(Editor’s note: Dave Kellogg is CEO of MarkLogic, an information infrastructure software company. He submitted this column to VentureBeat.)
While I often challenge VC conventional wisdom, I actually have a great deal of respect for the difficulty of what VCs do. Particularly in the early stages, I think it can be extremely hard to see value that might only become apparent months/years later. For example, by chance, I got to see a YouTube demo when the company was in its infancy – even before Sequoia made its investment – and while I was wowed by the technology (the demo I saw was on a mobile phone), I never would have imagined at that moment that they’d sell the company 18 months later for $1.2 billion.
Some companies did seem obvious to me. I knew PeopleSoft would work because I saw too many customers building their own HR apps on top of relational databases in the late 1980s. I knew Salesforce would work because I personally knew the difficulty of working with an IT department more concerned with financial systems and infrastructure than helping business operations.
In a nutshell, I think what early-stage VCs do is very hard. I know this both from observation and direct experience as an angel investor.
My first angel investment was in a company that built a complete linkmap of the Internet in 1999, but used it to automatically detect and re-route broken links (i.e., eliminate dreaded 404 errors). It died a few years later. A few years after that I realized how close it was to greatness. It had the Internet link graph, it just used it to solve the wrong problem: link correction as opposed to … uh … search relevance (i.e., Google). Oops. But this is the nature of early-stage investments. You can be miles — or only centimeters – away from greatness, and not even know it.
But I got back on the horse. My next angel investment was in a company that wanted to build an OLAP-style cube for content, in some ways conceptually similar to MarkLogic, but with very different technology and go-to-market strategy. The OLAP angle didn’t play out well for them, so the company did a big shift, using its product as an enabling technology for a call center application that eventually was sold to Salesforce.
Many would-be platform companies end up using their platform as an enabler a given application. In the XML world, Xyleme comes to mind as an example. The company started out selling an XML database and when they didn’t work for them, they built a learning management system on top and now focus on that. Frankly, I don’ t know if that’s working any better for them, but it is a good example of the pattern.
My other “investment” (in this case of advisory time and not money) was in a company that did self-service call-center applications and that had the misfortune of focusing on telecom as a vertical in 2001. Rather than switching strategies when telecom went south, they gutted it out, and were also eventually sold, but not without a few founder gray and/or lost hairs along the way.
So after a brief fling with angel-ish investing in the 2000 timeframe, I stopped for many years. Only recently have I started up again.
My first “investment” was one of time, not money, in joining the board of analytics-on-big-data vendor, Aster Data in 2009. I love the Aster founders. I think they have awesome technology. I see great things in their future.
I’ve also done one angel-band style-ish investment in a really unique company that’s still stealth so I can’t discuss it. It’s cool, weird, visionary, and practical. (And it’s not easy to find companies you can honestly describe with those four words.)
Going forward, I imagine doing a handful more. So if we know each other from a prior (or current) life and if you’re looking for a modicum of angel-style funding, give me a ping. Some CEOs golf in their spare time; I’d rather spend mine sharing some hard-earned wisdom.
(Although I do sneak in a little fly-fishing from time to timel)
Tags: angel investor, Venture Capital