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Investment Thesis: Warren Weiss (Part 1)

Posted on Tuesday, Oct 10th 2006

Warren Weiss of Foundation Capital is our next interviewee in the series. The DNA of Foundation as a firm is “Sales”. Most of the partners come from a deep enterprise sales background, and hence, they’re very focused on trying to figure out whether or not whatever you are trying to market, can be sold, and sold easily, cost-effectively.

Recently, I sensed that Foundation was flirting, like everyone else, with more consumer internet oriented viral businesses, rejecting their enterprise business expertise, but was pleasantly surprised to find out in this interview, that they’re still interested in enterprise / IT. IMO, they are one of the best equipped firms to tap into the mid-market IT opportunity that is opening up.

Warren also focuses on CleanTech.

SM: Please describe your background, to help entrepreneurs understand your point-of-view.
WW: I joined Foundation Capital with over 25 years experience in the software industry, including President & CEO of four public and private software companies. Most recently, I was President & CEO for Asera, a real-time software solutions provider. I was also President & CEO at Prism Solutions during the company’s transition from data warehousing tools provider to business intelligence application deliverer. I was also President of SQRIBE Technologies (now Hyperion) and President & CEO of SMI and have held other senior executive positions at Next Software (Apple), Continuum (Computer Sciences Corporation) and Dun & Bradstreet Software.

At Foundation Capital, I focus a lot on software companies — both software as a service and licensed software — as well as companies in clean tech. Right now I’m on the boards of SpringCM, MarkMonitor, Rearden Commerce, Silver Spring Networks, Itemfield, Novazone and Guardian Analytics.

SM: What stage are you looking to invest in over the next 6-12 months?
WW: At Foundation we primarily invest in early stage companies, and they have to have a heavy IT component. Roughly 80% of our new deals — the lion’s share being first round investments — are with people we have backed before, or who are referred to us from our personal network.

Our firm maintains close ties with Stanford, Berkeley and other leading institutions, as well as large corporate research labs like HP. These connections allow us early access to innovations at their purest from; we thrive on the chance to turn these great ideas into sustainable businesses. For example, Teresa Meng was a professor at Stanford when John Hennessey, then dean of the engineering school, brought us into a partnership for a company that was incubated downstairs in our offices and would ultimately grow to become Atheros Communications.

SM: What segment(s)?
WW: The bulk of our investments are in enterprise software, networking and communications, and semiconductors. However, we have a growing number of clean tech investments in our portfolio — such as Novazone and Silver Spring Networks — and a few consumer investments including Netflix, Bella Pictures and Simply Hired.

Foundation has had the opportunity to invest in great companies led by brilliant people, ranging from veteran entrepreneur Reed Hastings and Netflix, to Financial Engines, led by Nobel Prize-winning economist William Sharpe. We tend to shy away from investing in the space du jour. If you’re reading about it in the Wall Street Journal, you’re too late.

SM: What market dynamics do you look for?
WW: Foundation as a firm inherited some of its legacy from Merrill, Pickard, Anderson & Eyre, which was founded about 24 years ago – in 1995 Jim Anderson, one of the same partners that started Merrill Pickard, formed Foundation Capital with Bill Elmore and Kathryn Gould. Our firm was really built on a couple of premises; One is that we really don’t chase markets, and are not the kind of firm that has to own something in every piece of the chess board. Two, to really focus at a very early stage on deep intellectual properties — things that are compelling and in a large market. If we see an investment with a very large market opportunity, a deep, compelling, intellectual property, and a great management team, they’ve got a heck of a chance for success. At Foundation we like to partner with other blue chip, top tier venture firms because it creates a much more powerful network and a great financing strategy long-term for the firm.

SM: What size of investment are you looking to make?
WW: Our investments typically range from 1.5 to 10 million depending on a number of factors including the stage of the investment, and which sector the company is taking on.

(to be continued)

This segment is part 1 in the series : Investment Thesis: Warren Weiss
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