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Venture Spotlight: Terry Garnett, Venrock Associates

By Angel Mehta, Managing Director, Sterling-Hoffman Management Consultants

Angel Mehta: I’m interested these days in early life experiences…about the forces that shaped the kind of investor you’ve become. Can we talk a little about your early career?

Terry Garnett: Sure. I was actually born in London and my parents emigrated to the U.S. when I was about a year old and so, I’ve lived in California almost all my life. As a result, I’ve been around silicon valley long enough to remember when there were still a lot of orchards and things were very undeveloped. Through a series of serendipitous events, I ended up at Tandem Computers in the late 70’s which was one of the two hottest companies around – along with Apple.

At that point, Tandem was about a $50 million dollar company and grew to about $500 million in a 3-4-year period – so it was a real rocket ship growth period. It was the heyday of Jimmy Treybig…beer busts on Friday afternoon…just some very innovative management techniques, for that time anyway.

Angel Mehta: Presumably some of that grew out of HP, right?

Terry Garnett: For sure. I remember Treybig had actually put together a flowchart of how businesses operated and he PERSONALLY created a training course that every one of the senior managers had to learn, and then each manager had to train their employees on. This was even at a point when they had THOUSANDS of employees in the company. It was literally Business 101 compressed into a 2 or 3 day course. Every engineer, every assembly line worker, every sales person had to do it. It was probably one of the most impressive management training sessions I had ever seen.

Angel Mehta: Particularly impressive because of the beer busts, right? [Laughter]

Terry Garnett: [Laughing] The business training fit with the beer bust which was about getting groups from different functions to meet and spend time together. So there was actually a conscious strategy about trying to make the sales person and the guy in manufacturing to get to know each other. They might never meet otherwise, but at a party, people from separate departments would be standing next to each other in the beer line.

So there were some very interesting ideas that he put together that shaped a lot of the way I viewed management theory. Remember this was my first job out of college, so I figured this is how all companies run. Which was obviously not the case; Trey was five standard deviations out.

Angel Mehta: So how did your first entrepreneurial endeavor come about?

Terry Garnett: Well I moved around inside Tandem, and got very interested in one of the first personal computers that was ever in the company. Someone in the manufacturing group brought in an Apple 2 to actually do the master schedule on, which evolved into an Apple 3 and that was my first exposure to personal computing. I had taken computer classes in college, where we had computer punch cards?

Angel Mehta: So the Apple must have been a shock….

Terry Garnett: It was amazing that you could actually have a computer on a desk , put in rows and columns and all that (with Visicalc at the time). So I got very intrigued with the whole PC phenomenon and I actually left Tandem to start a small software company called, “Lightyear” . The offering was a modeling system for business decisions. We sold IT as a standard off the shelf $500 dollar PC application through Businessland and Computerland and all these different stores. So we got up to about 25 employees and went out to raise venture capital….

Angel Mehta: How old were you?

Terry Garnett: I was about 25 at the time. That’s actually how I met Venrock in 1982. Venrock was one of 30 venture groups I went to over a 12 month period. Venrock did not invest but I got to know one of the partners in New York, David Hathaway, very well. Anyway, we eventually raised $1.5m. It was a positive experience because on the entrepreneurial side, I got exposure to lot of the struggles and problems that every entrepreneur faces. It gives you a little more empathy as the years go by, just in terms of meeting people who come in to try and raise money - because it’s always hard no matter what people say.

Angel Mehta: Were you prepared for what the entrepreneurial experience would be like when you started Lightyear…

Terry Garnett: Nope. Totally naïve. There are two schools of thought on the issue…. I think to be a great entrepreneur, in some sense, have to defy gravity. I think if you knew completely going in what you were going to be up against and how formidable the challenge is, it would be a very tough thing to tackle. So, in some ways, being young and naïve and NOT knowing what you’re getting into is a big part of the package. I think that that works in your favor.

The other school of thought is that because it is so hard, the experience of having done it before is precious. Especially on the side of the table as an investor, you’re really looking for people who have been through it already. They can short circuit the path to get there. They know what the mistakes are, and hopefully have learned the hard way in terms of what works and what doesn’t.

Angel Mehta: So would you have backed yourself back then?

Terry Garnett: Probably not. No. You know, Angel, there’s a lot of stories of people that have come out of the garage and made it big – but those are the exceptions. I think if it’s a completely new market, where there is a completely green field and you can tolerate a lot of mistakes - then you do see people come out of left field, do something completely new, and make it.

Angel Mehta: Right….

Terry Garnett: But if it’s a space that’s somewhat mature…or if you could sort of see how someone’s going to create the company, what it’s going to turn into…geez, in this kind of environment with so much capital out there - it’s the people who have the experience that are going to win in the end.

Angel Mehta: Let’s fast forward a few years. How did you end up at Oracle?

Terry Garnett: I was at Ashton Tate…In 1991, Oracle was blowing up and a good friend of mine who was at Oracle set me up to meet Larry Ellison. Larry offered me a job to come work for him as VP of Marketing. Pretty much the day I went to Oracle was the day my wife (who I met after business school) left Oracle and went to Sybase – she wound up running about half the development there and I eventually became Senior Vice President running marketing & business development at Oracle so that was pretty interesting.

Angel Mehta: And at the end of four years with Larry?

Terry Garnett: I left as everyone does with a lot of broken glass and I realized that at that time - this was 1995 - that Oracle had spawned a lot of great entrepreneurs and managers, especially the application space and in the enterprise software space. A lot of that alumni club from Oracle had gone out into the Valley and either started companies or were in senior roles in other great companies. So when I left, it was with the idea that I wanted to invest my own money.

Angel Mehta: Did you head to Venrock right away?

Terry Garnett: Actually, even before I came to Venrock, one of the first deals that came across my plate was Tom Siebel. Tom was just getting the company off the ground, raised a million dollars first round from about ten people he knew in silicon valley….I was one of them. A couple of months later, Dave Hathaway at Venrock called me and asked me if I had ever thought about going in on the venture capital side.

At the time, Tony Sun was the only person here at Venrock in California. Everyone else was in New York. So for the next 4½ years, I invested in probably about a dozen companies. The second one I worked on with Ray Rothrock was Checkpoint, which turned into a great success here at Venrock. Then right after that I wound up meeting Rick Adams who used to be the CIO of Goldman Sachs. Rick started a company in Denver called, “New Era of Networks” (NEON). So I had some great experiences at Venrock…at one point, I had Crossworlds, NEON, and NIKU go public within a 3 month window.

Angel Mehta: This was right before the bubble burst in early 2000?

Terry Garnett: Yes. Lucky for me, because I decided right before that it would be good to take some time off [Laughing]…not that I foresaw that things were going to go down hill, but I wanted to be with my family and did a lot of traveling. In the middle of 2001 after Venrock had raised this new large fund, they called and asked me if I’d consider coming back as a General Partner. That’s what I did about a year and a half ago…It’s been an interesting odyssey.

Angel Mehta: What was your impression of Tom Siebel in the early years? What was it that convinced you to invest?

Terry Garnett: You know when Tom was at Oracle, he had a vision for building a new application for tracking sales leads and customers and all the rest. He actually built something very similar to Siebel CRM when he was at Oracle internally. So I think what he was trying to create at Siebel was really just taking it to the next level. Tom, by the way, is an example of someone who knew EXACTLY what he wanted to do.


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