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



Venture Profile: Joyce Chung, Cardinal Venture Capital

By Angel Mehta, Managing Director, Sterling-Hoffman Executive Search

Can 'corporate venture capital" really work? Joyce Chung left Adobe Ventures to form her own venture fund when she realized that there was too much exciting stuff in the world that had nothing to do with Adobe's core business. Angel Mehta, Managing Director of Sterling-Hoffman, chats with Joyce Chung about why Adobe seemed impervious to the software downturn, the founding of Cardinal Ventures, and hot new investment areas.

Angel Mehta: I’ve always been curious about corporate venture capital arms. You did a stint with Adobe Ventures: Was their mandate to invest only in deals that were complementary to its own core business?

Joyce Chung: It’s an interesting question. Adobe Ventures was a little bit different from other corporate investors since it was actually started not for the purpose of investing in complementary technologies, but with a simple financial objective. The objective was to get better returns on the money that Adobe had. For example, we worked with Granite Ventures, which at the time was H&Q Venture Associates, as a General Partner (GP) of the fund. They were compensated 100% on carry, management fee and returns. So, there was no motivation on their part to be strategic with Adobe. The Adobe Ventures Group was also compensated on the performance of the fund, which actually motivated us to find companies that would bring in good financial returns, first and foremost.

Angel Mehta: Did you ever feel limited in the kinds of deals you could do?

Joyce Chung: There was a limitation in that as we had to make sure we could somehow make it relevant to Adobe’s business. Compensation was obviously different since we were employees of Adobe. What was good about it was that you’d have the resources of Adobe backing you. From a due diligence standpoint, I could call on the chief scientists and the advanced technology group to come and look at a company before doing a deal. They could diligence it, and test product offerings against product managers or other people within the organization. It’s a huge value add.

Angel Mehta: Adobe has an interesting history in that they seemed to fare much better than other ISVs through some rough patches over the last few years. What, from your perspective, allowed them to succeed when other software companies were having such a difficult time?

Joyce Chung: Adobe is rock solid in terms of technology offerings - they really stick to their knitting. They know what they’re good at; they expand upon it and grow it in a very predictable fashion. It was a much more conservative management approach, relative to what I imagine, say, Microsoft would be like… “We have to own every market by tomorrow!”… Adobe understood focus, and that focus helped them carve out a territory that nobody can beat them in.

Angel Mehta: So you think it was a purposeful focus, rather than a lack of creativity or ambition? Joyce Chung: There is no lack of creativity. There have been major innovations at Adobe – John Warnock and Chuck Gesche drove that in the early years. They brought a vision to the company that allowed Adobe to remake itself every 5–8 years, which is why they’re still around and successful.

Angel Mehta: Why did you leave Adobe and start Cardinal?

Joyce Chung: I reached a point where I wanted to look at deals in a variety of areas that had no relevance to Adobe systems. I wanted the freedom to look at lots of different things. Adobe didn’t want to have direct control of the companies because of some legal and accounting issues. They couldn’t own more than 20% if they were direct investors. But, if we did it through this structure (a partner, such as Granite), we could own as much as we wanted and we wouldn’t have to roll it up on our income statements. Also, as a venture capitalist, I think the compensation is a little bit different when you’re out on your own versus corporate structure. Plus, it was 2000 – everybody wanted to be a venture capitalist. [Laughing]

Angel Mehta:
Did your heart sink when the bubble burst?

Joyce Chung: Certainly there were moments of soul searching, but I would have done it again in a heartbeat. Starting a venture firm is an entrepreneurial endeavor: running your own business, growing it, building a team – it’s been a great learning experience.

Angel Mehta: What do you find the hardest thing to be about venture investing?

Joyce Chung: Not being able to step in. There is a limitation as to how much you can influence and impact a company in their results because you’re not directly running that business. There are situations when you feel frustrated because you don’t feel the job is being done effectively. That’s probably a sign that you need to do something about it. That’s the difference with an operating role. You can own it and take the glory or the pain, whatever it is, or actually the results of what’s happening. I don’t think a VC can truly take all the credit or the blame.

Angel Mehta: Most investors and entrepreneurs agree that luck plays a role in any success story. So how do you, as a board member, hold entrepreneurs or CEOs accountable for ‘absence’ of luck?

Joyce Chung: There are things you can and can’t control. If an entrepreneur has developed a plan and either met or modified that plan, as required in the collective judgment of everyone involved, and fails… well I don’t think you can fully say that’s a bad entrepreneur. We all bet on what the market is going to do and what the competition is going to do and whether the timing is right, luck notwithstanding. You can still hold them accountable by observing how well they execute relative to a plan.

Angel Mehta: What segments is Cardinal presently focused on?

Joyce Chung: Our main focus is on early stage software in general, but one area of interest in particular is digital media. With technology advances in storage, in computing power, in content being digitized with wireless LAN networking broadband… you have all the pieces there that enable a really different experience for digital media in terms of content creation, content delivery, and content consumption. We’re already seeing a lot of those changes happening but the market is going to continue to evolve and be very different in as little as three years.

Angel Mehta: The consolidation in enterprise software over the past 3 years has been amazing… it almost feels like the industry is ‘ending’ to some degree. What are your views on the issue – will software ever be a growth business again?

Joyce Chung: I would disagree with that because how do you define software. More people are writing software and using software in more kinds of devices than ever before these days. The models are changing, for sure. SaaS is no longer the ‘next big thing’. It is becoming the standard mode of delivery. So shrink-wrap software is probably done. There’s not going to be another company like Adobe that’s going to be building shrink-wrap software, get funded and become a billion dollar business. There probably won’t be another Siebel or SAP… but there is still opportunity. The world is not going to stop.

Joyce Chung is a Founding Partner of Cardinal Venture Capital. She is responsible for investments in Chipcon (acquired by Texas Instruments), Mobilygen, Valista and Zilliant. Joyce received her BS in Chemical Engineering from the Massachusetts Institute of Technology and her MBA from Stanford University Graduate School of Business. For interview feedback, contact Joyce at joyce@cardinalvc.com

Angel Mehta is Managing Director of Sterling-Hoffman, a retained executive search firm focused on VP Sales, VP Marketing, and CEO searches for enterprise software companies and lead investor in http://www.softwaresalesjobs.com, the # 1 site for software sales jobs. Angel can be reached for feedback at amehta@sterlinghoffman.net


VC: Joyce Chung
Firm: Cardinal Venture Capital
  • Favorite band: Israel Kamakawiwo'ole
  • Hobbies: Running, hiking
  • Biggest fear: Our civilization's destruction of life on this planet
  • Passionate about: My boys (2 sons and husband)
  • Favorite movie: Cinema Paradiso
  • Favorite color: Blue
  • Least liked food: None (I like them all!)
  • Most admired person: My father

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