Microsoft-McCaw crew's new venture
Ignition puts capital into wireless Internet start-ups
Friday, March 10, 2000
By JOHN COOK
SEATTLE POST-INTELLIGENCER REPORTER
Last December, Brad Silverberg, John Ludwig, Cameron Myhrvold
and several other former Microsoft and McCaw Cellular executives
gathered in the Kirkland offices of game developer Valve to discuss a
new kind of venture capital firm.
The group, which together claimed more than 150 years of wireless,
software and Internet experience, didn't know what direction they
would take. What they did know, however, was that they wanted to
differentiate themselves from established venture investors like
Benchmark Capital and Kleiner Perkins Caufield & Byers.
After comparing notes and discussing ideas, the group finally had what
Myhrvold called an "aha moment."
Instead of investing in a wide range of businesses, the firm would
fund only wireless Internet start-ups.
They modeled the firm on Wayne, Pa.-based holding company Internet
Capital Group and called it Ignition because it would help start new
companies.
The firm, which announced its formation yesterday, now is
aggressively attacking the wireless Internet market. It has raised $140
million from Qualcomm Inc., Softbank Venture Capital and Madrona
Venture Capital. Its 10 founding partners are all former top executives
at Microsoft and McCaw Cellular.
"Like the rest of the founders, I have liked to be a part of technological
changes," said Jonathan Roberts, who spent 13 years at Microsoft,
most recently as general manager of Windows CE. "We thought the
wireless Internet was the next tidal wave."
Tossing investment dollars into one category is a risky move. After all,
diversification has long been a rule of venture capital investing. But
that's starting to change. Funds that target specific niches or
technologies, say XML technology or business-to-business
e-commerce, are gaining acceptance as venture firms attempt to
distinguish themselves in a crowded field.
Myhrvold, former vice president of the Internet customer unit at
Microsoft and a founding partner at Ignition, says there is a big enough
market to support a specialized fund in wireless technologies. He
points to Craig McCaw who during the past 20 years has profited from
his many investments in telecommunications companies such as
Nextel, Nextlink and Teledesic.
"Traditional venture capitalists will give you money and attend board
meetings," he said. "We want to do more."
The firm has hired a team of recruiters who will scour the country for
top managerial talent. It also will set aside some office space in its new
Bellevue headquarters to incubate new ideas and mentor chief
executives in an "entrepreneur in residence program." The firm plans
to make early stage "seed" investments as well as later stage
investments. Its focus will be in wireless technology centers such as
Seattle, San Francisco, San Diego, Japan and Europe.
Myhrvold, whose brother Nathan -- former head of research at
Microsoft -- sits on the Ignition's board of advisers along with
RealNetworks CEO Rob Glaser, University of Washington computer
science chairman Ed Lazowksa and nine other technology movers and
shakers, said Ignition is not looking for the quick payoff. Instead, he
said the firm wants to build companies for the long term.
"We are not financial engineers and we are not God's gift to
deal-making," he said. "But we know how to build teams, enter new
markets, and we know how to win."
Some who follow the local technology community agree.
"These people have fabulous business backgrounds, and they should
be very well positioned . . . ," said Craig Sherman, a lawyer who
works with start-ups in the Kirkland office of Venture Law Group. "It
is a great thing for the business community in the Seattle area that there
are extremely talented people going into the business of funding and
advising early stage companies."
Pete Higgins, a former Microsoft vice president who counts many of
the founding partners as close friends, agrees.
"This is the A-Team," said Higgins, who recently joined Madrona
Venture Group as a strategic director. "These are smart guys applying
their considerable talents to an exploding area."
Becoming a venture capitalist, where a $1 million bet can turn into a
$100 million jackpot, is becoming a popular vocation these days for
former Microsoft executives.
Sam Jadallah, a former vice president at Microsoft, last year joined
Internet Capital Group. Tom Johnston, a former group product
manager at Microsoft, joined Seattle-based Alexander Hutton Venture
Partners last fall. Tony Audino, of Voyager Capital, Bill Miller, of
Olympic Venture Partners, and Steve Arnold, of Polaris, also are
former employees of the software giant.
But it's not just technology whizzes and Microsoft millionaires who
are jumping into the venture capital game. Eric Russell, president of
Frank Russell Co.'s investment management business, announced last
month that he would leave the company his grandfather founded in
1936 to pursue early stage investments in new start-up companies.
Nordstrom co-president Jim Nordstrom made a similar announcement
last month.
"I don't know (when) there will be another opportunity like this in our
lifetimes," Nordstrom told the P-I at the time of his departure. "I want
to participate more directly."
George Clute, founding partner of Olympic Venture Partners in
Kirkland, welcomes the new entrants. But after 24 years of financing
emerging growth companies, Clute knows the cycles of the business,
too.
"These are the salad days right now. It is a party," Clute said. "People
who think this is the way it always is, are smoking dope."
P-I reporter John Cook can be reached at 206-448-8075 or
johncook@seattle-pi.com |
