There's a saying in business: Be
careful how you treat people on the way up, because you might see them
again on the way down.
David Gerster, founder of a San Francisco start-up called DeltaClick
Inc., is Exhibit A. Last year, Gerster was earning his master's degree in
business administration from the University of California-Berkeley when he
applied for a summer job at Flycast Communications, an Internet
advertising company in San Francisco.
Gerster was all set to take the job when, at the last
minute, Flycast's vice president of business development, Greg Stuart,
rescinded the offer. ``He said he just wouldn't have time to supervise
me,'' Gerster remembers.
Now, Gerster is about to start supervising Stuart.
Once the contracts are signed this week, Stuart is expected to take the
chief executive officer's post at DeltaClick. Gerster, who now holds that
title, will become the company's chairman. (``That was the most
imposing-sounding title I could come up with,'' jokes the 30-year-old.)
How Stuart ended up working for Gerster is almost as funny a story as
how DeltaClick came into being.
Earlier this year, the company was nothing more than a three-page
business plan that Gerster decided to enter in a competition at Cal.
Gerster's idea -- a software application that shows visitors to a Web site
links to other related sites -- was one of almost 200 in the business plan
contest, which was being judged by a panel of venture capitalists.
The VC who happened to review Gerster's entry, Carl Nichols of
San Francisco-based iMinds Ventures, liked his idea so much that he
invited the budding entrepreneur to make a pitch to his firm before the
three-month contest was even over.
``He was looking for a couple hundred thousand dollars, which we
thought was cute,'' says Nichols, who says he ``fell in love'' with
Gerster's business model and predicts a large market for DeltaClick's
services. For instance, a user visiting an MP3-trading site would see
links to other similar music sites, which is sure to keep the folks at the
Recording Industry Association up at night.
iMinds surprised Gerster by offering him $1.5 million in seed money --
not a bad return, considering the UC-Berkeley competition was dangling a
paltry $50,000 grand prize. (Cash in hand, Gerster dropped out of the
contest shortly thereafter.)
DeltaClick isn't the first fledgling firm to find funding via
Berkeley's business plan blowout; according to the contest's Web site
(http://web.haas.berkeley.edu/groups/bplan),
the 1999 winners have snared more than $35 million in funding (though some
of them, like online real estate broker ZipRealty.com, had already landed
venture capital before entering the competition).
iMinds provided Gerster with more than cash; during his pitch session,
he was surprised to see a familiar face at the table -- that of Stuart,
who had joined iMinds earlier this year after another company acquired
Flycast.
``We kind of got off on the wrong foot,'' Gerster says of last summer's
experience with Stuart. ``But it's a small world.''
NO PAIN, NO GAIN: A good time was had by all at last weekend's fourth
annual Sand Hill Challenge soapbox derby race.
Well, almost all.
Dean Intersimone, the Handspring Inc. engineer I told you about Friday,
had a bit of a mishap piloting his company's entry, a shark-shaped racer
designed by the creator of ``Free Willy.'' Intersimone was encased inside
without benefit of windows -- he steered by looking at a miniature TV
monitor hooked up to a camera mounted in the shark's snout.
Unfortunately, the contraption plowed into a barrier, and Intersimone
was left with a bloodied face and stiff neck. Perhaps Kleiner Perkins
Caufield & Byers, the VC firm that sponsored the car, got a bit too
high tech for its own good.
One of the race's biggest hits was the entry by VC firm Draper Fisher
Jurvetson. The bizarre melange featured a panel truck rigged up to look
like Noah's Ark, a turbaned Tim Draper as Noah leading a pair of live
llamas and people dressed as bunnies, wolves and other animals careening
off the back of the truck on engineless go-carts.
Draper & Co. managed to slow down the proceedings for 40 days and
40 nights -- or at least it felt that way to some spectators broiling in
the morning sun. But hey, at least it wasn't raining.
ANGELS ASCENDING: As the valley's VC funds keep getting bigger, more
entrepreneurs seeking small chunks of money are being overlooked, a trend
that's boosted the importance of angel investors.
Angel investing -- the practice of wealthy individuals taking early
stakes in start-ups -- used to be an ad hoc industry. But with the rise of
groups like Redwood City-based Angel Investors LP, the field is becoming
increasingly organized -- so much so that some say the line between angels
and VCs has blurred.
The latest entry to the field is Starting Point Partners, a collection
of nine area executives who are announcing their fund later this week. The
group is made up of founders, vice presidents and other top officials at
brand-name companies like Siebel Systems Inc., E.piphany Inc. and Cobalt
Networks Inc.
The team was put together by Peng Ong, founder and chairman of Web
software firm Interwoven Inc. Partners had to pony up at least $1 million
each to join the fun.
All of the partners are investing on their own, anyway, says Alex Yu,
vice president of corporate development at Liberate Technologies. ``But we
all got really busy and couldn't really do a lot of deals.''
By coming together as a branded angel fund, Yu says, Starting Point
will lend its portfolio companies extra weight when it comes time to seek
bigger dollars from Sand Hill Road. ``Branded VC matters,'' Yu points out.
Starting Point will focus on firms in the Internet infrastructure and
networking spaces, which is where most VC money is going these days. The
group will employ a full-time fund manager to keep track of its
investments.
The partners won't say just how much is in the total kitty, but the
group aims to limit its investments to two per partner, and each
investment will range from $200,000 to $1 million.
It's worth noting that all but one of Starting Point's members are
people of color, and two of them (Sonia Bhanot of Verano and Karen Ha of
Savvio.com) are women CEOs. But there's no specific mandate to fund
entrepreneurs of color, Yu says.
``We're in the same social circles,'' he says. ``It kind of just
snowballed.''
