MENLO PARK, Calif. – After 30 years as a venture capitalist, you would think J. Burgess Jamieson would have a lot to say about his career. He founded Institutional Venture Associates (IVA), Jamieson & Co. and Sigma Partners. While Jamieson won’t say much about himself, his associates jump at the chance to explain his style.
“He is the only venture capitalist I have ever come across who, during the period when he was not investing the money as quickly as he had anticipated, dropped the management fee on his own,” says Stathis Andris, president of Venture Investment Associates.
After joining Electronic Memories & Magnetics Corp., Jamieson made his first venture investments in 1968 through the company officers’ investment pool, and their success secured his interest in the VC business. About the time a situation at Electronic Memories encouraged him to reevaluate his career, Philip Greer approached him with an opportunity at BankAmerica Corp.’s VC fund, WestVen Management, and he took it.
Three years later, Jamieson formed IVA with Reid Dennis and Burt McMurtry. Andris called IVA one of the most successful VC funds ever, distributing $185 million on $19 million invested. IVA split in 1980, and Jamieson returned to investing for his own account through Jamieson & Co.
Soon after the IVA split, a former colleague Gardner Hendrie, asked Jamieson about the VC business and mentioned a plan for a new company. With characteristic clairvoyance, Jamieson flew to Boston the following week and put together the syndicate for Stratus Computer Inc.
In late 1984, Andris, a fund-of-funds manager who often ignores VCs’ solicitations, actually encouraged Jamieson to raise an institutional venture fund. Content with his current situation, Jamieson hesitated, but Andris promised to lead the investment in the fund and to recruit the limited partners needed to complete the syndicate.
Despite Jamieson’s reservations, Andris would eventually take about 17% of the limited partner interest in Jamieson’s next effort, Sigma Partners. Jamieson is the managing general partner of Sigma’s first two funds, and he continued as a special LP in subsequent funds.
The Great Cycle
Jamieson preaches the cyclical nature of the VC business. It’s at the core of his investment philosophy. Interestingly, he formed two VC firms in the rubble of the investing frenzies of the early 70s and early 80s. He also recently bowed out of institutional venture investing.
“In 1999, I just got very uncomfortable with the venture business generally,” Jamieson says. “The valuations got unreasonably optimistic.”
“This giant bubble in recent years, which was caused, I believe, by the creation of excess liquidity, or money supply growth by the Fed, has prolonged that [10- to 12-year] cycle.”
According to Jamieson’s theory, the Federal Reserve over-pumped the money supply until late 1999, forcing the excess capital into financial assets.
With money supply growth creeping up again following the dip in 2000, Jamieson expects a short-term boost in the stock market, but this solution may simply defer the problem of the high valuations of financial assets, creating long-term inflationary results.
He does not think the Valley will escape the difficulties. He expects failure among venture-backed companies and VC firms, but he thinks the shake-out will be good for the industry over the long term.
Amid the carnage, the venture market may actually be ripe. After all, Jamieson founded two firms in times like these, when most existing VC firms were too busy repairing their portfolios to notice his efforts.
“I used to drive down to board meetings in the 70s, and there were acres of orchards, which I guess were mostly apricots and plums. In the spring, they were really neat beautiful,” Jamieson says. “That’s all gone.”
The valley changed in three decades. The open spaces around Menlo Park have been replaced by the money chase and the quest for trophy houses and other status symbols. But when the capital dries up, valuations will come down, and the business will become interesting for Jamieson again. The money chase does not do much for him.
“Most enterprises or efforts undertaken with a view toward just making money seem to fail,” Jamieson says. He says a consumptive, flashy lifestyle conflicts with the diligence needed to grow a company.
“The habits of management teams among this recent crop of start-ups and early-stage companies have been incredibly badly shaped,” he says. “They have incurred huge negative cash flows which in many cases have been absolutely wasted.”
He also wonders about the management of VC firms. Downplaying the pursuit of growth for growth’s sake, he says high returns become more difficult as fund sizes increase.
“I would much prefer to do an outstanding job managing a modest amount of capital than a mediocre job of managing a huge amount,” Jamieson says. As for the billion-dollar funds, “I hope those managers know something I don’t.”
Unlike IVA and WestVen, Sigma does not contribute much to the Silicon Valley alumni network. In its 15 years, only three partners, including Jamieson, have left the active fold all of whom left in their mid-60s through retirement or semi-retirement.
Jamieson raised the money for the first Sigma fund himself, immediately brought in venture lawyer Brad Jeffries as a partner and then hired four investment professionals over three years. One of the four hires, Wade Woodson says he interviewed for six months before earning an associate position at Sigma.
The new hires all had operating experience and good networks, but none of them knew much about VC. Woodson said in those early days Jamieson was the sensei, captaining the ship but at the same time preparing his pupils to take the firm forward. Woodson is the managing general partner for the current Sigma fund and the previous two funds.
In 1985, Stratus’ Hendrie became one of the first two hires at Sigma.
“He taught me everything I know about the business just simply by asking me questions. He never told anybody what to do,” says Hendrie, now a semi-retired partner. “But, I’d often change my mind.”
Woodson says Jamieson designed an institutional culture that understands and supports change. Among other things, each Sigma fund is matched by a large, GPs’ side fund, equal to maybe 20% to 25% of the main fund’s assets.
As the senior partners in the firm decrease their GP responsibilities, they also relinquish a representative portion of the carry to the younger members. However, they increase their participation in the GPs’ side fund and keep an incentive to stay involved with the firm.
Jamieson & Co. now consists of Jamieson; Sandi Howarth, an assistant; and Winnie Schlossareck, the 27-year veteran chief financial officer. The firm basically exists as a platform for launching Jamieson’s philanthropic endeavors, managing his interests in about 1,500 acres of Northern California vineyards and making personal VC investments mostly in the German-speaking European countries. The outfit shares office space with Sigma, and he still works with a few Sigma companies.
Jamieson attended the Massachusetts Institute of Technology on scholarships from Grumman Aircraft and Westinghouse Electric Co., and he never forgot it. Jamieson has established numerous scholarships at MIT and endowed a professorship. Last fall, he taught a course as an adjunct professor. Jamieson says he enjoyed the position most when the students stayed late or came early to speak with him, and he was pleased the university has invited him to teach again.
Andris says Jamieson (“the most straightforward person I know”) surrounds himself with people of similar values. He chooses entrepreneurs and partners that he can trust. He looks for thoughtful, family-oriented people with real operating experience. He says intelligence is necessary but not sufficient for success in the business.
“Intelligence has nothing to do with good judgement or character,” Jamieson says. “I think integrity, realism, not believing one’s own press notices and having an otherwise stable life are very important.”