(Post) MBA Blog

Last Thursday a group of MBAs at Judge had the great privilege of an informal, roundtable discussion with Julie Meyer. This was thanks to Alan Barrell, the Cambridge angel, who asked her on our behalf.

Julie Meyer was a coup for a number of reasons. She is the founder of FirstTuesday, the regular networking events that matched start-ups to VCs in the late 90's, becoming in the process a global phenomenon. Julie was very much the poster child of the Internet generation, especially in London, where I had my eCommerce start-up in 99-00, (before the crash made me pack my bags for charity work in Central Asia!). Yes I hit FirstTuesday. Yes it was inspiring.

Secondly, Julie is one of the most accomplished networkers in the industry. It's fair to say she has possibly the most valuable contacts-books in venture capital today; forget rolodexes, we're talking full-on databases!

Last but not least, Julie co-founded Ariadne Capital after selling her stake in FirstTuesday. Ariadne is a new, fresh approach to venture capital; certainly one to watch. Ariadne is even on the lookout for new people!

These are the notes of the meeting. She conveyed more valuable information in less time than a new MBA could hope to transcribe, so the notes are necessarily a little on the 'raw' side.

On Venture Capital
Julie felt that VCs do not seem to have enough accountability for their actions and on the other side, entrepreneurs just wanted to spend other people's money.

The current VC model is to take 2% of funds under management, but it doesn't have to be this way!

Any venture capital firm has two clients, the funding institution and the entrepreneur. The interests of both these clients needs to be aligned, but this is rarely the case. Indeed, we should be overemphasising this alignment, due to the unstable human element in any deal/start-up.

On Start-ups
Any start-up needs to be sales-focused and when Julie comes across a good sales-person she grabs them. Sales has been somewhat looked down upon in the industry (even at INSEAD, where Julie took her MBA). Sales people are important because reference clients are crucial, particularly in the early days. In terms of the flow at Ariadne, it's capital -> sales -> talent.

Start-ups need to think globally, and they can only do this effectively by being in the right circles. Julie has very close relations with players such as Microsoft (Steve Balmer in particular), Cisco and Apple as these guys will be the trade buyers. Julie said that the trade sale should be the priority for start-ups, rather than the IPO, at least in this market. Few start-ups will achieve a successful IPO, so it is sensible to rely on the trade sale for an exit; the IPO may be a red-herring. Of course, this kind of exit means networking like mad from the start!

Ariadne is currently looking at a number of high-tech areas: P2P, business intelligence, WiFi and security. These companies are generally convergent and disruptive. Ariadne is not currently looking at life-science/biotech.

On The Ariadne Way
Ariadne's business model is one of investor and advisor, for instance Julie's ability to reduce the sales cycle for start-ups. A lot of VCs actually started out as advisors and then became investors. Kleiner Perkins for example started out 30 years ago as a firm advising small companies on government grants.

Ariadne is a demand-focused, customer-centric organisation. The firm looks for markets that are crying out to be serviced and then tries to find the technology that will service that need. The average deal size for Ariadne is 3-5 million. Deals are normally Series B or C, although rarely it is Series A.

Ariadne will seek institutional funding in 2004; it is currently funded by private investors exclusively. In terms of the structure of Ariadne Capital, it has 25 founding investors and 8 executives in residence.

On Ariadne People
In terms of the kind of people at Ariadne, Julie said that diversity of work background is extremely important. She herself had not come from a VC background when she started the firm, and this allowed her to come to it with a relatively fresh perspective and set of ideas. This is why she values diversity in the firm, which has people from consulting, industry, investment banking and technology. Regarding folks coming to VC with technology backgrounds, she thought this was great and very important, but these people also need to concentrate on scaling up the business.

And great deal structurers don't have to come from investment banking! Bundeep Singh Randar (COO) of Ariadne is one of the best deal structurers in the industry, yet is not from investment banking. Ariadne is breaking the rules! Ariadne is looking for people who are change agents, who are not waiting for the market to change before they do anything.

On 'Julie'
Julie mentioned that she felt she moved too quickly with her prior venture, First Tuesday, and that she teamed up with people whose priorities were not properly aligned with each other and the venture.

Julie's formula for replicating success in Ariadne: look for the people that have already been successful and figure out how they achieved their success. "Successful entrepreneurs are my universe!" she said.

The concept of fairness in deal is crucial to Julie and the team at Ariadne. Adversarial situations will not help in the long-run. Squeezing start-ups of equity until they have only a tiny amount will correspondingly reduce their motivation, which is bad for everyone involved.

(Author's note: Ariadne is Greek, the name of "the daughter of Minos and Pasiphaë who gave Theseus the thread with which he found his way out of the Minotaur's labyrinth..")

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