how they can be successful within their company. My number one passion is about seeing great technologies see the light of day, so I’m quite happy to give people advice that helps them navigate their own companies. That’s a way, meanwhile, for us to stay informed. And if they are not able to make that internal transfer, it doesn’t end up looking like a Hail Mary pass. If we look like we were Plan B all along, that is my ideal situation.
X: The team here must be pretty different from your usual group of venture partners.
DT: I joined after the spinout [of New Venture Partners from Lucent]. The people here very much have a passion about this technology transfer thing. Andy Garman, one of the managing partners, was at PARC. [Garman also managed spinouts at Bankers Trust and Lucent’s Bell Labs.] So he’s been butting his head against tech transfer for years. Steve Socolof was closely involved in the spinoff from Lucent and was in management consulting. Tom Uhlman, before Lucent, had been at HP, so he saw the problems there. Those are the three managing partners. So there is a deep commitment about this issue of spinouts and trying to help teams move these technologies downstream.
X: How does the pitch that NVP makes to potential investors differ from other venture firms?
DT: The limited partner base is not as atypical as you might think. But we are offering them a different value proposition. For one thing, it’s a differentiated deal flow that’s coming to us. The guys on Sand Hill Road are all seeing the same deals and vying amongst themselves, so if you are thinking about investing, should you do your n-plus-first investment on Sand Hill Road, or should you invest in NVP? The second part of the proposition is that these are technologies where somebody has invested a lot to give us a head start. This is university research, plus some corporate research on top usually, and it’s much more de-risked and ruggedized and all that.
I don’t kid myself that I’m smarter than the folks on Sand Hill Road, but we are looking to do deals that they would not normally do—and once we package these deals, they will often participate. We like to syndicate, but most other VCs don’t really like to lead the spinout.
X: How hands-on do you get with your portfolio companies?
DT: We are very hands-on. Part of the reason most VCs won’t do these deals is that you have to spend a lot of time looking at the deal, and then you have to negotiate the IP, and then you have to go find a CEO and sales and marketing people to go with the founding team. During that first six to nine months before you do the spinout, and for a year or two afterward, there is a lot more heavy lifting by the investors. Once you get to the Series B, it’s pretty much the same. In the classical VC world, partners are really good at looking at a huge deal flow, picking the ones they want, and moving on. We are able and willing to spend a lot more time. It also means we’re going to look at far fewer deals, but as I said, the stuff we’re looking at is a lot more mature. Because we’re getting highly selected deal flow, we can afford to put in a lot more time per deal.
X: What do you spend the most time on with your portfolio companies?
DT: Probably putting teams together, and thinking about what else they could do with the technology. In the classic VC world, what happens is that business plans get serially improved as entrepreneurs shop them around. The entrepreneur shows up, the VC tells them why they aren’t going to invest, the entrepreneur improves the plan, they go to the next VC, and the original VC doesn’t benefit. We stick with the deal and go the whole life cycle. The entrepreneurs have typically been thinking with blinders on, because their assumption has been that they are going to commercialize their technology within the context of their company, and that causes them to think in a very limited way about channels. We get to exercise a lot of creativity. The traditional VC has the same creative capability, they just tend not to use it. They tend to say yes or no.
Continue to Part 2: The spinout story at Everspin, and what happens when companies when companies don’t give their researcher-entrepreneurs’ best ideas a fair hearing.
