William H. Janeway, Warburg Pincus
Track: Keynote
Date: Thursday, February 12
Time: 9:30am - 10:30am
Location: California Ballroom B & C
TrackBack
Most IT start-ups are product-driven: the goal is to deliver an
innovative product to a defined market. The conventional venture
capital model - multiple funding rounds, multiple investors per round -
evolved to address the operational risks of this sort of venture. But
failure to execute operationally is not the only source of risk; every
venture is also subject to volatility in the price and availability of
capital due to the volatility of the stock market. After the collapse
of the Internet Bubble, many promising companies foundered because
their funding dried up.
By contrast, our biggest successes at Warburg Pincus (VERITAS, BEA)
have come from inverting the normal venture funding model, with the
visionary investor as company co-founder. Starting with the
identification of a major market discontinuity, we have teamed with
experienced operating executives to assemble the components of a
complete business - technological base, product development and
management, channels to market; buying what we can, building what we
have to - in order to establish positive cash flow from operations as
rapidly as possible. And we have supported the multi-year process of
building a sustainable business by underwriting all of the capital
needed to reach positive cash flow, thereby not only enabling
management to focus full-time on the business but also insuring against
the risks generated by a volatile stock market.
As has been the case with every transformational wave of fundamental
technological innnovation since the Canals, the short-term greed of the
Internet Bubble financed a Darwinian explosion of exercises in building
out the necessary infrastructure and of experiments in finding
commercial uses for it. When the bubble inevitably collapsed, it left
behind two sets of road maps: at the application level, the business
models that worked, such as Ebay and Yahoo! and Amazon; at the
infrastructure level, a set of challenging technological requirements
needed to deliver a distributed computing and communications
environment as scalable and secure as it is robust and easy to manage.
This is precisely when our alternative model is relevant again. In the
post-Bubble world, long-term financial commitments are required to fund
the ventures that will fulfill the long-term technological vision and
implement the long-term commercial promise of the Internet Age.
Download presentation file
