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.

2 comments:

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
www.ryze.com/go/tatsuno
www.dreamscapeglobal.com

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.