Live with guest host John Schwartz
Discussion With Venture Capitalist Jack Biddle Thursday, June 10, 1999 at 1 p.m.
Welcome to The Download – Live. I'm your host, John Schwartz, sitting in for Shannon Henry. Shannon will be back in two weeks. My guest today is Jack Biddle (below, left), a partner with Novak Biddle Venture Partners.
Biddle is a former IT industry analyst and has served as an executive with several software and venture capital firms. He is a member of the board of the Computer & Communications Industry Association.
Henry profiled Biddle's firm in February, telling of the humble office that wields so much power over so many futures. One room with four desks serves as a soapbox for hopeful entrepreneurs and a sparring ground for Biddle and his partner to debate which firms have promise.
We discussed the emergence of the Washington area as a tech center and the availability of funding for start-up companies.
Hi, everybody, and welcome to our chat. We're here with Jack Biddle and welcome your questions. I'm John Schwartz, filling in for Shannon Henry.
John Schwartz: --What are some of the companies you've helped to fund?
Jack Biddle: Locally, we were investors in Telogy Networks, which makes software for carrier class voice over internet. It was announced last week that Texas Instruments is buying them for a shade over $500 million.
John Schwartz: --I'll kick off the questions. Mr. Biddle, how did you decide to take on the world of venture capital?
Jack Biddle: Its a little strange, but its what I have wanted to do since I was in college in the early 80's. Its a business where you can make a difference, and intellectually, its like being a kid in a candy store full of brilliant ideas. I started in the business out of school, then left for 12 years to learn the operating side, then co-founded NBVP with Roger Novak
Jack Biddle: There really isn't. There is just too much uncertainty.
John Schwartz: --What are other companies you think bear watching--whether or not your company has invested in them?
Jack Biddle: Ciena's founder has a new company that sounds very promising. We passed on a deal or two that in hindsite we should have done. WebMethods is pretty interesting. That said, we think our portfolio has a pretty fair share of some of the more compellin new companies in the region
John Schwartz: --Let's talk about some of the recent deals in the area--Texas Instruments has bought Telogy, a local firm that writes the software that runs DSP chips, which are found in mobile phones, phone network switches, and more. What does that deal do for the local company?
Jack Biddle: I think the Telogy/TI deal is just the latest of many very significant local start-ups. Companies like AOL, Ciena, UUNet, Torrent.
John Schwartz: --How much of your time is taken up, roughly, with pitches?
Jack Biddle: We probably spend roughly a third of our time working with current portfolio companies, another third taking detailed due diligence checks on strong candidates, and a third on first meetings, and reading business plans
Virginia: What's the most persuasive pitch you've ever heard?
John Schwartz: Let's just assume, because this is a family publication, that we're still talking about business here. Mr. Biddle, do you recall one pitch that really stood out--and what about it got your attention?
Jack Biddle: We have made several comitments pretty much on the spot, and other times, we might spend 6 months.
Arlington, VA: How do new entrepreneurs go about connecting with a venture capitalist? How does that process work?
Jack Biddle: We get so many plans, its really hard to stand out. Its like getting a thousand resumes for one job. You don't look for reasons to say yes, you look for reasons to say no. He wasn't an eagle scout, 62 others were, etc.
McLean, VA: Mr. Biddle: Could you speak a bit about your past experience as an IT industry analyst? How much did that educate you about both the technical and business -money- issues you now deal with day to day when deciding where to invest your money?
Jack Biddle: I was at the Gartner Group early in my career, and it was beneficial. You really learn in that business the importance of 'mental mindshare'. The entrepreneurs who can position there companies well with the analysts, wall street, and the media are in the best position to recruit the best people and the best investors. It feeds on itself, and tends to become self fulfilling -- not always, but often
Washington. D.C.: How much of an investment do you typically make in a company?
Jack Biddle: We have intentionally stayed small so we can continue to focus on the 3 guys/gals in the garage.
John Schwartz: In one of your responses, you said that your time is set up in thirds: "We probably spend roughly a third of our time working with current portfolio companies, another third taking detailed due diligence checks on strong candidates, and a third on first meetings, and reading business plans." What does that mean in terms of a typical day? When do you start up in the morning, and what sort of business-related social events keep you going into the night? When do you get to call it a day?
Jack Biddle: My wife isn't thrilled, but with the recent closing of Fund II, I usually get up at 6, get home at 7, see my family for an hour, then am on the computer or reading plans until 12 or so, but try not to work on week-ends
Falls Church, VA: I just returned from a conference in the Silicon Valley, and let me tell you, the energy there is palpable. The whole Bay Area is tech-crazy, and it's really quite an exciting environment. I know our tech sector is expanding and vibrant, but we just don't generate that kind of buzz here, and it's regrettable. Thoughts?
John Schwartz: This question undercuts the one I just asked you, but it does raise an important point: is the fact that Washington a government town detract from its ability to position itself as a high-tech center? Is it possible to be a tech Mecca when the atmosphere is suffused with budget talk, partisan food fights and sex scandals?
Jack Biddle: This is a real interesting question. I have kind of joked about the inevitability of 100% tax rates when the congressman and senators have to commute 2 hours because they can no longer afford to be near DC, since the techie millionaires will own all the good local housing.
Cinnaminson, NJ: Say I have a great idea, but no -and I mean NO- capital or entrepreneurial experience. How easy -or difficult- is it to get a business plan together, find potential backers and nmake a convincing pitch?
Jack Biddle: Depends on the idea, but if you don't have any capital at all, and can't develop the idea where its credible, its really nearly impossible to get institutional money.
washington, dc: is it possible for ordinary investors to invest money in your venture fund?
Jack Biddle: The VC world is nearly impossible for individuals to invest in, unless you are a 'value added' investor. Cable and Wireless's just retired CEO is an investor, as are many others like him. But they are huge helps to us.
washington, dc: the whole question of valuation for a brand new company seems to be a shot in the dark. does the vc assign the valuation, or is there some input from the founders?
Jack Biddle: Its always a negotiation. The entrepreneur explains how he is worth 30 times year 2001 revenues, since Koop, or Yahoo is. We don't really care what the public pays.
washington, dc: does it make more sense for a new company to seek venture funding or angel investor funding?
Jack Biddle: If you've got a good idea, and are committed to making it happen, what makes sense is to get on with it any way you can. If you can get quality VC, take it. If you can't, take angel money. As they say, 'gotta play to win'
Bethesda, MD: As an entrepreneur what's the process for seeking venture capital from your firm. What documents, information do you require? What's the selection process and criteria? Where does one start?
Jack Biddle: We work with all the accounting firms and tech lawyers. They are a good way to get an intro. We do occasionally invest in 'over the transom' ideas, but that is rare.
Arlington, VA: What are some of the other sources of contribution to your funds?
Jack Biddle: Institutions are conservative, just like VC's.
St. Joseph, Mo.: Are there many women in venture capitalism these days?
Jack Biddle: There are very talented Women in VC, but it is a minorty. Suzanne King locally is at NEA. There are superstar female General Partners at Oak, Patricof, etc.
Arlington, VA: When do you think we'll start seeing startup companies emerging from retired millionaires from AOL and UUNet?
Jack Biddle: As a rule, retired millionaires don't make great entrepreneurs. We like near millionaires who wouldn't dream of retiring, and still have the fire in the belly.
Jack Biddle: The worst thing to happen is to have me or my partners no more about your market than you do. The best is to have an absolutely commanding knowledge of the players, markets, etc
Silver Spring, MD: Have you financed or considering financing and African-American internet ventures?
Jack Biddle: We have looked at a number of deals started by African Americans, but haven't financed one yet. We fund 'deals', not groups. Frankly, we are probably more likely to fund a minority founded company because there might be more fire in the belly. In technology, it really is all about what you can do.
Jack Biddle: Who knows! The demographics of the baby boom means lots a free cash, which is driving a lot of this, but its also a cyclical world.
Well, folks, that wraps it up for us today. I'd like to thank Jack Biddle for taking the time to be with us, and for shedding light on the world of venture capital. It's been great. And let's all wish Shannon Henry well--the reason I'm filling in for her is that she's getting married today! So congratulations, Shannon, thanks to Jack Biddle and to all of you for joining us. See you online!
Thanks for taking our questions!
The VC world is stratified by early, mid and late stage funds. We are early stage investors, so the idea/team is never complete. Thats what we do.
© Copyright 1999 The Washington Post Company