MENLO PARK, Calif. – Barry Eggers, one of the founding partners of Lightspeed Venture Partners, formerly Weiss, Peck & Greer Venture Partners, jokingly states that he has wanted to be a venture capitalist ever since he was in the womb. However he didn’t really come to that conclusion until after an impressive career at Cisco Systems Inc.
After receiving his M.B.A. from Stanford University in 1991, Eggers got right to work at Cisco as the director of business development. “I started at Cisco early on in the company’s history – when they had about 400 to 500 employees, and spent a lot of time developing the company’s partnerships and sales channels with the telcos – AT&T’s, MCI, Sprint – and the big equipment providers like Nokia and Alcatel,” Eggers says. “I was actually one of the first guys at Cisco building its telco relationships both from a sales channel standpoint and a joint development standpoint.”
When Cisco Systems got into acquisition mode in 1994, Eggers stepped up to run the acquisition group. “I did Cisco’s second, third and fourth acquisitions, so I was sort of the guy that was building the process that could be replicated for future acquisitions and integration,” explains Eggers. During his career at Cisco, Eggers worked on the acquisitions of Kalpana Inc., LightStream Corp., Newport Systems Solutions and Stratacom Inc. with a brief respite in between when he served as director of field operations for Cisco’s ATM Business Unit in Boston.
Throughout his tenure at Cisco, Eggers kept in contact with Chris Schaepe, a business school classmate who also happened to be a general partner at Weiss, Peck & Greer.
“When I came back from Boston to do the Stratcom integration it was a logical time to sort of poke my head up and look at other opportunities,” Eggers says. “Cisco had grown from 400 people to 12,000 people over the six years I was there, and I saw an opportunity to go into venture capital and work with smaller start-ups and get back to building businesses…that’s what I truly enjoy.”
Eggers left Cisco in January 1997 to pursue VC at WP&G [Weiss, Peck & Greer Venture Partners changed its name to Lightspeed Venture Partners on Oct. 11, 2000]. “I chose Weiss Peck & Greer because I liked the platform it had and the team – it was a young team with a lot of experience, and it was on the up and up,” Eggers says.
Back to Basics
As a VC with Lightspeed Ventures, Eggers focuses on investments in the areas of communications and networking. The Menlo Park-based firm has over $2 billion under management and focuses on early-stage investments in product and services companies in the areas of Internet, software and communications.
Eggers has arranged funding for companies like Ellacoya Networks, a developer of high performance subscriber management systems; Nishan Systems, a developer of next generation storage networks; and Oresis Communications, a developer of multi-services switching platforms.
One thing Eggers has not done as a VC is invest in a dotcom. “I am probably one of the few VCs that never invested in any dotcoms,” he says. “We as a group didn’t do too many and I personally didn’t do any. So I don’t have any of those headaches.”
While he may not have gotten caught up in the so-called dotcom mania, he could not help but get caught up in the overall fervor it generated in the VC market, which he compares to that of being on a treadmill that kept getting faster and faster. “The treadmill was the time you had to look at deals and make a decision about whether to invest, and the time you had to get companies to a liquidity event,” he says. “It seemed that as more and more money came into the industry the treadmill moved faster and faster.”
Eggers says eventually the whole treadmill broke and is now back to a more manageable pace – a pace that allows VCs to do their job more like the way they are supposed to.
“We have more time to look at companies and analyze the investments we are considering and do a more complete set of due diligence – not that we didn’t before; but we just have more time now.”
Eggers believes there is a certain amount of momentum investing in the VC market that separates the financial investors from those that want to build companies. “That’s why I, and Lightspeed Venture Partners, are here – to find good people in high-growth markets and help them build great companies,” he says. “Now we have more time not only to do the up-front work but also to focus on what’s real about a business – that is you’re in business to create profits and I think we lost track of that in a big way.”
The Golden Rule
Elsewhere in the VC arena, the bursting of the dotcom bubble has resulted in putting the financing leverage firmly back into the hands of VCs, or as Eggers says a return to the golden rule – he who has the gold make the rules.
“There is still a shortage of good entrepreneurs, so the best ones are still going to have people chasing them and they will have some leverage. In general, the money has slowed, so there definitely has been a shift back to the VC’s favor and that’s great,” he notes. “If you look at the money we’re investing now, we are investing at much lower valuations into real businesses and backing good people, so for the funds that are investing this year or starting to invest this year it should be a good vintage year assuming the Nasdaq comes back within two to three years.”
Eggers says the VC market is clearly going through a correction cycle. “Money is slowing, valuations are coming down quickly, and leverage is back in the hands of the VCs,” he says. “The question is [for valuations] will they correct fast enough – I think private valuations are still correcting. The other question is when will the public market come back so we can get some type of multiple returns on our investments.”