Television’s J. R. Ewing put Dallas on the map. Before him it was just a spot where the Trinity River sat down to take a break as it wandered across the high desert plains. Now venture capitalists like Ed Olkkola, a general partner at Austin Ventures (AV), have turned Dallas into a mining town, searching for gold nuggets in the form of communications startups.
AV, with more than $3.1 billion under management, set off a stampede of venture investing in the Lone Star State. Venture investment in Texas grew to $4.46 billion from $987.8 million over the past five years, according to Venture Economics (VE), publisher of Venture Capital Journal. That represents 45% annualized growth compared to 25% for the entire nation.
Olkkola’s stomping ground is the Dallas area, known for its wealth of communications companies. He opened an office in the Dallas suburb of Richardson in 2000 and has put $148.2 million to work in Texas-based companies. If you’re trying to put together a communications deal in the area, Olkkola is the man to see.
Historically, Austin has been the Texas hotspot, but the North Dallas communications market is coming on strong. In fact, Dallas was the seventh most active region of investment in the nation in the third quarter of last year (with 18 companies pulling in $371 million), beating out Austin, (No. 10, with 23 companies attracting $229 million), according to VE.
Olkkola, 43, joined AV in September 1998. It didn’t take him long to rack up his first hit. He invested $3 million in Agere, a maker of network processors, in Nov. 1998 and sold it to Lucent Technologies Inc. for $415 million 17 months later, according to VE.
Olkkola was previously with Compaq Computer Corp., where he was vice president of business development and invested in the communications sector on behalf of the company. He’s been a venture capitalist for the past 17 years 14 of them in corporate settings like Compaq and Motorola. It was at Compaq and Motorola that he knocked out most of his homers, including Ramp Networks, Raptor Networks, and Stratacom.
He says he was drawn to AV because venture deals were the best part of the Compaq job and he enjoys building relationships with CEOs. “Being a CEO is the loneliest job in the world,” he says. “What the CEO really needs to have is someone that they can talk to on a confidential basis.”
Chief executives Olkkola’s portfolio companies can’t say enough about him. “Ed is the kind of guy that when you talk to him on the phone and tell him you’re going in for an important meeting with a customer or investor, he says, Call me, I can be on a plane in two-hour’s notice,'” says David Heard, CEO of Santera Systems Inc.
“In our last funding round, he was instrumental in getting people to answer phone calls and respond to us in 24 hours,” says Alastair Westgarth, CEO of Navini Networks Inc. “If you want to get a decision made, you need to get to the decision-makers quickly. He’s done that.”
Olkkola’s CEOs list multiple technology strategies and capitalization ideas he has contributed.
“Ed almost always comes up with something the rest of us have not considered,” says Scott Grout, CEO of Chorum Technologies.
For example, Heard was trying to figure out how to refine and build Santera’s wireline business and broaden its other offerings when Olkkola suggested he spin out the wireless technology into a new company. That’s just what he did, creating Spatial Wireless Inc., which is backed by new investors and Santera, Heard says.
Going forward, VCs will find repeat entrepreneurs and venture-minded engineers in Austin, but they will have to wait a little longer for Dallas to mature.
But, nothing inspires engineers to start companies like watching their neighbors get rich. Who knows? Maybe one of Olkkola’s portfolio companies will be the first big hit to turn the stampeding VCs and entrepreneurs – toward Dallas. With Santera collecting another $110 million of venture funding in August, the Dallas market creeps ever closer to the inflection point.
“Austin has been the fastest growing market in five years,” says John Thornton, a general partner at AV. “Dallas is where Austin was five years ago. The most active investor in that market has to be influential.” That’s just what Olkkola aims to be.
General Partner, Austin Ventures
Investment Focus: Optical networking, switching products, wireless, network infrastructure and voice-over DSL
Biggest Hits: Agere Systems (bought by Lucent), Extreme Networks (NASDAQ: EXTR), Ramp Networks (bought by Nokia), Raptor Networks (bought by Axent) and Stratacom (bought by Cisco).
Board Seats: Broadcloud, Chorum Technologies, Genesis Campus, Netrake, Santera, and TelOptica (13 total).
Years as a VC: 17
Did you know? At Motorola, Olkkola’s group once had the chance to acquire a little company named Cisco. His boss passed.