 5 years.

Angel Mehta: How do you think being a late-stage investor is different from being an early stage investor in terms of the actual competencies / experiences of the job?

Jay Hoag: I think that there’s actually a mixed perception that somehow with late stage investing, we sit around and clip coupons all day whereas in early stage, everybody’s shouldering the weight and making big decisions. Clearly the companies are more formed by the time we get involved, but there are many key management team decisions: are there important strategic partnerships to both introduce and work?… What are the other hiring issues confronting the business?… How you round out the Board? There are some late stage company CEOs that I speak with every day. We are very active with the companies we invest in… in fact, we’re often the largest outside shareholder! We can’t afford to NOT be involved!

Jay Hoag is a Founding General Partner of TCV, has been a venture capitalist and technology investor for over 22 years. Jay's technology sector focus includes: eCommerce, Software, and Services. Prior to TCV, Jay was a Managing Director at Chancellor Capital Management where he spent over 12 years as a technology focused venture capitalist and fund manager. From 1988 to 1994, he grew the public technology asset base from $20 million to over $250 million and generated industry-leading performance. For article feedback, you can contact Jay at: jhoag@tcv.com

Angel Mehta is Managing Director at Sterling-Hoffman, a retained executive search firm focused on VP Sales, VP Marketing, and CEO searches for enterprise software companies. He can be reached for feedback at: amehta@sterlinghoffman.net


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