Silicon Valley Bank and eVestment Hit a Nice Exit with Nasdaq

People often fixate on the Home Run Deals: the Googles, the FaceBooks and the like. A home run deal is a 50x-100x return on a deal where you get in 1) really early, 2) really cheaply, and 3) an astronomical valuation that you 4) stay with the entire ride without being diluted. It is the stuff of movie magic and business books. But it’s also extremely rare and risky.

FaceBook was able to manufacture a success at a critical time by using Russian money in place of an interim round. Plus they locked up all world markets before positioning their final public offering. This was done at the end of the process, not the beginning. They discovered you don’t wait for things to go up. You force it to go up by controlling everything. Yet it was still a white knuckle ride and there were a lot of very big mistakes that were costly – the pajama adventure at Sequoia was quite memorable and led to quite a bit of trouble for the lad. That’s why he needed the Russian money. And as one VC likes to say, “You don’t screw around with the Russians”.

So how do folks make money in the vast majority of Silicon Valley tech deals? What early investors look for is someone who knows how a business works. They have a strategy to be able to consistently grow a business taking advantage of their expertise and contacts. They have sufficient resources to fund that growth while widening their customer base so as to present a desirable acquisition. And they need more than one acquisition candidate who sees them achieving this steadily.

And a good example of a reasonable and profitable tech venture investment is the recently announced acquisition of eVestment by Nasdaq.

The company raised $19M from Silicon Valley Bank. Over the next six years they did seven acquisitions, allowing them to aggregate the value, obtain several key customer accounts, and present a compelling proposition for Nasdaq to acquire for $705M. Their investor was in it for the long-term as it takes time to create a credible business in the financial sector.

For those who think this was too long to wait for the money, if you took that $19M and put in an annual yield of 9% over six years and compound it, you’d end up with future value of money estimate of around $32M.

Their primary investor, Silicon Valley Bank, made 22 times the future value of that money invested. The rule of thumb is ten times for a smart investment. Bravo to eVestment and Silicon Valley Bank.

Hello world!

After a non-brief hiatus where health matters intersected with work matters, I’m back to writing about technology, policy, people and innovation in Silicon Valley.

I’ve always lived in Silicon Valley. I was born in Fremont, got my physics degree at UC Berkeley, and have worked at and co-founded several tech companies here. I road my bike through orchards and fields now filled with homes and shops. I drove 2 lane roads now turned into always busy expressways. I went to school with people who have gone on to successful careers, even reshaping industries… and some who are no longer alive.

I’ve lived in Los Gatos for the last two decades. It’s a nice town (really and literally, the Town of Los Gatos), with a splendid library, just out-of-the-way enough to participate in Silicon Valley without enduring too much of the transitory madness of chimerical tech trends.

It’s an easy drive to all those places that matter, although those places have changed too. What was hot is soon not. Money changes hands, or vanishes into pockets. And the must-hear pitch is as quickly forgotten as yesterday’s weather.

There are patterns and anti-patterns to Silicon Valley, this Valley of Heart’s Delight. But now the heart is made of silicon and transistors and zeros and ones. It beats in picoseconds through cores of processors and devices. Thoughts and dreams and desires, both subtle and base, are accessible with a touch.

A. C. Clarke said “Any sufficiently advanced technology is indistinguishable from magic”. Perhaps this is why the gap between science and public policy, education and superstition has grown in the United States. This is a threat to Silicon Valley innovation and national security.

As the complexity of technologic and scientific innovation increases, those who “productize” and “monetize” innovation have successfully hidden much of the actual scut work of design, development and manufacturing from prying eyes and in some cases, regulatory fingers.

Corporate HR blacklists to protect Silicon Valley monopolies, creations of fictitious businesses and paper transfers of technology IPR invented here to bogus tax havens, and the hands-off creation and supervision of manufacturing facilities in poor countries with the inevitable stories of abuse and exploitation all paint a less than flattering picture of a “maturing industry” disinterested in innovation.

But where does one go when the “renovation, not innovation” mantra becomes tiresome, and magic doesn’t cut it?

Complex products made “simple” are inherently deceptive in both design and intent, but not because it makes technology accessible. Rather, the cult of “simple” design obscures technology as magic. And once technology becomes magic in people’s eyes, the value for the foundational knowledge and experience underpinning innovation is lost.

So we come full circle.