Spinout Doctors: How New Venture Partners Saved Freescale’s Magnetic Memory and Other Stranded Technologies

9/2/10Follow @wroush

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reinvented many years later. Unfortunately, there isn’t the will to do anything about this in the mainstream venture community.

X: Do you come across companies that style themselves as so innovative that, basically, it’s impossible to get things spun out from them, even if that would be the sane thing to do?

DT: Absolutely, but that’s probably just a stage in a company’s development. When you are in rapid growth mode, you are trying to do everything. Google is in that space. I would not expect to see a lot of spinouts from Google at this point. You’re seeing a lot of people leave Google and trying to start things, but the view at Google is that if it’s a really good thing to do, we will do it ourselves and make it fit. I think there will be a swing of the pendulum, where they will decide their interests are best served by focusing on a smaller number of things.

Microsoft is interesting in this respect. They do have an IP ventures group that looks at spinning things out, but not with the original founding team. They’ll try to identify something they can spin out, and then recruit people to learn the technology, so they can retain the original team. That is not as attractive a model to us. We are not 100 percent opposed to it, but typically a startup has to reinvent and change directions a few times, and you really want to make sure that you know the technology.

X: You’ve probably seen cases where entrepreneurs inside big organizations had great ideas, and they got “shelved” rather than spun out. What happens to those people then?

DT: It depends on the orientation of the people. Some are hugely loyal to their companies. They work on a project, they love it, they want to foist it on the world, but as long as they feel the project got a fair hearing in the company, they are willing to accept the “no” and go on to do something great for the company. I saw that at Intel. The key part was to make sure they got a fair hearing. Another group of folks may have a different disposition, or their allegiance may be more to the technology, and when you try to take those people away from their dream, you run a high risk of breaking them. They may stay in the company, but with an attitude that may be bad for the company and for the people adjacent to them. Many executives tend to say, “I want to keep my people,” but ironically when they cancel a project they just put them into the redeployment pool and let them fend for themselves. So it’s very weird. As a research manager, you want to keep your people, but the right thing is probably to stop and say, “Where are these people going to do best?”

X: It sounds like there’s an element of career counseling to what you do.

DT: I wouldn’t say collectively that we necessarily do that, but individually I see that as part of what I’m doing. I’ve had circumstances where I’ve been talking to a corporate partner, even about something that we’re not going to spin off, and I’ll say, “We don’t think we can really do a spinoff, but on the other hand you have a problem—you have great technologists who care passionately about this, and is there a good answer here to get a good result for that organization and those people?” Then too, I’ve seen cases where somebody has a project canceled, got their hearing, went on, and did another project that was better and more closely related to the company’s agenda and then benefited from the learnings from the first project.

X: Are there any other venture firms that do what New Venture Partners does?

DT: There was one player in the past, Blueprint Ventures. They failed to raise another fund. To be honest, I was a little disappointed, in the sense that it was nice to have another player in the space. But it’s also nice to be the only one.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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