|Home - Venture Profile - Sep 03 Issue
Venture Spotlight: Geoff Moore, Mohr-Davidow Ventures
By Angel Mehta, Managing Director, Sterling-Hoffman Executive Search
This article is the second of a two part series with Geoff Moore. To review part one, click here.
Angel Mehta: Tell me how you ended up becoming a Venture Partner at Mohr-Davidow.
Geoff Moore: In the 90's "Crossing the Chasm" struck a cord with the venture community because arguably every venture investment was a chasm-crossing activity. The first venture firm I got involved with was IVP, Institutional Venture Partners. They actually gave me an office for a year…it was almost as if I was an executive in residence.
Angel Mehta: This was in exchange for your coaching their CEO's on how to 'cross the chasm'?
Geoff Moore: Yes. I worked one day a month with one of their portfolio companies… quite frankly I couldn't have been more thrilled. I had 3000 Sand Hill Road on my business card…it was great! [Everybody laughing]
Then after a while they pushed me out of the nest, and Mayfield Fund asked if we would run their people through some training on the basic concepts. So we had a series of CEO seminars around "Crossing the Chasm" for them….and then the Atlas Ventures on the east coast wanted to have their CEO's go through this thing too. What really happened is that people liked the fact that they now had a vocabulary for confronting basic issues in high tech strategy…Investors were saying, "This lets us talk to our CEO's about problems in kind of a short-hand code that we all get."
Finally, I ended up connecting with Jon Feiber and Nancy Schoendorf who are the Managing Partners at Mohr-Davidow. They ran a series of portfolio companies through a similar exercise and kind of took me aside later and said, "Look, we have this idea about a 'venture partner" and we'd like you to consider playing that role with us." So we experimented with it over about a six-month period…And all of us liked the results and so here we are today.
Angel Mehta: The portfolio could almost serve as your own private research lab to test various theories…
Geoff Moore: Absolutely. I now have a captive set of start-ups to work with and study…and particularly now given that TCG Advisors is working with larger companies, I get my entrepreneurial fix from Mohr-Davidow's portfolio, which is great. The other benefit for me was the chance to participate in the equity of a venture firm…because you can't build equity in a consulting firm – not with what we do. I suppose if you try to lock up the intellectual property and pounce on anyone that violated your copyright, fine, but we always had the opposite point of view at the Chasm Group. We felt that anyone could use our IP if they wanted to, and we'd benefit because we were the experts. But we couldn't figure out a way to create equity…so joining Mohr-Davidow was phenomenal for that reason as well.
Angel Mehta: And what about evaluating new investment opportunities? Do you get involved in trying to evaluate each deal, and whether or not any given startup actually stands a chance of 'crossing the chasm', so to speak?
Geoff Moore: It's a very exciting part of the role, certainly, when you have people come in and pitch companies to you and you then get to figure out, 'Should we invest in this company or not and why or why not?" I got to tell you, that's been the biggest source of learning for me. Remember, I'm a venture partner; I'm not a general partner. I would be a terrible general partner because every time I'd see a pitch, I would think, 'Wow, this is a great one - I hope we invest in it!" (Everyone laughs). We ONLY Invest in 10 companies a year, give or take, but every single deal I see, I think, 'This is a good one…"
Angel Mehta: Geoff, if I ever start a company and need financing, I'm pitching to you first! [Everyone Laughing]
Geoff Moore: If I were in control of the bankroll, you'd be funded before you left the table. So needless to say, money should never be my responsibility. But seriously, what has been fascinating is learning the logic of why investors say yes or no to a business plan. And then to add to that, going through the bubble experience of how to deal with the market when you're thinking, 'this is crazy'. How do you deal with that and maintain integrity? Then when the market went the other way and forces were working against you, how do you maintain integrity and deal with that? Going forward in this decade, everyone realizes that you have to reset your matrix because you're pretty sure the data from the last five years is corrupt. So what is the roadmap for how we invest? How do you do that? There's an emotional depth and intellectual depth required here that is just extraordinary. It's not a thing that I'm particularly talented at, so I just love being on the inside watching it work.
Angel Mehta: So let's go back to learning about why the General Partners at Mohr-Davidow would say yes or no…most importantly, what are some of the common themes around why they say no?
Geoff Moore: Well first I think you have to understand Mohr-Davidow is an early stage investor… different venture funds will have different motives. If you're an early stage investor, the promise you've made to your limited partners is to be the first institutional money into most of the companies we back. The point being, it's a home run game…
Angel Mehta: Not about singles…
Geoff Moore: Right. So now you can apply that to whether you fund something or not and it ends up being about four buckets:
The 'market" one is 'is this is a home run play?" In other words, if these people hit the ball, does it go out of the park or is it a single play? So, for example, you can start some very interesting businesses that will build up to a $30 or $50 million dollar business but they're never going to be a $500 million dollar business.
Angel Mehta: Not that $30m to $50m is a failure….
Geoff Moore: Sure, that's a terrific business to start - but it's not an appropriate business for an early stage venture firm to back. So the first issue is the market and 'is the market already saturated?" Then there are all the issues around strategy. Are there going to be barriers to entry? Can you create a defensible position or are the big guys coming? There's lots of stuff around markets and that's probably the place where I'm able to contribute the most.
The second issue is technology: around the uniqueness of the proprietary-ness of the offer and that's where you can do a lot of due diligence. This is where associates can be extremely helpful because they can really dig in…especially in life sciences where you're going, 'Well I don't know what this means but it sounds good to me…'….So you have to network with the university community to understand opportunity and to vet opportunities you see from other sources. So its technology due diligence and market diligence and it is usually one of those two categories where entrepreneurs excel. If they are a science-oriented guy, they might be really strong in technology but if it's more of a business process or enterprise software entrepreneur, he's usually strong on the market side.