The Two Californias of Venture Investing

Idea rich and resource rich: support them both with the right ecosystem.


27 April 2004
AlwaysOn
Jim Armstong

Although Sand Hill Road falls within the same state lines as Santa Monica, from a VC's perspective, they are worlds apart.

Silicon Valley has a unique place in the world of venture investing, as it is located within a confined radius in Northern California. Working out of Clearstone's Menlo Park office, we can literally walk out the front door and find all the ingredients-entrepreneurs, sophisticated capital partners, management/sales and engineering talent, and most importantly, an understanding of the patterns and challenges that create or deny success for the fledgling technology company. The flow of credible entrepreneurial ideas is rich, and new companies emerge almost daily. Trusted relationships have been built around successful patterns of learning how to get these companies to sustainability.

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Something Ventured, Something Gained

CIOs and venture capitalists are back together. VCs are eager for CIOs' insights on startups. CIOs get access to and influence over the latest technology.


15 April 2004
CIO
Kim Girard

How CIO Councils Work
The specifics of VC-CIO relationships vary quite a bit. There are about 700 venture capital outfits in the United States, ranging from firms that seed-fund new ventures to later-stage investors willing to gamble a lot of money on a company with a product. Though the National Venture Capital Association and other organizations that track the industry can't pinpoint the number of VC-organized CIO councils, dozens of firms are quietly using the groups as a crucial part of their investment strategy.

Larger firms such as JPMP and New Enterprise Associates gather their CIO groups once or twice a year in person and more often by telephone. Clearstone Venture Partners, which runs a midsize fund, prefers a more loosely knit CIO group with fewer members and roundtable-style get-togethers. A few venture firms hire CIOs to provide in-house expertise or invest in CIO groups. For example, Rabbe was an executive-in-residence at Clearstone for seven months before taking a job as CIO at Yahoo. Mobius Venture Capital invested in the Feld Group, a consultancy comprising former CIOs who helped revamp the IT departments of Fortune 500 companies such as Delta Air Lines and PepsiCo. The Feld Group, which is now owned by tech-services giant EDS, helped give Mobius "visibility into the world of CIOs," says Bill Burnham, a former managing director at Mobius.

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More Pain Than Bane - Start-ups survive Sarbanes-Oxley strictures

3 April 2004
intelligent enterprise
Mark Leon

Board Recruitment Might Suffer

It is the gray area of whether board members may be penalized that might have a more immediate effect. A firm's board has new responsibilities under the law to certify to the SEC that accounting and audit procedures are SOX compliant. Some questions of board member liability, according to Jim Armstrong with Clearstone Venture Partners, are unresolved. "One of my main concerns is that it will be harder to recruit board members," says Armstrong."

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FOREIGN FINDS:
Venture and Private Equity Investors Eye Overseas Markets


22 March 2004
Los Angeles Business Journal
Andrew Simons

Don't look now, but venture capital and private equity firms could be nextto move some of their operations overseas.

A cheap but maturing labor force and emerging economies are making for some interesting opportunities abroad, according to local investors who normally shy away from investing beyond the U.S.

"While we have not invested in companies that have a predominant portion of their activities offshore, we are certainly looking at the issues and opportunities there," said Murray Rudin, an Irvine-based partner with Los Angeles-based private equity firm Riordan Lewis & Haden LLC.

To be sure, investing in local companies still is the priority for many Orange County and Los Angeles-based investors.

But some foreign-based technology and biotechnology startups interest them, as do others that provide outsourcing and consulting services.

A big enticer: Startups can be grown cheaper overseas, said William Quigley, managing director of Santa Monica-based Clearstone Venture Partners LLC. Quigley said he's looking at a potential investment in a telecommunications gear maker in India.

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A global hardware R&D hub?
4 June 2003
Business Standard
Subir Roy

Two companies which have joined the old timers in the league table for high end work are Force Computers (a multinational) and Tejas Networks. The Bangalore development center of Force (owned by Solectron) contributes over half of the design requirements of the company which is number one in its segment of embedded computing and computing platforms, says Ushari TS, managing director for India. As an end-to-end design operation, Force has to work with microprocessor manufacturers and the plus point now is that companies like Intel and Motorola are also there in India doing their own designing. Therefore, an "eco-system" is developing with a range of companies performing various tasks in the entire designing value chain. Force also generates its own IP but it is in "what we put together. Designing a system for a customer is our IP," adds Ushari. Like all high end design operations in India, Force is scaling up, having increased its people strength from 35 to 100.

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Getting back into the water
2 June 2003
Los Angeles Business Journal

The stock market appears to be showing signs of a rebound as global conditions inch towards more stability than has been seen in months. However, not everyone is convinced that the market is ready to shed its bearish ways just yet, and many believe caution is the order of the day. So the Business Journal asks:

Are you going to play the market or play it safe?

"I think you'll see the amount of venture capital in Southern California is going to be growing. There are offers flying everywhere for venture capitalists offering to invest in companies. There's a lot of activity. Personally, I'm a long-term holder. The worst thing you can do is sell in a depressed market. I'm also a long-term believer in information technology, and I think we're still in the first inning there. In all the sectors around data storage and security, there's lot of neat things happening with products that a lot of corporations are going to buy."

Jim Armstrong
Managing Director
Clearstone Venture Partners


Venture Capitalist - Now's Time To Invest In Tech
By JAMES DETAR
10 March 2003
Investor's Business Daily

Q & A

Tech venture capital investing fell off the charts after the dot-com bust. But venture money is starting to trickle back into the market.

One reason, say some analysts, is that parts of the tech sector are ready to grow again.

Gartner Dataquest, for example, says it expects chip sales will rise 9% this year to $167 billion.

William Quigley is managing director at Clearstone Venture Partners, a Menlo Park, Calif., tech venture firm. He specializes in computer chip and communications start-ups. Quigley says now is a good time to invest in some tech segments.

In an interview with IBD, Quigley talked about what's hot.

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Netflix adds its name to dot-com survivor list
By Scott Herhold
27 January 2003
San Jose Mercury News

In the short, painful history of the boom and crash, only a handful of dot-com companies has made it to profitability and credibility: eBay, Expedia, Yahoo and perhaps Amazon.

Now you might want to add one more to your potential watch list: Los Gatos-based Netflix (NFLX), which has seized on the seemingly offbeat idea of renting DVDs through the mail.

I've written skeptically about Netflix before. At $12.33 a share as of Friday, it's still well below its $15 IPO price in May. It's not an investment for the faint of heart.

But a couple of recent positive signs make it worth watching the stock, which has moved up smartly since reaching a low of $5.22 in October.

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Mergers' 'goodwill' gone bad can sour the books
Ron Wilson
24 February 2003
Electronic Engineering Times

San Mateo, Calif. - Two giants of the new economy, AOL Time Warner and Broadcom Corp., hit the headlines in recent weeks with enormous quarterly financial losses. Broadcom reported an astonishing $1.768 billion loss for a single quarter, and AOL eclipsed the chip maker's news with a $45 billion write-off.

Analysts and corporate financial managers say there probably are more huge write-offs coming, but they may not spell gloom and doom for the electronics industry as a whole or even, necessarily, for the individual companies. The reasons are buried in the source of the write-offs: a relatively obscure change in policy by the Financial Accounting Standards Board announced in the middle of 2001.

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