On July 15, 2008 SDF held the Digital Media Quarterly at Fish Richardson in Redwood City. Mike Doran of Fish & Richardson moderated a panel with Jamie Bertasi of Tellme, Jason Harinstein of Google, Chad Kinzelberg of Scale Venture Partners, Yezdi Lashkari of mXact, and Anne-Marie Roussel of Microsoft. They discussed the digital media business models, the pitfalls and what technologies are driving new media.
Mike Doran of Fish & Richardson focuses on early stage companies as they grow for M&As or IPOs. He said the second quarter of 2008 had no VC backed IPOs for the first time in thirty years. In spite of that, VCs raised nine billion dollars in the second quarter over the first quarter. With no IPO exits, acquisitions seem the way to go.
Acquisitions are risky. You can destroy the very thing you want. Buying a brand or intellectual property is nothing compared to talented people who can create more of both.
Every company Jamie Bertasi of Tellme has worked for has been acquired, starting with Lotus. She says companies like Microsoft stay the course despite economic downturns. To get acquisition attention, build a successful and exciting business and they will find you. Build company because it is your passion, the possibility of an early buyout should be secondary. After acquisition, people stay because they love what they do but should still be generously compensated so they stay for at least two or three years.
Jason Harinstein of Google Inc. deals mostly with acquisitions and occasional strategic investments in places like China. Google has announced fewer deals but is still looking. There are more companies wanting to be bought. There is so much money in the pipeline that it will take time to get it into a new company. He looks for passion and not people wanting to sell out.
Chad Kinzelberg of Scale Venture Partners deals with growth or late stage companies like internet media. advertising, software as a service, mobile and enterprise applications. He says there is a lot of VC money chasing too few good deals. He encourage startups to continue building their businesses until the overall climate improves. If you develop a competitive advantage people will buy your company. Venture capital has an advantage over corporate investment. It can avoid conflict of interest should your company attract a corporate competitor.
Yezdi Lashkari of mXact is an expert in collaborative filtering from his days with Firefly. It was acquired by Microsoft giving him useful experience when a small company is acquired by a large one. One way to get attention is to have something unique like Firefly’s product. Firefly was courted by both Netscape and Microsoft. They thought Microsoft wanted it more and went with them. You can’t predict who is going to buy your company because a startup may change direction responding quickly to the market. It is critical to have a champion inside the acquiring company that knows how your company will add to theirs.
Anne-Marie Roussel of Microsoft is part of their global emerging business team focusing on gaming for the xBox, music for the Zune, video for the Media Center. She looks for very small startups. They want talent and incredible IP and quick access to a new market. Last year they acquired over 22 companies and 14 deals so far this year. The latest purchase is an Israeli company that brings semantic search and catalog corporate data for MS SQL Server.
The best way to be acquired is to not focus on being acquired. Focus on building your business. Be the reason why a company would want to buy your company. Be so good they can’t ignore you.
Here are some pictures from the event.
Copyright 2008 DJ Cline All rights reserved.