Venture Voice – interviews with entrepreneurs

Entertaining Entrepreneurship

VV Show #12 – Deborah Farrington of Starvest Partners

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Statistically speaking, Starvest Partners shouldn’t be in business: Few venture capital funds raised in 1998 survived the dot com bust, first-time partners are a huge bet, and no other venture capital firms are run by women. But don’t tell that to Deborah Farrington, the founder and co-chairman of Starvest. Her firm’s performance has excelled in the past several years and is headed into the top quartile of its field. Debby’s got a number of big hits under her belt now, but she’s not about to stop taking risks.

Show notes:

1:45 Career start

  • Went to Harvard Business School.
  • Worked at Merrill Lynch doing corporate finance for 10 years in New York, Hong Kong and Tokyo.
  • ‘They [the investment firm Debby where used to work] kept saying ‘Why don’t you do it like this.’ Like many entrepreneurs, I said no no no no no. I had a vision I wanted to pursue.’
  • In 1998, four partners who’d never worked together before raised a $150 million fund. Starvest Partners, L.P. was born.

7:45 Cold calls and building relationships

  • ‘Being able to set forth an idea in a succinct fashion and not wasting the other person’s time was important.’

11:50 Raising a venture fund

  • ‘We knew in order to get in the game we had to give up something. We don’t have to do that today.’
  • Strategy was focusing on investing in business services, which was not traditionally a hot industry for venture investing.
  • ‘And also, let’s face it, luck generally plays a role as well. It was a super time for fund raising.’
  • ‘We made one investment in 1999 because we could not find anything that met our criteria’ Often we asked ourselves, ‘What’s wrong with us?” That discipline paid off big in the long run.
  • ‘The largest companies definitely require 5 to 6 to 7 years to build, and there’s really nothing to get around that.’

19:45 NetSuite investment

  • Made an investment in NetSuite, founded by Larry Ellison of Oracle fame.
  • When asked if she wanted to invest: ‘I, with stars in my eyes, said absolutely.’
  • ‘When he approached us, he said, ‘Debby, you’re about the only venture capitalist that I know that I think is really smart but also nice, so I’d like to work with you.’
  • Starvest committed $6.7 million to NetSuite before it had any revenues and couldn’t get any West Coast venture capitalists to back it. Now NetSuite has $40 million in revenue going on $100 million and is going public soon.

22:50 Be nice?

24:35 Board involvement

  • ‘The majority of our companies have CEOs they did not start with.’

29:00 CEO’s abilities to scale

  • ‘If we’ve had a failure as a firm, it’s been not changing out CEOs soon enough.’

36:00 Giving up control by taking on investors

  • ‘If you had 10% of a billion dollars, that’s not too shabby.’

42:10 Pitching to Debby

  • ‘We’re funding someone now who had a prior company that failed, but we think it’s terrific because he learned on somebody else’s nickel.’

49:40 Women in venture capital

  • While Debby attended Harvard Business School, women accounted for only 10% of the class.
  • ‘I’ve always liked being a pioneer.’
  • ‘I think there definitely will be more women venture partners.’
  • ‘This is a very tough business. I’ve always gravitated toward things that I thought were difficult to do. Perhaps something perverse in my personality.’

54:35 Women in the firm

  • ‘Politics completely leaves the room. Testosterone completely leaves the room.’
  • ‘Three attractive women walk in and nobody forgets you.’
  • ‘All of our portfolios are headed by men except one. It’s [gender] really not an issue.’

58:40 Harvard PresidentLarry Summers controversy

  • ‘My advice to Larry is remember you’re never off the record.’
  • ‘I think the whole gender argument is overdone.’

63:03 The title ‘Chairman’

63:20 Starvest’s promising portfolio companies and future

  • NetSuite: planning on going public in mid-2006.
  • Newgistics: planning on going public in mid-2007.
  • ComparisonMarket: owns, largest insurance operation on the web, planning to go public in mid-2007.
  • Mazu.
  • MessageOne.
  • Blazent.
  • Starvest expects to raise a second fund in 2006. The goal for next fund is $200 million.
  • Required reading for the Starvest team’s off-site retreat: Tom Friedman’s The World Is Flat and Malcolm Gladwell’s Blink.

Official bio:

Deborah Farrington is a Founder and Co-Chairman of StarVest Partners, L.P., a $150 million New York City based venture capital fund formed in 1999 to invest in e- business services and software.

Ms. Farrington’s 25-year career in financial services encompasses private equity investing, investment and merchant banking, both in the U.S. and abroad, and securities analysis. Her focus during the past several years has been on investing in business services companies; she has significant experience in business services, e-Business and application service providers. She has worked with many private and public companies as a director, officer, investor and advisor and has special expertise in financial strategy, analysis of growing companies and corporate governance. She has operational and management experience having served as Chairman of the Board and COO of both public and private companies.

On behalf of StarVest, Ms. Farrington is currently a director of NetSuite, Inc., a San Mateo, California based company that provides an integrated web based accounting and other business services to small businesses and of which Larry Ellison is founder and former Chairman; ComparisonMarket Inc., a Cleveland, Ohio company that provides comparative insurance quotes over the Internet and is the largest independent insurance agent in the U.S.; and Fieldglass Inc., a Chicago based software company that provides spend management services to large enterprises. She is also a director of Collectors Universe, Inc. (NASDAQ: CLCT) the largest grader and authenticator of high-end collectibles, including coins, stamps, sports cards and autographs.

From 1993 to1997, Ms. Farrington was President and CEO of Victory Ventures, LLC, a New York-based private equity investment firm. During her tenure with Victory, she was a founding investor and Chairman of the Board of Staffing Resources, Inc., a diversified staffing company, when it grew from $17 million to $250 million in revenues.

From 1987 to 1993, Debby was managing director with Asian Oceanic Group and its affiliates, a Hong Kong-based merchant bank, which invested side by side with its Asian entrepreneur clients. From 1991 to 1993, she was Executive Vice President and a Director of Tigera Group, Inc., a NASDAQ listed public company affiliated with Asian Oceanic and she also served as a director of VideoTech.

From 1976 to 1987, Debby was with Merrill Lynch & Co. where she had a variety of international and domestic assignments in investment banking, securities analysis and management, while based in New York, Hong Kong and Tokyo. At Merrill Lynch, she worked on numerous public and private offerings and mergers & acquisitions for U.S. and international clients. She also held positions with responsibility for international planning, strategy and human resources.

Ms. Farrington is a 1972 graduate of Smith College and received an MBA in 1976 from the Harvard Business School. She has been active in fund raising and alumni affairs for both Smith and Harvard, and currently serves as on the Board of Directors of the Harvard Business School Alumnae Association. She is a member of the Committee of 200 and is President of her New York City Co-op.

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