Brad Feld

Category: Investments

Return Path just issued an Email Delivery Index research brief based on data they collected from 16,000 email campaigns representing 3.4m email messages over a four month period. They discovered that the best day to do an email campaign is Monday as delivery rates can be up to 10% greater.

Apparently much of Google’s IPO information will be disseminated via email. The expected concern about emails being blocked and spoofed immediately come to mind, as I’m sure all the phishers are out in force trying to figure out how to scam people on the back of Google.

We’ve got several companies in our portfolio – specifically Return Path and Postini – that are doing great work to try to address all the problems surrounding the email ecosystem. It’ll be fascinating to watch how the emails concerning the most visible IPO of 2004 get handled given the radically different approach Google is taking.

Google should definitely ask Morgan Stanley to send out the first batch of emails on a Monday.


StillSecure’s new product – Safe Access – just got an outstanding review in the August issue of Information Security. The punch line of the article is:

“Safe Access’ agentless architecture is brilliant and simple to deploy. This endpoint security solution gets straight “A’s” for enforcing policies to keep infected and vulnerable PCs off the network.” – George Wrenn, Information Security Magazine

The explosion of spyware, adware, and insecure client software (e.g. Windows XP, IE) has brought intense focus on endpoint security. StillSecure came up with a unique, agentless way to provide this security, building on the vision and expertise from their other great products, Border Guard and VAM. Anti-virus and anti-spyware products help, but if you don’t have your entire network locked down (which usually implies either high security overhead or limited end-user functionality) or control over the folks accessing your network (e.g. home users, remote users, visitors), these products are difficult to keep updated, hard to manage, and often annoyingly slow to use. Given how insidious the various attacks are and how quickly they morph, having an agentless solution is a great approach. It’s technically difficult to create software that works this way – StillSecure has come up with a product that addresses this problem in a unique, exciting, and cost-effective way.


On Thursday of last week, IBM announced that it had acquired Cyanea. James Chong – the CEO at Cyanea – is taking a senior management role at IBM, as James will be running the Application Management Group within Tivoli. As part of his new role, he will be integrating the various application management technologies that IBM has through Tivoli, their recent acquisition of Candle, and the acquisition of Cyanea.

We’re extremely excited about this deal. Cyanea has been one of the most successful early stage software companies I’ve ever been involved with. They shipped their first product within 9 months of being funded and in their first year of product shipments became one of the top providers of APM products.

IBM was an initial investor in the company and James had engineered a very substantial OEM agreement with IBM. We were in the final throws of closing a significant Series B financing when IBM made an offer for the company. James, the team, and the investors struggled with whether to go it alone or be acquired – IBM ultimately made it attractive enough for us to choose the acquisition route.

While I didn’t make our original investment in Cyanea, I took over responsibility for the company when Bill Burnham left Mobius. Bill wrote a good post on the APM market after the transaction was announced – I recommend it if you have interest in the players and technology in the APM market.

Between IBM’s acquisition of Cyanea, IAC/InterActiveCorp’s acquisition of ServiceMagic, ePartners merger with EYT, and solid July performances from a number of my portfolio companies, it was a busy but satisfying July.


Yesterday, IAC/InterActiveCorp announced that it acquired ServiceMagic.

ServiceMagic connects homeowners with prescreened and customer-rated residential contractors, real estate professionals and lenders. They are the market leader in this category of local services with over 50,000 active service professionals using their services, having facilitated more than 2.4 million customer request for home services, and generating an estimated $8.4 billion in consumer spending.

We invested in ServiceMagic in the fall of 1999. The co-founders – Michael Beaudoin and Rodney Rice – did an extraordinary job of creating a real company that survived the dotcom implosion, came out the other end with a strong business, did $20m of revenue in 2003, and was profitable and cash flow positive. IAC/InterActiveCorp has assembled a powerhouse e-commerce business through their acquisitions of companies such as Expedia, Hotels.com, Hotwire, Ticketmaster, Match.com, Citysearch, Evite, and LendingTree. ServiceMagic is another great addition to their Local & Media Services segment.

We’re all extremely excited about the transaction. Congrats Mike and Rodney!


I wrote about the merger of EYT and ePartners a few weeks ago.

Today, ePartners announced that Microsoft had named it Global Partner of the Year at Microsoft’s annual Worldwide Partner Conference. While not as exciting as the $32 billion Microsoft dividend announced yesterday, it’s great news for ePartners as the Global Partner award is Microsoft’s highest Microsoft Business Solutions (MBS) award.

Congrats to the ePartners team!


StillSecure – one of my companies that was founded and run by long time entrepreneur Raj Bhargava (cofounded NetGenesis, ServiceMetrics, Interliant, Quova, and StillSecure) – had a great week.

They started the week by releasing v4.0 of their VAM product (Vulnerability Lifecycle Management). VAM 4.0 is a mature enterprise vulnerability management product that now includes patch management and something we call one-click remidation workflow management (the best workflow management in the security market). We had good pickup on the product release including CMP Systems Management Pipeline and CRN.

Releasing a new version of a product is always a big deal, but we ended the week with a Best Buy award in SC Magazine for Border Guard – our intrusion prevention product, one of the key magazines for security professionals. We tied with Tipping Point and beat out companies like ISS and Netscreen.

The actual review was dynamite. Whenever you get the highest rating in every category, Positives of “easy to set up, comfortable to navigate, and it really streamlined the complex process of intrusion prevention without losing functionality”; Negatives of “nothing much”; and a Verdict of “one of the best in terms of usage and installation” you have something be happy about.

I’ve very proud of Raj and the StillSecure team and decided to shamelessly toot their horn. If you are looking for high quality, cost effective network security software (or know someone that is), please aim them at StillSecure.


Earlier this week, one of my companies – EYTannounced that it had merged with ePartners. My close friend and collegue Howard Diamond was the driver of this deal and is now executive chairman of ePartners. Howard was previously the executive chairman of Rebar / Corporate Software – an investment of mine that was acquired by Level 3 in 2002.

This is a big deal for us since the resulting company – to be called ePartners – is the largest Microsoft Business Solutions (MBS) provider in North America. ePartners has over 400 employees, including 220 solution consultants, 29 offices, and is headquartered in Seattle. For those of you that don’t know anything about MBS, it’s the division of Microsoft that was formed through their acquisitions of Great Plains and Navision over the past few years and includes the Microsoft CRM product line.

MBS has recently come under scrutiny as it has underperformed expectations. Also, the Oracle / PeopleSoft DOJ trial has revealed that Microsoft considered making an investment in Peoplesoft as a potential white knight as well as considered acquiring SAP in an attempt to further its foothold in the ERP business.

While the Microsoft – Peoplesoft investment and the Microsoft – SAP acquisition are highly unlikely, Microsoft is clearly committed to MBS and the ERP market. While VC’s have not historically funded companies that provide system integration and consulting services for Microsoft’s products, there have been several companies funded in the MBS universe. The merger of EYT and ePartners combines two of them and results in the largest and best financed in North America.

I’m expecially excited about this since my history with Microsoft Business Solutions products (specifically Great Plains) dates back to 1994 when AmeriData – which had acquired my first company (Feld Technologies) – became a major Great Plains integrator. I was also on the board of SBT Accounting Systems from 1994 – 2000 which competed with Great Plains and was almost acquired by them in 2001 before being acquired by Computer Associates. Finally, my partner Heidi Roizen was on the Great Plains board from 1998 – 2002 and was very involved in the Microsoft acquisition of Great Plains. I orginally invested in EYT in 2000 and – while it has been a twisty road through the bursting of the Internet bubble, I’m very pleased with where we are today and proud of the people that have helped get us here.


There has been some buzz over the last two weeks about VC investments in RSS-related companies including our recent investment in NewsGator.

One company that was overlooked is MessageCast.. MessageCast was founded in late 2001 by Royal Farros, David Hodson, and Mike Rubin. My partner – Heidi Roizen – provided the seed investment (Heidi and Royal had previously worked together for a long time at T/Maker – the company that brought us the wonderful invention of “clickart”.

MessageCast provides a platform for publishers to provide their content via IM technologies – specifically MSN Alerts. Suddenly, instead of publishing via email, content providers can cause an MSN Alert to appear on your screen. This – of course – is only opt-in – so you (the user) have complete control (and LiveMessage is completely CAN-SPAM compliant).

“Why should the RSS world care” you ask? MessageCast is in beta on their MessageCast Syndication Edition for RSS publishers. To try it – if you are an MSN Messenger user – simply click on my LiveMessage link right here or on the top right side of my blog under Syndicate Me.

Now – MessageCast won’t be a replacement for your RSS reader (hopefully it’s NewsGator or NGOS Web / Mobile / POP / Media Center Edition). Instead, you’ll use MessageCast for your urgent feeds – the one’s you want to know about the minute they are posted. MessageCast is provided to the publisher as a service – no software is required and it takes less then five minutes to configure for an RSS feed.

Give it a try and give me feedback on what you think.


Earlier this week Return Path announced that it has acquired Netcreations. As a result of this merger, Return Path now has over 1,500 U.S. marketers as clients, 500 top web sites and ISPs as data partners, 650 channel partners, and a registered user base of 41 million active consumers.

Both Matt Blumberg (Return Path CEO) and Fred Wilson (Return Path board member, managing director of Union Square Ventures) have written blogs on the deal. Rather than repeat what they’ve said (beyond – of course – congratulating both the Return Path and Netcreations teams), I’d like to talk about two key events that have occured in the Return Path’s history as a way to illustrate how acquisitions can play a key part in the creation of a startup.

Return Path Acquires Veripost – Creating a Leader in an Emerging Segment

I can’t really speak to the initial creation of Return Path as I was only aware of it shortly after I funded a company called Veripost (it was originally called IECOA – “Internet Email Change of Address” – thankfully we changed the name). The analog analog for Veripost (and Return Path) was that of the NCOA (National Change of Address) program provided by the USPS (if you have ever moved and filled out the change of address form in your post office, you are likely in the NCOA database).

Both companies came into existance in the 1999 – 2000 time frame. Veripost was a raw start up at the time that was founded by Eric Kirby (now at Doubleclick), George Bilbrey (see the comments on George below in the Assurance story), and Kevin O’Connell. Veripost spent the first twelve months of its life building its email change of address (ECOA) product. Return Path did the same and both companies launched at about the same time. We knew we were competitors, but initially didn’t realize how direct the competition would be. Even though both companies were very young, they instantly began slugging it out. There were a few other folks trying to put together ECOA systems, but they weren’t very visible.

In the summer of 2001, both Veripost and Return Path hit the road for a second round of funding. Interestlngly, they ran into each other at several venture firms who were looking at making an investment. I knew Fred was an investor and either I reached out to him or he reached out to me (I can’t remember which). If you recall the late 2001 funding environment, it was pretty bleak as the Internet bubble had burst and VCs were rapidly retrenching to work on their existing companies. In the context of this, Fred and I quickly broached the idea of merging the companies and then backing the combined enterprise. Given our past relationship (which was extremely positive and high on trust), we were open about strenghts and weaknesses on both sides. Fred has reminded me several times that at the end of our first conversation, I said something to the effect of “We can fund these companies separately and they’ll continue to beat the shit out of each other. At some point, one of us will have picked the right one and the other company will be dead. Or, we can merge them together and – worst case – we’ll have one shitty company to worry about…” (probably reflecting the emotional low that most VCs – and technology entrepreneurs in general – were feeling after the Internet bubble burst).

Simultaneously, Eric and Matt had started talking to see if combining the companies made sense. They had a typical “hush hush” meeting at a trade show (one of the DMA shows, if I remember correctly) and both came away excited about the idea of merging the companies. Since both the CEOs and investor groups were aligned on the idea, we started working on it in earnest.

In short order, we came to terms on a deal to merge the companies and put together a single financing. Both Fred and I have done a lot of mergers so we insisted that the two management teams work out the combined vision and team before we pulled the trigger on the deal. As part of this, Eric and Matt did a superb job of rationalizing the senior team and the operations of the company – leaving the CEO, finance, and sales in NY (where Return Path was located) and engineering, operations, and customer support in Colorado (where Veripost was located). Pre-merger, Veripost had about 15 employees; Return Path had about 25. Post-merger, the combined company had around 20. We were nervous about the split geography, but in hindsight it has worked out remarkably well. The integration was very smooth – hopefully Matt will blog about it at some point.

Greg Sands from Sutter Hill had been looking at both companies. He very much liked the idea of merging them together so he led a financing that Mobius, JP Morgan, Flatiron, and Doubleclick participated in.

Return Path Acquires Assurance Systems – Extending an Established Company into an Adjacent Market

Return Path’s ECOA business took off nicely. However, after about a year (end of 2002), the ECOA market was growing slower then we had anticipated. Since we had an excellent customer base and reputation / relationship with these customers, we started thinking through other potential services that we could add to the platform we had created. Spam had become a key issue for the email marketing industry and our clients (legitimate opt-in direct marketers like Williams-Sonoma) were struggling to insure that their email got through to their customers. Coincidentally, one of the Veripost founders – George Bilbrey – had started a new company called Assurance Systems. George had bootstrapped his company – working out of our offices in Colorado – and was growing the business very quickly.

We starting talking about Return Path acquiring Assurance Systems. George was still an observer on the Return Path board – as a result he was very aware of where we were as a business as well as the strategy discussions we were having. George, Matt, and Karl Florida (Return Path’s VP of Operations) went deep on the idea and we quickly agreed that the fit was superb as the functional strategy made a lot of sense and we felt confident that we could cross sell Assurance’s products to existing Return Path customers (we were already doing this). Geography was easy – George and Assurance were in the same office as the Return Path Colorado office. The cultural fit was also easy – George would be rejoining a team that he had helped create at Veripost.

Once we decided to do the deal, we were able to complete it in about 30 days. A year later, the delivery assurance segment of Return Path’s business has grown to be the same size as the ECOA business and shows no sign of slowing.

Act 3: Return Path Acquires Netcreations

Return Path’s acquisition of Netcreations is our most significant deal to date. Return Path now provides the email marketing market’s largest and most trusted permission-based customer acquisition solution. We also provide the leading market research solution to direct markers. We believe that as a result, Return Path now offers marketers an unparalleled suite of best-in-class e-mail marketing solutions to improve the performance of their customer acquisition and retention e-mail programs.

Matt Blumberg, Michael Mayor, and the combined Return Path / Netcreations team – congrats and let’s go get ’em!


Rally Software – which we funded with Boulder Ventures in October 2003 – just shipped their first product. Nine months from startup funding to v1 – not bad!

Rally provides an on-demand subscription service for Agile software development. I’ve written a little about Agile software development in the past – we’re finding many of our software companies are adopting various Agile development approaches. The “on-demand subscription service” is a key attribute of Rally’s product family – rather than heavy upfront licensing fees for software development tools, a customer can quickly and cost-effectively begin using Rally’s products.

If you or your company is using or considering Agile software development, I encourage you to take a look at what Rally’s products can do for you. If you are in the business of providing Agile products and services, consider becoming part of Rally’s ecosystem.