the returns are still substantial. If you look at BiPar, it’s a great case study. We were the seed investor that got it started. We started with a modest amount of capital. Over time, we’ve put $13 million in. It was probably our second largest deal. (We put $15 million into another deal, Audience.) A large holding for us as a venture team, not necessarily for Paul on the whole balance sheet, but we put that in as the risk got lower. It paid off. This is a deal where we’re going to get more than $100 million in cash. As a venture return, we believe this is one of the largest a Seattle-based investor has seen in the last five years or so. In 2009, it will be one of the better venture exits, period. Anywhere.
X: So who’s on the Vulcan Capital venture team, and what are their specialties?
SH: There are three of us. Myself, I’ve been here since 2002. The investments in the current crop, we really started investing in late 2003. The in-between year was a good bit of getting structure in place, the strategy, and managing through some of the prior investments. There’s myself and two others on the team, Stuart Nagae and Yongbai Choi. We really function as a single unit. For the most part, I’m the lead on the deals we do. We have a couple other affiliates. Michael Kranda, who has worked with us and remains active on a copule boards, for biotech advisory work. He brings expertise in that arena. We also have some other in-house expertise in the areas of clean energy and cleantech, alternative energy.
X: And how do you like to spread investments out across these tech sectors?
SH: My background is core technology. We’ve been increasingly doing activity in cleantech. We have four clean energy-related investments we’ve done. Because it’s a new sector for us, as it is for most VCs, we’ve paced our capital. We typically start with smaller equity stakes, non-lead roles, with our colleague Jill Watz, who brings energy technical background to the table. We’ve been able to get involved early stage in some core cleantech technologies. Our strategy is to partner with strong, deep-pocketed syndicates who have more expertise in the space. But at this point I can say that relative to other local investors in energy, solar, geothermal energy, we have quite a bit of expertise within our team. [See Luke’s separate story today on Vulcan’s biotech strategy—Eds.]
X: Tell us more about your investment themes, and how they’re different from the old days.
SH: Strategically, when we started deploying new capital back in late 2003, we made several changes. The first is we’ve gone early stage. We’ve gone earlier stage than many other traditional institutional investors. We’re willing to do sub $1 million dollar seed investments. They often look more like angel-size rounds. That’s reflective of our capital flexibility, as well as areas we can bring a lot of value to the table.
The second piece is a theme-driven approach. These are areas where we believe we have technical expertise, prior investment expertise. We can bring a focused effort to the table to make an investment decision, as opposed to getting involved in the early stages. There are other areas where we admittedly claim no expertise. We try to be very selective about the areas [where] we put capital.
If you look at the 20 companies we’ve invested in over the five-year time frame, most have an interesting backstory. The most active themes for us today [include] intelligent Web, and next-generation evolution of data. We invested in ZoomInfo as a result, we seed funded Radar Networks as a result. We created Evri in-house. Paul was very involved at that at sort of the whiteboard level. We spun it out and funded it. We created Gist in-house with T.A. [McCann], who was an entrepreneur-in-residence with me at the time. We whiteboarded that over a year ago, thought we were onto something, spun it out, and created it. That’s an example of how a single theme has led to derivative investments.
We’ve been very active in mobile as well, as a key theme. It’s broad in its definition. A few components we’ve been most interested in: We’ve invested in spectrum, two wireless spectrum auctions. One in 2003, and another in 2008. Let’s just say we saw the scarcity of spectrum, running against what we believe demand is for appliances, devices, smartphones, iPhone. With a view as infrastructure as the best way to play. Between spectrum, and another key investment, Audience, which is at the chip-set level, we’ve looked at a lot of opportunities in that space.
X: If you take out Charter Communications, are you beating the S&P 500?
CT: It’s a good question. I’d have to do the math. We do have some very good
