Creating Options is Fundamental

Tony Conrad never expected that he would resign from San Francisco-based VSP Capital in late 2004.

But when internal conflict drove Conrad and several others from the venture firm—its LPs later pulled the plug on its third and last fund —he didn’t know what would came next. He just knew he was stepping away from a lucrative, prestigious job because the alternative had become worse.

As it turned out, Conrad says that the move was the best one he could have made.

Over the last five years, he has become a venture partner at True Ventures in San Francisco, a special advisor to AOL Ventures, and he has co-founded and sold Sphere, the contextually relevant content engine, and, a custom profile and personal analytics provider, to AOL for at least $50 million.

If it sounds like Conrad is juggling a lot, that’s not by accident. Since emerging from VSP, Conrad says that he has become focused on creating options for himself and everyone else who he’s involved with.

When he couldn’t decide whether or not to focus on Sphere or on True Ventures, for example, he decided it would be wise to pursue both for as long as possible.

“When you’re a VC, you get invited to a lot of things that are very investor-centric,” Conrad says. “When you’re an entrepreneur, you get invited to a lot of things that are very entrepreneur-centric. [Now] I can go into either of those environments.”

Among the other advantages to enjoying entrée to both, says Conrad, is hearing who the interesting engineers and product people are and having access to entrepreneurs in a way that’s much more collegial and non-threatening.

“Founders see you as one of them because you are one of them,” he says.

Conrad has been smart about creating options for his startups, too. Take Sphere. Roughly two years after it was formed, the company—which pivoted once and which Conrad characterizes as somewhat of a slog—was approached with an acquisition offer by new media executives Jonathan Miller and Ross Levinsohn.

At the time, the duo expected to receive financial support from the private equity firm General Atlantic to begin rolling up content-related startups. That roll-up never happened because several of their acquisition targets, including Automattic, weren’t amenable to selling. Meanwhile, rising valuations were causing General Atlantic to blanch—Miller, Levinsohn and General Atlantic later would part ways.

Never mind what was happening behind the scenes. With one offer on the table, Conrad “did what you should do,” he tells VCJ. He told AOL, one of Sphere’s largest customers, that Sphere was in play.

He also approached Google, which he says made Sphere a “verbal” offer. Soon after, AOL locked up an agreement to buy Sphere for a reported $25 million. (One source tells VCJ the price tag was higher but Conrad declines to confirm any figures or discuss earn-outs.)

Conrad says it’s possible that he couldn’t have sold Sphere had it raised much more funding than what it did: about $4.25 million from investors, including Radar Partners, Trident Capital and angel investors Scott Kurnit and Will Hearst.

He says creating similar options for is the reason he kept its pricing out of the stratosphere, too. “I honestly think I could have raised $5 million on just the idea [of],” he says. raised $425,000 from investors, including True, Radar Partners, SV Angel and AOL Ventures at a post-money valuation of $3 million.

Though never disclosed publicly, AOL acquired last December for a reported $25 million. Conrad remains CEO of and expect him to keep the valuation low if he starts a third company.

“I’m not sure [pricing a new company higher] creates alignment with the people who are your partners, called your investors,” he says. “If I’d priced either [Sphere or] at $5 million or $7 million, which I easily could have done, the multiple [my investors] would have gotten would have been a lot less attractive.”

It’s why when Conrad sits down with entrepreneurs, as either an investor or a peer, one of the first pieces of advice he dispenses is that they be careful of where they value their business.

“Creating options is fundamental,” Conrad says. “If an entrepreneur has an option to sell his business and it represents a 4x because of how he priced it, no one is going to block him. And he may turn that [acquisition offer] down, but I bet it creates an option that he can say yes to in the process: another offer, a new financing, a commitment to do more with less.”

Tony Conrad at a Glance



Home state: Indiana

Degree: B.S.; B.A., Business and Journalism, Indiana University

Founders see you as one of them because you are one of them.

Tony Conrad

Career: Brand management, Foote Cone & Belding; Brand management, Gervais-Danone France; Director of M&A for Groupe Danone in Southeast Asia; General Partner, VSP Capital; Co-founder, Sphere; Co-founder,; Venture Partner, True Ventures; Special Advisor; AOL Ventures

Did you know: Groupe Danone is the second-largest producer of packaged water and Conrad led its acquisition of Aqua, which nearly doubled its water business, in the late 1990s.

Sample Investments



Vendor of online email and news services

Located: San Francisco

Funding: $2M, including from Draper Fisher Jurvetson and VSP Capital

Exit: Acquired by Yahoo in 2004 for a reported $30M



Sells direct-to-mobile entertainment content

Located: San Francisco

Funding: $34.5M, including from True Ventures, Spark Capital and GrandBanks Capital

Exit: None



Parent company of blogging platform WordPress

Located: San Francisco

Funding: $30.6M, including from True Ventures, Polaris Venture Partners, Radar Partners and The New York Times

Exit: None



Social, stock micro-blogging service

Located: San Diego

Funding: $8.6M, including from True Ventures, Foundry Group and numerous angels

Exit: None