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



Venture Profile: Oliver Curme, Battery Ventures
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Angel Mehta: So those are both conditions that seem within a company’s ability to control. What about external factors?

Oliver Curme: Sure. There are times when the industry conspires against you. We were in a company called, “Parallan”… This was the early ‘90’s and they made one of the original application servers. The only problem with it is that they chose the OS2 operating system. It was in development for 18 months and just as they launched their OS2 server, Microsoft and IBM got a divorce and Microsoft started telling the world that OS2 operating system which they had built was a piece of garbage [Laughs].

So we had a great product but we got slammed by Microsoft. We tried to sell the company to IBM…spent six months negotiating with divisional IBM lawyers and reached an agreement. Suddenly, IBM’s outside lawyers came in and renegotiate for another six months. Then IBM corporate lawyers renegotiate for yet another six months. Finally, they refused to buy the company and insist on OEMing the product. That was so successful that Parallan went public!

Angel Mehta: Luck just matters, doesn’t it… What do you think is the biggest misunderstanding entrepreneurs have about venture investors?

Oliver Curme: I think that from an entrepreneur’s perspective, they understand that you can’t wait around for everything to become clear - you’ve just got to go.

Angel Mehta: Any decision is better than no decision…

Oliver Curme: Right. But as a result, entrepreneurs often get upset with venture capitalists because they’ll talk to venture capitalists for a month, then two months, then three months… and the venture capitalists will never seem to make a decision. This annoys the hell out of entrepreneurs. I mean, either invest in the company or don’t invest in the company. But you’ve got to look at it from the venture capitalist’s perspective. If I’m the only venture capitalist talking to a company and I have the opportunity to invest at any time, why should I invest now if I can wait six months and see how the company does? If I still have the opportunity to invest six months later I’m going to wait.

So if you’re talking to just one venture capitalist and you’re expecting that venture capitalist to make an investment decision, you’re out of your mind. In the absence of competition, the investor will never be forced to make a decision. The analogy I always use is ‘successfully raising venture capital is like getting sheep to jump off a cliff’. You can lead the sheep up to the edge of the cliff and encourage that sheep to jump… but ultimately, the sheep will just kind of give you a dumb look and walk away. But if you can get a whole herd of sheep all galloping along, sort of following the leader, you can get the whole flack of sheep to jump off a cliff.

Angel Mehta: So that is your sense of venture investors in general…they’re like Lemmings?

Oliver Curme: They’re like sheep. They’re bigger than Lemmings, but I don’t know if they’re any smarter. [Laughing] It’s just not in a venture capitalists interest to invest in a company in the absence of competition. It will always be better to delay and see what happens.

Angel Mehta: So what advice would you give then to software entrepreneurs about raising capital?

Oliver Curme: The advice I give to software entrepreneurs or any entrepreneur is you’ve got to manage a process where you go out to a sufficient number of qualified venture capitalists that would have a predisposition to invest in your company. In fact, the best ones are ones who have made money in that particular niche before. Because they’ll typically overlook all the problems and think this is another homerun and they’ll invest again. The way to raise money is find half a dozen qualified venture guys, go to them and then nurture the process along so the herd is altogether. If one of them seems to be doing a lot of due diligence and the rest of the herd is behind you, slow him down until you bring the rest of the herd up. You want to get it to the point where all of them have done sufficient due diligence to be able to make a decision and then you have to catalyze the process by having one of them throw in a term sheet at which point everybody else throws in a term sheet and then they start bidding against each other.

One of my companies is a business intelligence company called, “Netezza”. It’s done this three times very successfully. I led the B-round and I really loved the opportunity, but I tried to preempt the process by putting in a term sheet early. They waited until they had five or six term sheets in and then I just kept outbidding everybody until I was the VC who had paid the highest. That’s how I got the deal, and then they did it again with another round.

Angel Mehta: What should every entrepreneur know that they don’t typically hear in the standard ‘how-to’ guides for raising venture financing?

Oliver Curme: Entrepreneurs always read up on materials that help them anticipate the questions a venture capitalist will ask. The one thing that always surprises me is how infrequently and entrepreneur will ask us questions. You’ve got to build a relationship, and it won’t happen with me just asking lots of stupid questions and hearing canned responses.

Angel Mehta: There has to be a dialogue, in other words…

Oliver Curme: Right. So my biggest piece of advice to people is don’t just get into a situation where the VC is peppering you questions, pepper the VC back. “Here’s our distribution strategy what do you think of it?”… ” Have you seen other companies in this market?”… You’ve got to get feedback during the process because usually people rely on the PowerPoints, answer a lot of questions, shake hands and go away. That’s ridiculous! There has to be a dialogue established and the best way of doing that is to get feedback from a venture capitalists.

Angel Mehta: Do you think it’s possible to create a methodology or set of processes that can lead to somewhat predictable results in venture capital? It seems like such a difficult business to gain visibility into… Is a formula something you can even articulate?

Oliver Curme: I would say there’s one quality that I correlate with success among the various professionals at Battery – the degree of cell phone usage. The investors at Battery with the best track records are the ones that are always on the phone. They are constantly networking and they’re constantly working and they’re constantly out there finding deals and working with other people and establishing relationships. So I would say that you’ve got to be a little bit of an extravert in order to be successful at this game.

But ultimately, it’s working within a group of really smart people and over a 5- to 10-year period seeing enough of other people’s mistakes and your own mistakes and conversely seeking how other people have been successful. I think an individual within a large venture firm like ours, with 30 investment professionals, does get the benefit of learning from the entire group. It’s a specialized industry you can’t just focus on one area you’ve got to learn a lot of things in a lot of different areas. Our focus as managers at Battery has been to provide a supportive environment for our junior people to learn from the group and to be able to try things and learn to be successful in the business. So, again, there’s not one or two or three things to learn, there’s a lot of different things to learn. You’ve probably also got to be somewhat contrarian but after that there’s room for a variety of different types of personalities who can be successful in this business.

Oliver Curme has focused on investments in software and computing since he started with Battery in 1985. Some of his best investments include Aurum Software, Chordiant Software (CHRD), HNC Software, Infoseek, and Pixelworks (PXLW). Prior to joining Battery, Ollie was a lending officer in the High Technology Division of First National Bank of Boston. He holds a BS from Brown University and an MBA from Harvard Business School. Feedback on the interview can be sent to: ollie@battery.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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