Menlo Ventures Steps into the Spotlight With Deals Like Uber and Poshmark
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make more money investing than working for an hourly rate.
For his co-founding partners, Montgomery recruited other people with technical and operational backgrounds in the computer business. “Part of the DNA is that all the people who came here, came from very modest beginnings and had to work damn hard to get where they were,” Siegel says.
One of those hard workers was a now-retired partner name Tom Bredt. “When I first came here, I had a company that was going sideways,” Siegel recalls. “I remember saying ‘I wonder if this is one we should let go?’ And Tom said, ‘No, goddammit, that is not what we do here. You are going to make it succeed or die trying.’ Well, I am still alive.”
The company was Netmosphere, which was acquired by Critical Path in 2000; Menlo ended up earning 3.5 times its original investment on the deal.
Among insiders in the enterprise hardware business, Menlo has a reputation for fairness, decency, and good judgment. A large number of the CEOs of its portfolio companies have been backed by Menlo before, and “even the CEOs who have been fired in the past still say ‘I was treated graciously’ and come back to us with their next company,” Siegel says. “If you went to Wilson Sonsini to get incorporated and asked ‘What are some good venture firms,’ they would point you our way, and we were certainly well-known in enterprise and infrastructure, where the firm had its huge successes in the 80s and 90s.”
But the firm was far less famous among younger entrepreneurs and founders of consumer-oriented startups. And for good reason: until recently it had only one managing director, Shawn Carolan, who was focused on consumer deals. His investments included CinemaNow, Roku, IMVU, Playspan, and Siri, but that wasn’t enough to give Menlo a high profile among consumer companies.
That’s part of the reason Menlo brought in Pishevar as a managing director in 2011. Pishevar is a networker par excellence—a ubiquitous presence at valley parties and startup accelerator demo days, with powerful Hollywood friends like Ashton Kutcher, Sean Penn, and Lady Gaga’s manager Troy Carter. “Part of the problem [with Menlo] was they didn’t want to talk about their successes,” Pishevar says. “They had a network of people, but not the public face, especially to the new entrepreneurs. There was an opportunity to take the package of everything that has happened and help people become aware of it.”
In addition to helping to drive the rebranding campaign, Pishevar launched Menlo’s $20 million Talent Fund, which has been the source of some 35 seed investments since December 2011. (A Talent Fund investment requires the approval of just two Menlo partners, not the whole firm, Pishevar says.) He also made sure Menlo got a piece of some of the hottest consumer companies on the market, including Uber, Fab, and Poshmark.
To pull off some of those deals, Pishevar says, he had to bring more than analytics and domain expertise to bear. “The analytical side is absolutely important, but on the other side of the spectrum, you have what I call the algorithm of the human heart,” Pishevar says. “That has to do with culture and values and work ethic and how willing you are to sacrifice your time to move the needle for your entrepreneurs. The winning formula, for us, has been to have both.”
The Uber deal may be the best example. To win that one, Pishevar went at founder Travis Kalanick from every angle.
“I didn’t really know Shervin…[but] I was getting e-mails from him and intros from everybody he knows,” Kalanick told Forbes. “I met with him because I had no choice.”
And once that first meeting was in the bag, Pishevar followed Kalanick on a trip to Ireland at the precise moment Uber was considering offers from several competing venture firms. “We walked the streets of Dublin and really bonded, and signed a term sheet there in the hotel,” Pishevar says.
“Actually, Shervin wouldn’t let Travis out of his hotel room,” Siegel jokes.
The high-touch approach didn’t wane after Menlo won the deal. When Uber was facing a taxi-industry revolt in the District of Columbia, Pishevar brought all his social-media power to bear.
“The city council was trying, in less than 24 hours, to pass a bill called the Uber Bill that would have locked in Uber’s prices at four times the minimum for other taxis,” Pishever told me. “It was definitely the taxi industry using their relationship with city council members to push it through. So we did a big push in social media. I did a blog post in the Huffington Post that went viral, they e-mailed all their customers in Washington, and suddenly the city council and the mayor had 50,000 people emailing, calling, and faxing. It was overwhelming, and they basically pushed out the reform a few months. I just went to the [presidential] inauguration, and we have Uber taxis working all over D.C., so it was a huge sea change.”
To find out a little more about how Menlo works its magic, I spoke with Manish Chandra, the CEO and founder of Poshmark. The Menlo Park, CA-based startup, which collected $12 million in a December 2012 Series B round led by Menlo, runs a fashion marketplace that lets women browse, buy, and sell clothes from their mobile phones.
Peer-to-peer marketplace businesses are subject to some unusual dynamics, Chandra says, so he was “looking for a partner who, number one, had the capability to understand what I was talking about.” In particular, bringing buyers and sellers together can be slow and difficult in the early days of a marketplace. “But once you get it rolling it moves faster and … Next Page »