Archive for the ‘Venture Capital’ Category

OpenStack: An example of why we are so passionate about early stage technology

Monday, November 12th, 2012 by ryan

I recently had the opportunity to speak at the OpenStack Summit in San Diego. It was a great conference and all the content is online for all to enjoy which is truly an opensource gift for those who couldn’t make it in person.

While its still early for OpenStack, I know its going to be a major disruptive force. OpenStack gives the opportunity for enterprise companies (or service providers) to offer similar basic capabilities as service offerings such as AWS to internal groups (or external customers) on their own private cloud. I am excited about the possibilities and so much so that I put together an entire presentation around the opportunity for startups and venture investors. My presentation with video captures most of our current thinking.

If you prefer just the slide deck

The high level summary is that OpenStack has started what will be a complete rebuild of the enterprise data center. It will take time and it won’t be a straight path but this shift represents one of the most fundamental changes to enterprise infrastructure in my 12 years as an IT investor. Many existing companies will adapt and thrive – many more will fail – but the massive disruption in the enterprise IT market will create enormous opportunities for startups in the years ahead.

Let me know what you think.

Tags: ,
Posted in cloud, OpenStack, Venture Capital | No Comments »

Reflections on going Public on the Taiwan Stock Exchange

Monday, September 24th, 2012 by Sanjay

In Jan 2005, Storm Ventures invested in IML a fabless semiconductor company based in Campbell California. In 2008 the company had $47 million in revenue and was profitable and the board began evaluating options for an IPO (Initial Public offering). The board concluded that a NASDAQ offering was not feasible for a variety of reasons:

1/ IML’s revenues were below $100 million

2/ IML had a high customer concentration with Samsung accounting for a majority of the company’s revenue.

At the same time the Taiwan Stock Exchange (TWSE) was out in Silicon Valley marketing its stock exchange as a venue to access capital as well as to provide liquidity for investors. The TWSE was going to for the first time; allow non -Taiwanese companies to register and sell stock on the TWSE.  IML began evaluating this alternative and in early 2009 decided to file for an IPO on the TWSE .
The process took almost a year and IML finally on May 18, 2010 became the first non-Taiwanese company to trade on the TWSE.  The stock was priced at NT$ 143 (US$1.00= NT$30 )and went up to NT$ 243 before settling down.
Here are my thoughts:
1/ The IPO process took much longer than I anticipated as both the company and its advisors were learning the rules in Taiwan as well as the Taiwanese regulators were trying to determine which rules should apply to non-Taiwanese companies and which ones did not apply to companies incorporated out of Taiwan.
2/ The cost to go public was an order of magnitude lower…closer to $ 300k rather than $3 million. This included , legal, accounting and D&O insurance.
3/ IML did raise $40 million less an underwriter fee which again was much lower than the standard 7% a US banker would have charged.
4/ The PE multiple was similar to a semiconductor company on the NASDAQ.
5/ Taiwan will follow International Financial Regulations (IFRS) which means that from an accounting perspective IML’s financial disclosures are very similar to what they would be on the NYSE or NASDAQ
6/ The lock up for insider was similar to what one would see here on the NASDAQ…for the first 180 days all of Storms shares were locked up and then 50% was released. After one year 100% was free of lock up. But we were still subject to blackouts and other restrictions on trading similar to the US
7/ The stock was bought by mostly individual investor (more than 70%) with very little institutional buying. Even now, more than two and a half years as a publicly traded company IML’s institutional ownership is below 20%. This was a bit of a disappointment for me as I had thought that there will be larger percentage of institutional ownership. One of the down sides of individual investors is that they look for dividend income.
8/ Liquidity has been an issue for Storm as we cannot distribute IML shares to our LP’s easily as each of our LP’s would need to open an account in Taiwan which places an unnecessary burden on our LP’s.

Overall I would say that the NASDAQ and NYSE still provide broader and deeper pools of capital and liquidity, and remain the gold standard for accessing public markets; but there are alternatives for those issuers willing to look elsewhere. Unless US legislators and regulators understand the global nature of markets and the need to be competitive globally, we in the US will lose the lead we have in financial capital markets.

Tags: , , ,
Posted in semiconductor, Venture Capital | No Comments »

A Perspective on Venture Capital

Monday, February 13th, 2012 by ryan

A post by my partner Sanjay that was originally submitted to Siliconindia. You can find it here.

To understand Venture Capital today, we need to first look back at the past performance of this investment class. Historically Venture Capital returns have been on average 800 basis points better than the stock market. In other words when the NASDAQ, DJIA or S&P 500 were delivering 12 percent to 15 percent returns then the Venture Capital industry in aggregate was delivering 20 percent to 30 percent. Now those were average returns for the whole asset class with some funds delivering returns as high as 80 percent IRR’s and correspondingly there others with returns that were lower than the average or even negative. On the whole, however, returns in Venture Capital were better than what you would have received by investing in bonds or stocks and the venture capital industry therefore attracted more capital and more managers.
(more…)

Tags: , ,
Posted in Venture Capital | 2 Comments »

Congratulations to the team at Sandforce!

Wednesday, October 26th, 2011 by ryan

This afternoon LSI Corporation announced that it is acquiring SandForce for $400 million in cash and assumed options.

We are excited for the team at SandForce and proud to have been a part of building a company that is helping to usher in a new era of storage. SandForce delivers solid state disk (SSD) processors that power volume flash memory in both high-end storage as well as consumer applications. The primary advantages of flash memory are that it is much faster, more reliable and consumes less energy than hard disk drives. Many of our limited partners and investors that have looked at investing at SandForce over the years will likely remember us saying that flash memory is the most disruptive force in storage since the floppy disk drive. We truly believed that when we made the decision to invest in 2006 as we saw the use of flash becoming more ubiquitous in devices like the iPod. We believed that as more consumer devices took advantage of flash, the price of flash would decrease and its uses in enterprise applications would increase. As the price of flash per GB came closer to hard disk drives, more applications would take advantage of all it had to offer including dramatically faster performance.
(more…)

Tags:
Posted in semiconductor, Uncategorized, Venture Capital | 2 Comments »