Is Movik Networks the Next Starent? A Chat with Highland VC Sean Dalton
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did, and another office in the U.K. as it goes after the international market for mobile data delivery. What’s more, there are some parallels with the telecom industry in the early 2000s, with carriers all moving from 3G to 4G wireless systems and trying to upgrade their data services.
All of this fits with Dalton’s, and Highland’s, main investment themes—especially what global can do for local innovation. “Entrepreneurialism is a worldwide opportunity,” Dalton says. “In order to invest effectively in the U.S., you need to know what’s going on in other geographies.” And in Starent’s case, creating real value abroad was crucial. “A huge part of Starent’s success is that India was developing a big part of the product, not just [quality assurance],” Dalton says.
Highland has a separate China-focused team that has made eight deals in the past seven years, including investing in Beijing-based Web firm Qihoo 360 (NYSE: QIHU). In Europe, Highland also has been involved in about 10 deals, mostly growth-stage investments, with companies such as PhotoBox (sort of the Shutterfly or CafePress of Europe), Wooga (like Zynga), and Spartoo (like Zappos).
Of course, we provincial types are most familiar with Highland’s Boston-area investments—in companies like Gemvara, SCVNGR, Session M, Kyruus, PerkStreet Financial, Heartland Robotics, and, yes, Movik Networks.
So I asked Dalton how the firm keeps its focus while being spread over so many geographies, sectors, and stages. Like others, Highland has developed a thesis around “how to scale a venture firm,” he says. One key component is consistent decision making. What he means is that “every decision is made as a firm, but from the entrepreneurs’ point of view, they are dealing with decision-makers in local areas,” he says.
Another part of the venture strategy is how each deal fits within the overall framework of Highland’s investments. “We don’t worry about [finding] the greatest opportunity in Europe or China,” Dalton says. It comes down to whether a deal is a great venture opportunity for Highland, he says, and that boils down to an assessment of the management team and the market. Not that everyone agrees on what’s a good investment. “Our best deals are the most controversial,” he says, pointing to Starent, Vistaprint, and Qihoo as examples of investments that spurred lots of internal debate.
As for his firm’s biggest failures, Dalton points to Amp’d Mobile, a California startup that flamed out in 2007 after raising more than $300 million in venture capital. “Ultimately it was VCs losing their mind,” and the company not executing the “basics of blocking and tackling” and not investing in the right people, Dalton says.
But back to Movik Networks—which, of course, is looking at a very different mobile landscape compared to what Starent saw 10 years ago. Mobile data networks are well established now. But some of the key challenges are that the average revenue per mobile subscriber is down, while data infrastructure costs are going up. “The question is how to ensure mobile [operators] can still be profitable while still making investments,” Dalton says.
Answering that question will require a truly global perspective—one that Movik is looking to build on as it prepares to demo its technology at the Mobile World Congress in Barcelona next week. And yes, the world will be watching.