From the Partnership

In this issue of our newsletter we focus on the entrepreneur and his or her vision, and the role of venture capital as an agent of technology innovation.

Ping Fu, the Chairman, President, and CEO of Geomagic, discusses her company and the role its 3-D analysis software will play in creating a new kind of manufacturing.

Valhalla Partner Kiran Hebbar discusses the increasing sophistication of technology in consumer-facing applications, and Director of Research Dan Gordon offers his thoughts on the venture-capital asset class and societal innovation.

As always, we welcome your comments and questions. Please email to editor@valhallapartners.com.

Valhalla CEOs: Ping Fu

Geomagic is your first startup in a long and inspirational history of facing and overcoming challenges. What led you to take on a startup at this point in your life, and what do you think of your decision to do so after 14 years of operating the company?

I was a reluctant entrepreneur. In the beginning, I was very naïve: I thought that I was simply doing some kind of technology transfer and I would find a business person to run the company after the technology was established and I’d go back to University. Obviously I was not right. Starting a company was like giving birth. One can’t just hand the baby to someone else and walk away. Looking back, starting a business was the best decision I’ve made in life. It was a tremendous learning and growing experience filled with hope, excitement, pain and triumph. Never a dull moment.

Your vision of Geomagic implies a vision of how manufacturing will be done in the 21st century. Could you give us an account of that vision?

When I grew up, I worked frequently in a manufacturing environment. I built radios, speedometers for cars, I operated milling machines, installed lighting in large buildings, and assembled TVs. I loved to work with my hands. Naturally, the first idea I had was to build personal factories for homes where the Internet connection would be a utility that was always on. I called it "IT-enabled cottage industry".

The beauty of applications spawned from Geomagic technology is their seemingly infinite variety, covering everything from refining a 119-year-old foundry process to exposing a fraudulent Picasso sculpture. Geomagic users are involved in the quest to set a world land speed record, in dental implants, in pediatric orthopedics, and in numerous major reductions in industrial time-to-market and return-to-market cycles.

What advice do you have for other entrepreneurs?

I would not attempt to give anyone advice, but I am certainly interested in sharing experiences. Three things that have struck me over the last fourteen years of my journey:

• On communication: being clear is more important than being right.
• On relationships: people don't remember what you say, they remember how they feel.
• On work/life balance: forget it, learn how to dance over chaos.

Partners' Viewpoint: Kiran Hebbar on the Role of Technology in Modern Consumer Based Applications

A recent conversation with the CEO of a Web-based B2C company revealed how he’s leveraging technologies for massive data management, distributed computing and analytics to create sustainable operational and market advantages.   This company is a growing and profitable vertical search engine.  Until recently, its user interface was created through a collaborative exchange of opinions between the UI designer, product manager, engineering and other employees.  As is often the case, the UI designer's and product manager’s opinions prevailed.  Now, with the help of technology, they have democratized the process.  Regardless of who generates the ideas, every hypothesis (such as font color, size of a button, number of search results per page, etc.) is formulated as a multivariate modeling problem.  Harnessing the massive number-crunching and analytics capabilities of the open-source Apache Hadoop engine, thousands of variations of the UI are shown to different segments of their Website visitors.  The effectiveness of each combination is measured along objective measures such as click-through rates and time spent on page.  In true Darwinian selection, the most effective idea is identified and released to the live site.  This approach combines quick, cost-effective, and continuous iterations with measurable results.  The company has seen tremendous benefits to revenue and profitability as a result.   On a larger scale, Google and Facebook have innovated on distributed computing and massive data crunching, which has resulted in a formidable competitive advantage and great consumer experience.

I look forward to investing in businesses like this that use technology in deeply innovative ways.

Dan Gordon, Valhalla Director of Research, on Venture Capital and Innovation

Being a Washington DC-based venture capital firm has given us a unique front-row seat on the massive regulatory changes contemplated or enacted by the Obama Administration who, having passed its healthcare legislation, is turning now to financial policy.

The venture-capital industry position on financial reform, as articulated by the National Venture Capital Association (NVCA), stresses a few key points:

• Support for Basic Research by the government, such as the newly-created $400M ARPA-E fund in the federal Department of Energy for funding innovations in cleantech.
• Support for a Highly-Skilled Work Force, stressing math and science education for U.S. students, but also immigration reform to make it easier for “the best and brightest scientists and entrepreneurs from all over the world [to] want to come to the United States to innovate and grow their businesses", as Paul Holland of Foundation Capital said to Congress recently, testifying on behalf of the NVCA.
• Access to capital, by continuing capital-gains treatment of carried interest and re-thinking the onerous public-company environment that has basically shut the IPO process down.
• Patent Reform, to improve the quality of patents and the predictability of the patent-granting process.

Winning over policymakers and others to these points has been something of an uphill struggle of late.  We find that it is important in such discussions with people who are not familiar with our industry to stress the role of venture capital in innovation.  The chart below puts this very simply: companies that were started with venture capital since 1970 accounted for 12.1 million jobs (or 11 percent of private sector employment) and $2.9 trillion in revenues in the United States in 2008 (the study was performed by IHS Global Insight in conjunction with the NVCA).



Source: NVCA

 

Q & A

We want, as much as possible, to open up our newsletter to questions, opinions, and suggestions from our readers. The great magic of our newest medium for communication is its interactivity.

Please click here to submit feedback. We will undertake to respond to every submission, and to print those of general interest in this section. The partnership is happy to address topics such as hot technologies, exit strategies, or due diligence. We look forward to hearing from you.

Our mailing address is:
8000 Towers Crescent Drive, Suite 1050, Vienna, VA 22182

Our telephone number is:
(703) 448-1400

Copyright (C) 2008 Valhalla Partners, All rights reserved.

Click here to unsubscribe from all Valhalla Partners newsletters