Tuesday, April 04, 2006

Exit Strategies for Start-ups: TiE Event

I attended a TiE (The Indus Entrepreneur) event tonight. There were 3 speakers-

  • Dan Avida, General Partner, Opus Capital (ex-CEO Decru)
  • Joshua Pickus, Senior Vice President & GM, Computer Associates (ex-CEO Niku)
  • Tom Berquist, CFO, Ingres Corporation (previously Securities Analyst at Citigroup)
Dan Avida sold Decru to Network Appliance for $272.5M; Josh Pickus sold Niku to Computer Associates for $350M.

The two entrepreneurs had built real businesses and lived through the tech bubble of the late 90s. Their key advice was to look through the buzzwords and focus on building a real business. They were only interested in start-ups with the potential of being $100M revenue business in 5-8 years. Even though exit via M&A (Mergers and Acquisition) is a valid option to explore- it should not be your intended purpose as a startup looking to get funded.

They unanimously agreed that a startup pitching itself as a perfect acquisition candidate with no potential of being a business on its own is not interesting to them. Of course, they do evaluate startups as potential acquisition candidates but as they said "Leave that to us. Focus on building a real business."

The most interesting thing I learnt was how EFI was founded. It was a hack to get Canon color copiers to publish documents from the computer rather than from its internal scanner. This hack later became a 'print driver' software that EFI started selling. Today its a $600-700M business with 700+ employees. Dan was clearly a visionary entrepreneur and a very impressive speaker.


Sheridan Tatsuno said...

The TiE speakers were definitely inspiring since they built real businesses. I appreciated their startup tips:

- Pick the right business (> good management)
- Set higher mission than ROI.
- Tech companies are bought, not sold.
- Acquirer's math = sales price x risk < $ generated
- Hire the best (3As: ability, aptitude, and attitude)
- Get helpful board with seasoned executives, not VCs. Being CEO is a lonely job.
- Narrow your focus.
- Cut more than expected when firing.
- Smaller teams force accountability.
- Sell benefits, not capabilities.
- Look for shifts. Avoid fads.
- Advertising not very good model.
- Web 2.0 is frothy. Not connected with reality. Focus on customer concerns.
- Ask the right questions.
- Get bad news fast.

Just these tips alone can add enormous value to any company.

Sheridan Tatsuno
Santa Cruz, California

Anshu Sharma said...

This is an excellent summary of key takeaways by Sheridan Tatsuno. I will be refering to this comment in my future blogs.