Charles Beeler, partner at El Dorado Ventures, remembers a meeting in 1999 where a couple of young bucks wanted him to fund their software company at a $60 million Series A pre-money valuation. They claimed their name alone was worth $40 million.
Beeler sent them packing. “It was something stupid,” he says, “with a bunch of Bs and Os or something.”
Even though entrepreneurs aren’t shoring up shoddy business plans with hot-sounding names anymore, plenty of young companies are still spending time and money trading in their old aliases for shiny new monikers. At least one-fifth of the companies in the VentureXpert database that received funding this year have also changed their names at some point in their existence. Many are companies getting fresh starts with names that aren’t so readily associated with a time period or a market that has flamed out.
So what’s in a name? Professional namers, who typically earn $10,000 to $100,000 for these identity switches, argue that a good name adds value to a company. But for every naming pro, there is a VC that thinks in-vogue, expensive names aren’t worth the business cards they are printed on.
“I think [a lot of customers] get confused by all the names that sound alike, and they usually don’t know what the companies do,” says Phil Dunkelberger, an entrepreneur-in-residence with DCM Doll Capital Management who just became the chief executive officer of the modestly named PGP Corp. When asked about naming alternatives he had considered, Dunkelberger responds, “Did we consider some Greek word used in the first century? No, we didn’t do that.”
Dunkelberger aside, Greek words and mythological figures are still fashionable root words for names, but that may be one of the few fashions that has survived from the past few years. E-anythings, dotcoms and lower case first letters followed by capital letters seem to have gone the way of the Nasdaq. Overly abstract names have also given way to a return to blue-chip sounding names, and names that are somewhat descriptive of the company’s products.
What the professionals recommend are one or two syllable names that are easy to pronounce and remember, and names that aren’t a “jarring combinations of letters.”
“Unless there is a business purpose to create an abstract name, I wonder why a naming professional would go that way on the first instance,” says Jeff Lapatine, director of naming and branding at Siegelgale whose naming portfolio includes a regional Blue Cross dubbed Anthem, NYCE (New York Cash Exchange) and Primedia.
Companies change their names for all sorts of reasons. These days, it’s very likely the old name has bad associations, or, as Beeler puts it, “Maybe it’s been on fuckedcompany too many times.”
Young companies often alter their business plans, so that an old name no longer fits the scope of the changed company. Startups may also find that the simple and descriptive name they launched with is not trademarkable or is too close to the name of another company. Sometimes the name is just not zippy enough.
If dullness is the problem, an engineer may be to blame, says S.B. Master, founder and president of naming firm Master-McNeil Inc. Master’s name portfolio includes PayPal, Ariba and Netopia. “A large majority of technology companies are founded by technical people,” Master says. “People who come from the technology side talk like engineers and name their companies like engineers.”
Master’s naming magic also includes her own initials of which she will only say, “Like so many of our clients who have outgrown the content or tone of their original company names, my (cute, perky) old name was not appropriate for my current key audiences as the president of Master-McNeil.”
Pressure to change names often comes from the marketing folks. Nina McIntyre, executive vice president of marketing and strategic alliances at Incentive Systems, says while her company considered itself to be the Mercedes of commission management software, research showed the market was viewing its products as generic-on par with the Chevy Cavaliers of the industry.
The company name also stumbled internationally in places like Germany, where it translated into a phrase more like general compensation than commission. The team wanted a name that was similar to their old one, but different enough to solve those problems. With the help of New Hampshire-based MicroArts and a tedious six-month process, Incentive Systems became … drum roll … Centiv!
That seems like a lot of work for very little change, but McIntyre is insistent it will reduce pricing pressure on its products. The old generic-sounding name put the software in competition with competing products which had less features. “If you’re a commodity, people buy you like a commodity,” she says.
With so many factors influencing a young company’s success, the benefits of these name changes are hard to quantify. Incentive Systems has only been Centiv for about a month, so it’s too soon to tell whether the name change has made a difference. (At the very least, we can now all join the Germans in being confused by what the company does.)
Master points out that in its June 30 quarterly report, when EBay valued the assets of PayPal it will acquire, it valued the name “PayPal” at $68 million. That’s “way more” than Master got paid to come up with it, and it’s clearly a bit of a funny number that accountants use. But, “Would EBay have bought them if they were still called Confinity?” Master asks. “Who knows?”
Some VCs, such as El Dorado’s Beeler, would say they know and the answer is yes. The name isn’t a deal killer, it is the company that is paramount and this renaming business is a waste of money. “I haven’t seen any name that I see as compelling in any way,” he says. “I’m pretty loath to pay some naming firm to come up with a new name for a startup.”
For its part, PGP didn’t shell out money for a name when DCM and Venrock ganged up to buy Network Associates’ mothballed PGP product line. Former CEO Dunkelberger, who is back in the saddle at his former startup, considered several names for the reinvented company: Like PGP Classic or PGP2. In the end, the customers said why not just keep calling it PGP, which stands for Pretty Good Privacy. “I’ve always felt you come back to what’s simple and what helps your customers know what you do,” Dunkelberger says.
One of Beeler’s companies has had its own turn at the name game. When the founders had to put a name on the articles of incorporation, they picked Transbit, which they liked well enough, but they found out they couldn’t trademark it. So they called the company Aleph Lightgate Corp. for a while and then cQuint Communication, but neither name cut it. Now the company calls itself Xponent Photonics, and they seem to like it fine. Beeler says the name changes weren’t a big deal.
“Yeah, it matters,” says Beeler. “You need to have an intelligent name, but at the end of the day, there are more important things to worry about.”
The customers these companies want to impress agree with Beeler. “The name of a company alone is not going to sway Intel’s decision to purchase technology products for use within our own IT department or within our own products,” says a spokeswoman for Intel, a company that was almost named Distek, Calex, Digicom and Moore Noyce (named after the founders, but pronounced “more noise”).
Michael Littenberg, head of the emerging companies and technologies practice at New York law firm Schulte Roth & Zabel LLP, says he hasn’t had a client talk about retaining a naming consultant in at least two years. He says it’s probably an issue of the expense, and reminds us that even professionals don’t guarantee success. “There were a lot of real savvy marketing people who were behind New Coke,” he says.
And then there is PricewaterhouseCoopers which spent in the neighborhood of $11 million on the rebranding and related advertising to become MONDAY:. It was a name that on the Tuesday after it was announced garnered scratched heads and derision throughout the corporate world. Before the laughter died away, the accounting firm changed its name yet again when it was bought by IBM.
For those companies who aren’t bought by IBM there is hope, however, if they search for some swag that investment-bank Piper Jaffray passed out at a conference a couple years ago during the high times.
The legendarily popular item was a naming wheel to help VCs who needed a name for their company (or probably more accurately a good laugh) quick. The paper wheel had three rings that rotated to generate company names. The outside ring had adjectives like red, blue or black; the middle ring had nouns like hat, stream or rocket; and the inside ring had company titles like networks, communications or systems. Voila! Black Stream Networks-call the banker for the IPO.
If only it were still that easy.
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