SM: How did you find this particular company that you ended up acquiring? LD: From a friend who sat next to me in business school. He was at a venture firm, so he knew of all the good companies that simply did not have leaders.
SM: Which venture firm was he at? LD: It was Foundation Capital. He told me about the first one, and the founding father of Foundation Capital told me about the other technology firm which was a big, scalable on-demand platform, which is really the most interesting thing I bought. The other thing I bought was really worthless; it had a little bit of sales, maybe $100K or $200K. But non-event.
SM: What was the name of the on-demand platform? LD: It was called Eality. I was as lucky as it gets but at least I was smart enough to jump on it. The guys that built that were three Chinese supercomputing geniuses who had all come from Hong Kong and had all met at Berkeley in the supercomputing labs. They had built this twice already. Talk about pioneering on-demand, they were way before anyone else. These guys had built an outstanding, one-code, scalable supercomputing platform but they did not have a CEO. They had that customer success guy who did nothing for them.
They had a Concur-like product before Concur did. We still have customers on it. I have to be focused, so I can’t sell it. The interesting thing was that the other company I had bought had some interesting apps, but the apps server was complete crap and could not scale. We had two Pentium 286s that would run this proprietary architecture that was such crap that when we had more than four customers that had in combination 800 users, the computers would just stop.
SM: Why did you buy that one? LD: I thought the applications were very, very interesting. They had very clever content on how to do a writing assistant. That is the thing that still survives in the company we have today. That lets you sit down and write a review for somebody when you do not know exactly what to write.
SM: So, in this portfolio of “stuff” you bought, you had the distributed computing infrastructure and you had a tiny bit of the SuccessFactors application. Is that correct? LD: You nailed it. I am amazed with all of the garbage that has come your way out of my mouth that you get that, but that is exactly what happened.
SM: I am in the business of synthesis 🙂 LD: You are cutting right through. I bought a bunch of shit and two things came out. A distributed architecture and a little bit of a product.
SM: Was Foundation out of the game at this point? LD: That is the funny thing. My friend left Foundation because they did not pull the trigger on SuccessFactors. I just felt that he should have gotten something. So before the IPO, I just gifted him some shares. He just emailed me yesterday after the earnings call and said that he still thinks about that point seven years ago when they had the chance to own 40% of SuccessFactors, and he still cannot believe Foundation could not pull the trigger.
SM: The venture business is full of stories like this. LD: Oh my God, it is. It is incredible. The super geniuses and the wonder boys just ignored me while I was presenting my life’s dream. I was just sitting there thinking, “Wow, these guys have gotten way to rich, way too early to completely ignore me this way.”
SM: Also having done way too little. LD: Exactly, so imagine I am standing there presenting what I have been preparing for 15 days for these big, important venture capitalists, and they are playing with their shoes.
SM: What you are bringing up is an issue many entrepreneurs have experienced. A total disrespect and arrogance on the part of the VCs. They forget, that the sole basis of their existence is to “serve” entrepreneurs, and not the other way round. I don’t know if you’ve read it– I wrote a highly controversial piece last year called The VC-Entrepreneur Compensation Disbalance.