IBM Venture Exec from Silicon Valley: Boston Startups Very Active in Mobile, Cloud Computing, Healthcare
Deborah Magid isn’t a VC, but she works in a venture group. Her responsibilities are global, but I’m asking her to think locally. She works for a tech giant, but I’m quizzing her on small startups.
Confused yet? Magid isn’t. She’s the director of software strategy in IBM’s Venture Capital Group, which started in 2000. Her charge is to track down the world’s most interesting startups in software, health IT, and cleantech, so IBM (NYSE: IBM) can build relationships with them and their investors—and sometimes acquire them. She acts as a liaison to the VC and entrepreneur community worldwide. In turn, she uses insights from those relationships to advise IBM on its growth strategies. IBM’s venture group does not invest in companies or manage a fund; rather it works with outside VCs to identify possible partnerships with their portfolio companies.
Magid is based in the San Francisco area, but she visited Boston last week (and she’s from Sharon, MA). So I met with her to get her thoughts on Boston-area startups, investors, and tech trends. It’s always useful to hear an outside perspective on the local innovation community—especially when it’s from a Bay Area expert who represents a giant like IBM. (Before IBM, Magid worked at Taligent, GE, and AT&T.)
When you think of Big Blue in these parts, you tend to think of its slew of recent acquisitions—some 18 Massachusetts companies since 2003, including Rational Software, Unica, and Netezza. In fact, Magid played an early role in building IBM’s relationships with several of these companies, including Watchfire and DataPower, initially through getting to know the companies’ venture investors.
But acquisitions are just one aspect of her firm’s growth strategy. Her broader advice to companies that want to work with IBM is to build a solid relationship around a customer first. “If you’ve worked together with a client, or two or three, and it’s gone well, then you start to scale and have a more strategic relationship,” Magid says. And that applies whether it’s a data management startup in New England, a sensor-network or smart-grid company in Europe, a software development shop in China, or a smart infrastructure firm in Africa or Latin America.
Wherever she goes, Magid makes use of local angel investors, venture capitalists, incubators, and startup competitions to help filter the companies she needs to get to know. Similar to the VC investment process, she evaluates the management team, the market, the technology, and the fit with IBM—and if it all checks out, she says, “I give a heads-up to someone in the [software] business unit.” Then a business team will meet with the company to explore ways of working together.
So, what’s she seeing around Boston, as compared to the Valley and elsewhere? Magid thinks Boston VCs are more “considered” in their investments compared with their Silicon Valley counterparts. That’s hardly surprising. What’s interesting is how she sees New England as a “center of gravity” for companies in biotech, sure, but also in mobile technologies and cloud computing. As particular strengths, Magid points to mobile services, such as payments, ad serving, video, and location-based services, as well as cloud infrastructure—technologies that enable companies essentially to outsource their IT needs for things like data storage, streaming video, and telemedicine.
Here are a few Boston-area companies that Magid singled out as being particularly interesting to watch:
—CloudBees, a recently-formed company focused on building a cloud-based platform for software development and production. (My colleague Erin reported on CloudBees’ venture financing and its acquisition of Stax Networks in the past couple of months.)
—DataXu, a developer of online advertising software for Web, video, and mobile devices. (I spoke with CEO Mike Baker about the company’s growth strategy last fall.)
—PatientKeeper, which makes healthcare software for doctors that automates tasks like viewing patient data and ordering lab tests. (My colleague Ryan has reported on the company’s mobile strategy and its venture financing history.)
—Sproxil, which uses special labels and text messaging to fight counterfeit production of medicines in developing nations. (The company won top honors at IBM’s Boston-area SmartCamp program last June, as Erin reported.)
Lastly, Magid shed some light on the deeper relationship between venture capitalists and IBM. It sounds like it has come a long way in the past decade—and it’s on pretty solid footing in this day and age where investors desperately need exits that an IBM could provide for their portfolio. In the late ‘90s, she says, there was a sense of “why should a VC talk to IBM?” But “then there’s a crash,” she says. “And then they think, ‘Maybe we do need your technical expertise.’”
Of course, the relationship works both ways—IBM needs to keep its finger on the pulse of innovative startups and their investors. “Now they’ve gotten to know us, and we have a great network,” Magid says. “They trust us now.”