to your customers....
to your customers. We would have to convince ourselves that you were a good
company.”
“So what? You have to do that with any company.”
“No, with all the other companies, we just look at the names of the venture
capitalists who’ve backed them, and if it’s a big name like Kleiner Perkins, we
just take the company public without doing any research. We have no idea what
these companies do, we have no idea who their customers are or if they’re satisfied.
We don’t do any research. We just take them public and take our fee. So
in the same time it would take to take you public, we could do five or six of
these VC-backed companies. Sorry, we’re not interested.”
That was a wake-up call, and I think in retrospect it shows why so many of
these companies that were taken public couldn’t survive. They had no profit
and no possibility of making it, but the underwriters never looked at them
carefully.
I had brought in Cesar and another business guy who was a Harvard MBA,
and we had all these VC firms knocking on our door. I was an engineer. The
MIT way of doing things is that you delegate to the experts. If you are riding in
a car with five guys and it breaks down and you are a math major, you don’t get
out and start poking around with the engine if there’s a mechanical engineering
major on board. So I felt like, “OK, these VC firms are all claiming they are
going to provide added value and that their money is different, but it’s hard for
me to evaluate these things, so I’ll just delegate it to these two guys who are
MBAs. That’s what they’re supposed to know about.”
Probably the VC firm that we should have picked was called Summit. They
were very humble; they said, “Look, we don’t know how to run your company.
We know how to go to institutional investors and get their money, and then we
invest it in management teams with a track record of profitability, like yours.
We’re not going to tell you what to do and tell you that we’re going to recruit
everybody for you because we don’t know how to do that. We know how to get
Philip Greenspun 329
money from pension funds, give it to you, and then talk to an underwriter along
the way.”
There were these two VC firms—Greylock and General Atlantic Partners—
that were among the group, and they would send their senior partners by to
schmooze us and talk about their successful track records–building companies
and management teams. I thought to myself, “I don’t want to be CEO of this
company where I have to repeat myself and tell people what to do and travel
| ← Because we were | everywhere. It would → |