I woke up to two big local Boulder deals. The first hour of my day (usually 5am – 6am) is “reading time” – online newspaper, catch up on email, blogs – so I always get a good dose of “whatever new happened” first thing in the morning before my run. M&A activity in Boulder is always a highlight, and there were two fun deals today.
Our local amazing shoe company – Crocs (which sports a number of now very wealthy angel investors (one of them refers to his Crocs stock as “his shoe money”) – acquired Jibbitz for $10m plus a $10m earnout. Congrats go to Sheri and Rich Schmelzer, who created Jibbitz in their basement in 2005, created a phenomenon that road on the “soul” of Crocs, got the business up to $2m / month in revenue, and scored a great exit. Rich and I worked together for several years on an ill-fated company called Xaffire (which was ultimately acquired by Quest Software, but not for very much.) Nice comeback Rich!
Another minute, another deal. Gilead Sciences acquired Myogen for $2.5 billion. I’m indirectly an investor in Myogen through my investment in Sequel Venture Partners – this is another nice win for Sequel and the Boulder biotech scene (Sequel was the lead investor of the first round of Myogen.) Congrats Dan, Sequel, and all the folks at Myogen. Bill Freytag (Myogen’s CEO) and his management team have a monster win on their hands.
Lest I forget the Pepsification of Boulder. Last week, everyone’s favorite local soft drink company – Izze – was acquired by Pepsi for $75m. Once again, I was an indirect investor through my investment in Greenmont Capital – congrats to Todd Woloson – Izze’s CEO and co-founder for creating an awesome company (and incredible beverage). In addition to Greenmont, my friends at Tango were also investors – drink up everyone!
Congrats to my friend Scott Maxwell who just launched his new venture capital firm – OpenView Venture Partners. I’ve gotten to know Scott over the past few years while working together with him on the Microsoft Emerging Business Team Venture Capital Advisory board.
Scott is a tireless, deeply focused, thoughtful, and supersmart guy who has developed and perfected his unique approach to venture capital investing at his previous firm Insight Venture Partners. His performance and track record shows and I am happy to count myself as an investor in his new fund.
Scott – I’ll see you in Redmond on Wednesday and give you a proper congrats then.
Pascal Levensohn and his partners at Levensohn Venture Partners have started a new podcast on Venture Capital called VC-Inside Out. The first two episodes are up: (1) Six Early Warning Signs of Trouble in the VC Board Room and (2) Creativity Meets Reality – Understanding the Completeness of your Idea.
While I was on vacation, I got an email from someone much more “in the know” than I am that it is highly unlikely that the final 409A regulations will be finalized in time for them to be effective by 1/1/07. Daniel Hogans – attorney-advisor in the Treasury Office of Tax Policy – stated during a speech at the American Law Institute-American Bar Association’s meeting last week that the proposed regulations’ effective date of Jan. 1, 2007, is “increasingly unworkable at this point.” People can “reasonably expect to see additional guidance” on the effective date issue. Hogans said he did not expect structural changes in the final regulations, but there will be changes in the details.
When I was a teenager in Dallas hanging out at the shopping mall and the skating rink, one of my favorite songs was Queen’s Another One Bites The Dust.
Another one bites the dust
Another one bites the dust
And another one gone and another one gone
Another one bites the dust hey
Hey I’m gonna get you too
Another one bites the dust
Today, Tandberg Data announced that it has entered into an agreement to acquire Exabyte for $28m. This is a sad ending for a company that is a key part of Colorado’s technology ecosystem. Exabyte was started in 1985 by a number of StorageTek (now owned by Sun) veterans including Juan Rodriguez – a firmament in the Colorado tech and worldwide storage industry. The company has had numerous ups and downs over the years, including several that I watched since I moved to Boulder in 1995.
Exabyte joins its cousins StorageTek and McData as two publicly-traded Colorado-based storage-related companies that are no more. I wonder who’s next (and who the “I’m” is in the chorus.) Oh well – as Jay Leno used to say “Eat all you want … we’ll make more!” Dear My Colorado Entrepreneurial Friends – view that as a rallying cry.
My friends at Cooley Godward announced yesterday that they are merging with NY-based Kronish Lieb Weiner & Hellman. The new firm will be called Cooley Godward Kronish. I’m been a long time fan of Cooley Godward, have worked closely with them in both Colorado and the Bay Area, and have had a long standing relationship (both personal and professional) with Mike Platt – one of the senior partners in the Boulder office. One of Mike’s partners (and another friend and colleague of mine) – Jim Linfield – indicated that the merger isn’t likely to have any impact on the Cooley Colorado office. Given how Cooley has operated in the past, I see this merger as a positive move for them. Congrats guys.
IBM announced today that it is acquiring Internet Security Systems for $1.3 billion. This is IBM’s third large deal in as many weeks. I wrote about IBM’s acquisitions of FileNet and MRO on August 10th for a total of $2.4 billion – I wouldn’t have guessed they would have made another $1+ billion acquisition so quickly. With the acquisition of ISS, IBM has entered the security market in a big way. I wonder if they have an affinity for companies with three initials (ISS, MRO) – I guess I should abbreviate a bunch of my companies names to see if I can attract some attention.
There’s been a lot of talk about Oracle being the major consolidator of mature software companies, but IBM continues to march forward aggressively. They bought FileNet today for $1.6 billion and MRO Software a week ago for $740 million. While – according to the Wall Street Journal – IBM has acquired 56 software companies since 1995, FileNet is the fourth largest after PWC Consulting ($4 billion), Lotus ($3.5 billion), and Rational ($2.1 billion).
Historically, IBM has been a small to medium sized acquirer – many of their acquisitions are between $25m and $200m. FileNet and MRO are chunky ones and help continue to build scale in the $17 billion plus (probably over $20 billion now) IBM Software division.
In the past few years IBM has acquired two companies that I was on the board of – Cyanea and DataPower. Both companies were growing quickly pre-acquisition and doing great in their respective markets. IBM paid a nice price for each of them and – based on what I’ve been able to gather – is seeing a significant ROI on their purchases as they push the companies’ products through IBM’s massive sales and marketing machine. This is both great for IBM and great for entrepreneurs as IBM will presumably be willing to continue to be an acquirer of strong, high growth software companies.
Cliff Reeves – currently at Microsoft – but also an alumni of both IBM and Lotus – had some good thoughts on the deal. In my dealings with IBM, I’ve found them to be a deliberate and thoughtful acquirer – I expect IBM Software will continue to grow effectively through acquisition for the foreseeable future.
I love to invest in companies where I can be actively involved as a user of their products. One of the benefits of actively blogging over the past two years has been an opportunity to play / work with numerous entrepreneurs in my own “lab” (my blog) to understand how their technologies and products work, how the ecosystem around them evolves, and what seems compelling (vs. just interesting or clever.)
Several of my companies give me great opportunities to dig really deeply into their products and help with strategy, product vision, and implementation. They intelligently keep me away from any real coding or product development activity, but I’ve developed skills as a great alpha tester and feature describer.
An example of this is FeedBurner. I’ve been an active user of their service since May of 2004, well before I invested. I got to know the founding team (and they got to know me) through my use of their service. I was suggesting features and finding bugs well before I invested – and their reaction to the feedback was part of what caused me to invest (not simply listening to me, but arguing with me, and often explaining why I was wrong.) I’ve continued to aggressively use all the features and am excited whenever something new – like the early beta (or even alpha) of the FeedBurner Networks comes out – and I get to help dig in and help shape the final product. Of course, the real benefit (ultimately to FeedBurner and their publishers) is the phenomenal feedback loop – both positive, negative, critical, and random – that emerges as a result of both users and observers – and – in today’s world – is readily available on blogs commenting about the service.
Another example is NewsGator. I downloaded NewsGator for Outlook the day before I met with Greg Reinacker for the first time in 2004. I didn’t completely understand it, but after we met, I completely got it. Since then, I’ve been banging away with glee on all of the NewsGator products – along with the competitors products – as we try to stay solidly ahead of the pack with regular innovation across the entire product line.
Every now and then I stumble into a fun random gem buried in a product that I never realized as I’m trying to solve a problem. I had one of these experiences today – Amy asked me if she could have the blogroll on the right side of her blog be the same as a subset of the feeds she subscribed to in NewsGator. She had been manually maintaining this in TypePad (and I was doing the same on my blog on the left hand side – I subscribe to 800 or so feeds but only list the ones I regularly read on the blogroll.) I knew about the NewsGator Online “locations” feature that allows me to create different locations – my Homer computer, my Laptop, my cell phone – and select a subset of the entire feedlist for the specific location (e.g. I don’t want all 800 feeds on my cell phone.) However, I’d never thought about using this for the blogroll.
Yes – that is way too fucking hard. But – since I worked through it once, I was able to do it in under 5 minutes for Amy’s TypePad blog. Plus, because of the magic of synchronization, you can change the blog titles in whatever reader you user (e.g. Amy uses NewsGator Inbox – she right clicked, chose Properties, and changed the names of the feeds to what she wanted – e.g. “Feld Thoughts” became “Brad Feld: Feld Thoughts” and then appeared correctly on her blog in TypePad.
When I think back over the past dozen years that I’ve been doing this, my most successful investments were ones that I personally related to, could use their products, and could really dig into them. Now – I know I’m not the broad market user, and I never confuse myself with that person (especially with enterprise related products), but I do play one on TV. Plus – it’s a really satisfying approach to this business.