[FoRK] the Kaltix story [de-mimed]
Rohit at ICS.uci.edu
Thu Jul 15 00:00:31 PDT 2004
Posted on Fri, Jul. 02, 2004
DOT EDU IS FIRST IN LINE TO SEE IDEAS HATCHED AT STANFORD
By Matt Marshall
It's an honored tradition in the venture capital world: prowling the
hallowed halls of Stanford University to get as close as you can to the
brightest students and their ideas.
But one venture firm, Dot Edu, has trumped all others. The husband and
wife founders hatched it from within the university's very bowels: He's
a professor of computer science at Stanford, and she's a former student
of political science.
The connection of Professor Rajeev Motwani and his wife, Asha Jadeja,
to the university effectively places them first in line to see the
ideas of many of Stanford's most talented computer science students. It
also allows them to take the valley game of connections -- multiple
ties with multiple players -- to a new level.
``There's a certain sense of family around it. . . . There's a Stanford
feeling,'' says Motwani. When asked about potential conflicts of
interest, he says he has never invested in one of his own students.
Dot Edu operates from a three-room office on Bryant Street, just off
University Avenue in Palo Alto. Motwani, an expert in algorithms and
theory, sources most deals through his network on campus. Jadeja does
the heavy lifting on just about everything else.
By getting so close to the source, Dot Edu effectively nudges aside
traditional venture firms. It gets in early, scooping up a larger
ownership stake for less money.
The couple won't disclose the fund's returns. But Dot Edu survived
through the downturn when many other new VCs wilted. It has invested in
about 20 start-ups, and made money off two so far: software company
Jareva and personalized search engine Kaltix.
After a $20 million fund in 2000, Dot Edu is now raising a second fund
of $60 million, which should close this summer.
The connection between venture capital and Stanford goes back to the
earliest days of Silicon Valley. John Doerr of Kleiner Perkins Caufield
& Byers, perhaps the region's best-known venture capitalist, said he
backed Sun Microsystems after walking the halls of Stanford.
Keeping the link
During the 1990s, a generation of student entrepreneurs built Internet
companies and cashed in on profits. Many have become venture
capitalists at firms like Cambrian Ventures, the Woodside Fund, or the
Mayfield Fund while retaining links to Stanford students and
Motwani was an early adviser to Google. He didn't invest in Google, but
retains some options for his role. The company's meteoric rise made the
couple realize it might be worth setting up a venture fund. ``Rajeev
was such a rock star,'' says Jadeja.
Indeed, Motwani -- a man with a quiet smile and a twinkle in his eye --
has been known to play keyboard and guitar in local bands. But he's the
shy one -- his wife is the live wire. She's the one who arranges
meetings, reminds Motwani to attend them and otherwise sets the agenda.
Motwani filters most pitches they hear from start-up teams. After he
agrees to an idea, Jadeja takes over. ``I must say, their technology
was Greek to me,'' Jadeja said of Kaltix, a Stanford start-up they
funded last year. ``I'm not an algorithms person.''
Kaltix is a good example of how Dot Edu works. Three students, led by
Sepandar Kamvar, had worked for four years on their idea, a search
engine that personalized results. They tried talking Google into buying
their technology, but Google dallied.
So they went back to Motwani and Jadeja, who helped them raise money,
gave them an office equipped with computers and acted as sounding
boards on how to incorporate the company and negotiate with Stanford
over intellectual-property rights. Soon, Kaltix was getting interest
from other players.
That's when Google finally stepped in and snapped up Kaltix only three
months after Dot Edu invested. The purchase price included Google
stock, so the exact return won't be known until Google goes public.
In Dot Edu's other win, Jareva, it reaped a 200 percent to 300 percent
gain when Veritas acquired that company two years ago for $62 million.
Motwani and Jadeja also use their academic network to find ideas at
other universities around the country -- and even abroad. For example,
they invested in Sychron, a company started at Oxford, England; in
Bytemobile, of the University of Illinois; and Centrata, of the
Massachusetts Institute of Technology. All of those start-ups have
since opened offices here, after encouragement from Dot Edu.
Motwani and Jadeja say there was no need to have Stanford sign off on
the arrangement, because Motwani is not a partner of the fund, merely
an adviser. He works only part time. Also, he notes Dot Edu has
invested in many deals outside of Stanford.
He has another rule: Don't invest in a friend's company.
Louis Mejia, of Stanford's Office of Technology Licensing, says the
university places a lot of trust in its faculty, and gives professors
flexibility in the sorts of arrangements Motwani is engaged in.
Experience in the real world gives his students a richer learning
environment, Mejia says.
A colleague, Stanford computer science Professor Jennifer Widom, says
not much bad can come from Motwani's venture activities, unless a
student is being exploited. But she says Motwani appears careful in his
work with students. He has become the go-to person inside and outside
of the department, she says. ``He keeps his fingers on the pulse.''
``The only people who may suffer are the ones on Sand Hill Road,'' says
But right now those people are interested in staying friendly with Dot
Edu in order to retain access. Vinod Khosla, a successful venture
capitalist at Kleiner Perkins, has co-invested with Dot Edu in a
company called Centrata. Venture firms regularly send Dot Edu bottles
of wine and other gifts.
Still, other venture firms find ways to ensure some front-seat access.
Morgenthaler Ventures, for example, gave an endowment to Stanford to
help start an annual business-plan competition. The winning student
idea gets a ``Morgenthaler prize.''
Motwani is certainly well-regarded in his field, but he's not the only
one, says Ken Guillicksen, venture capitalist with Morgenthaler
``He's naturally going to see things early that are in the network of
good relationships he has,'' says Guillicksen. But ``nobody has a lock.
. . . Nobody can say: `If it comes out of Stanford, I'm the funder.
Line up at the door please.' ''
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