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Steve Bayle has appeared in the blogosphere. He made an audacious entrance into my NewsGator Online Services custom search feed for “Brad Feld” where he asserted that I don’t know jack about naming things (he’s correct – my first company was creatively named Feld Technologies, proving Steve’s point).
I’ve been involved with two of Steve’s companies. The first was Mainspring which went public in July of 2000 and then was acquired by IBM. Softbank Technology Ventures and Flatiron Partners were investors and I sat on the strategic advisory board. Mainspring had a happy ending, but I didn’t have much to do with it as my involvement was light (but hopefully appreciated).
The second was Throughline which didn’t have a happy ending, but had some useful entrepreneurial lessons. Throughline was a classic seed investment. I knew and liked Steve. We sat down one day in NetGenesis’s office in Cambridge in 1998 and he walked me through his idea for a business that was a web-based broker for services that entrepreneurs needed (real estate, HR, technology services – that sort of stuff). He had a nice handcrafted PowerPoint presentation (yes – with more than six words per slide), a lot of passion and energy for the idea, credibility with me, and a partner who I liked (Laura Ring – who had previously been executive director at the Mass Telecom Council and had been involved in starting up the PWC High Tech Services Group in Boston). We spent some time talking about the idea over the next month and quickly decided to do a small seed investment ($500,000) to see if we had anything.
Shortly after the seed investment, we started working closely with Silicon Valley Bank on the idea. Their primary customer – entrepreneurial / venture funded companies – was our target and by 1998 everying was in high energy mode in the run up to the Internet bubble. They quickly invested (I can’t remember whether it was just equity or equity and debt) and we started testing out our thesis. We did a lot of seed stage stuff (small office, small team, lots of testing the ideas, prototype of the site, building relationships, and defining the business more clearly). We then started looking for a co-investor to build out a first round (Series A financing).
I recall that the idea landed with a huge thud. We got a lot of feedback – much of it positioned as “nice idea guys, but the market is too small and it’s not a venture-financeable concept”. In hindsight we were probably lucky – by mid-1999 / early-2000 VCs were flinging money at anything and Throughline would have easily been funded with much too much money. I don’t remember too many difficult conversations as Steve and Laura were pros about the situation. We came to the conclusion that it didn’t make sense to go forward and sold the assets of the business to SVB. I have no idea what came of it from there.
An important lesson for me from Throughline is that not all seed deals should go forward. We invested (and lost) $500k. I don’t regret this one bit – I did it with an entrepreneur who I respect and trust – we tried – and we cut our losses early when we realized we didn’t have anything. I’ve lost other seed deals in my career, but all it takes is one home run (e.g. ServiceMetrics – a seed investment story for another day titled “How to turn a $500k seed / $5m total investment into $200m in 18 months”) to make up for several hundred seed deals.
I expect Steve will be full of good entrepreneurial tales – of both good and bad. Welcome Steve to Blogland.