Sunday, October 8, 2017

The Venture Capitalist Microsoft Allowed To Invest Early

As noted in the outro from March 2012's "Batteries: The Venture Capitalist's Holy Grail":
...Microsoft famously didn't need venture capital either.
(Technology Venture Investors was the sole VC investor and got that plum only because Marquardt and Ballmer were buddies)
That's the Holy Grail, finding a company that doesn't need you but will let you in.

The battery on the other hand....that's going to be a longer slog than the press releases would lead one to believe. 
If you want you can look it up, here's October 2012's "The 1986 Microsoft Prospectus and Stock Performance vs. Google (MSFT; GOOG)"

And here's the headline story from TechCrunch, June 2014:

Sand Hill Road’s Consiglieres: August Capital

In his best-selling book “Give and Take,” Adam Grant argues that the fourth ingredient to success — aside from hard work, luck and talent — is the ability to connect with people.

After 10 years of research, he chose Sand Hill Road’s David Hornik as a prime example to prove his case that good guys can finish on top. If venture is a long game, then long-term relationships are paramount. In fact, August Capital’s story begins with a long-term relationship between a young VC, Dave Marquardt, and a friend-of-a-friend named “Billy Gates.”

The Making of a Firm
It was 1980, and 30-year-old David Marquardt was a young, hotshot VC at Technology Venture Investors looking for his next deal. He heard through the grapevine that another young hotshot, “Billy Gates,” was having success with a startup called Microsoft, so he called one of Gates’ employees and former classmate at Stanford Business School, Steve Ballmer, to get a meeting.

At the time, Marquardt was a rarity in the VC world filled with ex-bankers; he was a design engineer and deeply technical. This resonated with Gates and Ballmer, and Marquardt spent the next year going up to Redmond almost every weekend to spend time with Gates and his team.
augustcap-marquardtSometimes they would go to University of Washington football games, and other times they would brainstorm. But in that year, Marquardt sealed the deal, and became one of the investors in Microsoft’s Series A in 1981. At the time, Marquardt and TVI invested $1 million for 5 percent of the company. Thirty-three years later, he still sits on the board of Microsoft.
Relationship building and company building has been Marquardt’s ethos as a VC; and he carried that view of venture capital to August Capital, the firm he co-founded with fellow TVI colleague John Johnston.

Relationships Before Returns
“The venture business is an intensely personal relationship business. And it’s not an industry that scales well,” explains Marquardt. He says he would never consider adding a value added service. “Companies should do that themselves,” he adds. Bill Gates wouldn’t let me bring in outside PR people and marketing talent — that’s what founders do, Marquardt maintains. “My view is that the CEO is ultimately responsible and accountable for everything, and they are the ones that make the decisions. The VCs are there to support and be steady”

augustcap-johnstonMarquardt says that he’s seeing a lot of VCs who are closet operators who have been on boards and start pointing fingers at founders when things go wrong. “That’s not our style. Our style is more like telling the CEO, ‘Have you thought about this approach or this hire?’ We don’t believe we are there to make the decisions.”

While August may not have the marquis WhatsApp deal in its portfolio, or did not back Instagram early, the firm has had a number of early wins, such as Seagate, as well as quiet successes like Zulily and Splunk, which have helped its returns over the past few decades. And it’s clear that August isn’t all that concerned with getting some of the hype; the firm continues to be focused on its entrepreneurs and providing the kind of support Marquardt provided for Gates. 

By the time Marquardt and Johnston teamed up to found the firm in 1995, they had already backed Microsoft and did the Series B in Sun Microsystems. (Marquardt went to business school with the company’s co-founder Vinod Khosla). Their fellow TVI alum Bob Kagel went on to found Benchmark.

The company closed its first fund, of around $100 million, and brought on Andy Rappaport. Andrew Anker joined the firm in 1998. The mid-nineties were an inflection point in the VC world, explains Marquardt, as many firms were starting to split based on ideological differences. Some VCs wanted to do more packaged consumer goods, but some ‘renegade VCs’ were betting on technology and networked computers....MUCH MORE
A few months after this TechCrunch profile, in September 2014, Microsoft announced Mr. Marquardt was retiring  from the Board of Directors, a position he had held since 1981:

Microsoft announces board changes and quarterly dividend increase
...The company also announced that Dave Marquardt and Dina Dublon have decided not to seek reelection to the board of directors and will retire from the board at the expiration of their current term following the annual shareholders meeting in December....