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Venture Profile: Bruce Golden, Accel Partners
By Angel Mehta, Managing Director, Sterling-Hoffman Executive Search
Angel Mehta: There is a school of thought that says the best venture capitalists are the ones that have the least amount of empathy because they have no trouble making ruthless decisions. What do you think - true or false? How does your operating background influence your approach in this regard?
Bruce Golden: First, I think that over the last several years it's been vital to have real empathy with entrepreneurs and CEO's who are building early stage companies. These are probably the most difficult jobs in the world right now, particularly given three years of negative Cap-ex spending, where no one wants to return your phone calls. For the most part, the market hasn't wanted to buy new technology or evaluate new vendors. This makes it difficult to wake up in the morning and convince yourself, let alone the rest of your team, that you can make sales happen, build positive momentum, get customers excited, etc. This is when having an operating background gives you both credibility with the entrepreneurs and the CEO's, as well as empathy for how difficult the job is.
I spent 15 years as an operating executive before transitioning into the venture community, and I really understand how difficult it is to navigate your way out of complex situations. Issues like scaling teams up and down, refocusing organizational priorities, reducing or changing your product delivery capabilities and, therefore, possibly having to decommit on promises that you made to customers because you just don't have the resources to deliver what you thought you would six months ago – all of these represent significant challenges. These are miserable situations to find yourself in. As an investor, I find it's invaluable to reflect back on some of my own experiences as it provides important context. I also think it gives me some sensitivity towards developing skills in others to help them through those situations. I don't believe you have to be ruthless to make good decisions. You do need to be able to assess situations quickly and execute decisively, but this shouldn't be confused with ruthlessness.
Angel Mehta: So you don't think that having empathy hurts a venture investor at all?
Bruce Golden: Not really. The danger is that former operating executives often project themselves into the situations that they're investing in or evaluating. I think that after you've been an investor for a few years, there's much more clarity about your role and the fact that you are primarily evaluating the strengths of this particular team to build the business. In fact, I think people with an operational background are able to bring objectivity to the situation. But once you've made an investment, a key part of your job is to help that executive team, and in particular the CEO, make the right decisions in a timely, effective way and move on. The teams that execute are the heroes in the story, not the VCs.
Angel Mehta: How did you make the move into the venture world? Tell me about the transition to Accel.
Bruce Golden: Accel was an investor in Illustra Information Technologies, a very promising database start-up that I had joined after leaving Sun Microsystems. I had the very good fortune of working with Jim Swartz, one of the founding partners of the firm, who was on the board and an early investor in Illustra. Through Jim, I met many of the other partners at Accel. After Informix acquired Illustra, I managed the data warehouse and business intelligence part of the business for Informix. It was a very troubled merger because some of the executives at Informix misrepresented the financial health of the company to both the market and to the team at Illustra. When I shared with some of the folks at Accel that I wasn't happy at Informix, Jim Breyer invited me to join the firm as an entrepreneur in residence. I joined the firm initially as an EIR thinking that I was going to start another company, but within six months I discovered that I was interested in being an investor.
Angel Mehta: How did you decide to make the move to Europe? Why did the London office become a priority for Accel?
Bruce Golden: We had been having internal discussions about broadening our investment horizon to Europe and Israel for some time. Around the same time period, one of Jim Breyer's classmates from Harvard Business School, Kevin Comolli, approached Jim to get his thoughts about creating and launching a new venture fund in Europe. We invited Kevin to team up with us to define the opportunity and develop a business plan to launch a new fund for Europe and Israel. After several months of work and really evaluating the market we all concluded this would be a great idea – and Accel Europe was born.
Angel Mehta: Is there a view that the deal flow in Europe and Israel is somehow more attractive than the US? What is it that made Accel believe that there were attractive deals in Europe that were not getting picked up on the radar?
Bruce Golden: First, I don't think it's right to say MORE attractive. We only have one investment bar at Accel. Period. It doesn't matter if a deal is getting done in Palo Alto, London, or Tel Aviv. There are simply great projects here that we wouldn't see if we didn't have a team on the ground. Innovation happens all over the world – not just in the US. There were classic, game-changing opportunities in Europe and given that our bread and butter continues to be early stage venture, it just made sense. In order to address these opportunities and provide appropriate support and service to the entrepreneurs, you have to be physically close to them. You also have to invest in really understanding how investments get done in these local countries and in building up relationships with local venture firms here.
Angel Mehta: Could you elaborate on that?
Bruce Golden: In short, you have to know the cultural issues in each geography. Frequent touch points and face-to-face meetings with the entrepreneurs, partners, and other investors are key to getting things done. One of the most important factors in the success of Silicon Valley is that it is a very collegial environment. There is an infrastructure of syndicate partners on any given deal, all of which are very predictable and can be relied upon to fulfill their roles at different stages of building out a company. That kind of inter-dependency is just as important in Europe as it is in Silicon Valley. In order to really be part of it you have to put a stake in the ground – you have to be here and have a permanent commitment.
Over the last several years, there were a number of U.S. firms who declared that they were coming to Europe and then before they even showed up they actually pulled out.
Angel Mehta: Why is that?
Bruce Golden: Several reasons. There were a wave of investment firms that came over and said, 'we'll take a U.S. fund and make it global but not have a separate pool of capital'. Most of those efforts failed because there wasn't any real commitment to the geography. As you can imagine, people discovered that it's actually really difficult to figure out what a deal in Germany or Israel or France or the Netherlands or Scandinavia looks like. Occasionally flying in from Boston or California doesn't cut it if you really want to meet the team and become knowledgeable about the marketplace. As the market became more and more complicated and people became more and more focused on the U.S. projects, a lot of people just retrenched and said, "What are we doing in Europe? We can't really compete".
Angel Mehta: What about the later-stage or buyout firms?
Bruce Golden: During the boom period, many of these firms felt there was easy money to be made in early stage venture. They just didn't understand the asset class nor have the patience or discipline of building companies over five to seven years. You have to be comfortable dealing with those critical issues: What should the management team look like? What are the milestones? How do you build out strategic alliances? What is the sales / distribution model? How much capital should go in at each stage?
When it became clear that exits had dried up and that venture was a very different type of process, the later stage firms retreated back to their traditional areas of focus.
Similarly, the vast majority of corporate equity groups withdrew from this market because their returns were dismal and they didn't have the patience nor the willingness to deal with messy capital structure situations and complex follow-on rounds.