CEO Summit: Double the CEOs = Double the Deals
25th May 2011 · 0 Comments
Bob Metcalfe, the inventor of Ethernet and founder of 3Com among many achievements in an illustrious career, is pictured above with yours truly. Dr. Metcalfe is now a professor at the University of Texas and chaired the concluding panel of the CEO Summit.
This final post resulting from this event is about the availability of capital in Austin, and it’s a conversation not unlike many I’ve heard in Atlanta. Most tech centers have a certain amount of “Valley Envy.” I’m going to pick interesting comments from several panels on that topic.
Metcalfe stated that the availability of truly qualified CEO’s is the limiting factor on deals getting done. He said venture funds with which he has been associated could have deployed twice as much money if they could have found twice the number of CEO’s.
He said that the competition among the Bay Area, Boston, and NYC, is not a zero sum game. One advantage the Bay does have is its network affect. VCs there have a pool of “drop-in Ninjas” on marketing, operations, or whatever skill is needed at a particular stage in a company’s evolution. They also have CEO bench strength and can rapidly shift gears from the $0-10M revenue leader to the $10-100M builder.
Governor Rick Perry touted the Emerging Technology Fund, which to date has deployed $196M accompanied by $170M in matching grants. That’s a big plus for the state.
Jen Grogono, CEO of uStudio, reported a $2M strategic raise that she described as serendipitous but one that required a highly creative terms sheet to align the interests of the partner with those of her company. In particular, defining a “win” and potential exits in terms acceptable to her company was important in the context of being affiliated with a behemoth partner. (I’ve been caught in a “rounding error” classification twice by taking strategic money, so I know where that can lead.)
Barry Evans, CEO of Calxeda, a heavy science play aimed at reducing server power costs, used a combination of strategic partner contributed IP, $1M from the aforementioned Emerging Technology Fund, then seed money, angels, and more recently a 2.5 year process to close $48M. Patience and creativity there for sure.
Josh Baer, CEO of Other Inbox, bootstrapped his first company in college in 1996, the bootstrapped and sold two more, now with his latest has raised $4M from angels, 1/3 each from Austin, the Bay Area, and NYC. With profitability achieved he’s contemplating where to raise a next round. He noted in particular that what used to cost $5M to start dropped to $500K and may now be $150K and still headed down.
Josh Williams, CEO of Gowalla, founded his company in Dallas, launched at SXSW and then moved to Austin. He said Austin creates plenty of talent that supports the Twitter class companies, however in his case he hires more than half his people from the Bay Area. He did note that the Bay has more of an “all or nothing” mentality; failing at a startup in Austin doesn’t have such a cost-of-living penalty as in the Bay – one can enjoy a very pleasant existence here on relatively low wages in between startup gigs.
There were general comments about there being less friction in the Valley in getting deals done and underway, and mention was made of the commonly stated maxim that failure is not a stigma there, just experience. A response to that for Austinites is play your part individually, don’t quit, and think creatively and not linearly (“the MFA is the new MBA”). Austin was mentioned several times as having great Karma and a general willingness of entrepreneurs to help each other, which I have certainly found to be the case.
And, finally, Dr. Metcalfe at the end of the day was the first to bring up Dell, which was not mentioned prior and which was not represented in the room. I’ve often written that Atlanta needs an anchor tenant like Dell to create a new ecosystem of startups, but in fact Dell has not had that effect in Austin. It has generated considerable wealth but is more of a distribution company than a creator of technologies that lead to spinoffs.
