I have summarized my thoughts about the portfolio companies in terms of rescue or exit. Although we do not have any real dogs, it is probably fair to say that we do not have any clear winners either. Here is a review (and the hindsight), from worst to best.
I no longer understand where this company fits. It seems neither a great technology nor a service play. Needless to say that they are in a space where nobody seems to win and/or the attention for customers and analysts has turned away. Given the weak position of competitors this is not even tradable. No where to go?
Supposedly great technology without a “home”. We lost a tremendous amount of time past year to get this thing at least back into a technology play. I agree with Deepak: by merging this with Slomedia (what a name BTW), we could create more traction because of better management focus. From a financial point of view though, this seems like a restart with a low(er) valuation to get a new round based on a much better business plan (i.e. technology, management team, track record etc etc). Problem is we have $1MM in debt, and that’s a bummer even if the new merged company “assumes” this. Since the streaming audio/video space sees some resurrection, it might be that some other VC’s will look at again in the spring. How do we make until then even at a 200k/month run rate?
Again, we lost a lot of time and market momentum throughout 2000. Now, this is a very crowded space with very little technology (?) or market sector differentiation. From a technology perspective, there is not enough to attract a bigger company to snatch it. They do not have market momentum either to attract another company. Going it alone is no option. I agree with Deepak that we should not fund anything in the 250-500k range unless management (e.g. Boris Reznik) can/will pool it. There is no exit in sight!!!
Although “nice”—i.e. good technology , focused management, some customer traction— I am not sure that this sector will call the hearts and minds of a public offering. It seems too bland of a proposition – but I may be wrong. On the other hand we are “spent” and it is just wait and see. Our “involvement” is information gathering so we can answer our investors (sarcastic, I know)
The obvious: they have a catbird seat in this space and seem to out execute their competition. Not much we add at this point. Again, unclear to me whether this is as big of an idea to capture the minds of the IPO crowd. May be more realistic to sell it to one of the hospitality operators.
The wild card. We agree that the market sector is “hot” – this might be the fad of 2001 as far as investing. But unclear to me where SAN really stands competitively, leave alone the execution issues – CEO, market positioning, customer acquisition. If we make this work, this seems to have to best potential for any exit strategy, whether IPO or sale.
Anyways, Happy New Year!
Source: Michael Spindler