Local venture capital firm launches academics into world of business, despite tough economy
by Kate Lilienthal
At a time when venture capital for risky, budding companies is hard to come by, one Palo Alto VC firm is betting its capital on just those start-ups. Since 2000, Dot Edu Ventures has been making early-stage investments in cutting-edge technology initiatives founded by faculty and graduate students from leading research universities such as Stanford, MIT and UC Berkeley.
Traditional venture capitalists have shifted focus to more conservative, later-stage investments, and “angel” investors — high net-worth individuals — are keeping their money in the bank. Asha Jadeja, Dot Edu managing partner, and Rajeev Motwani, Dot Edu chairman and also a professor of computer science at Stanford University, however, are staying true to their firm’s mission.
“This is an excellent time for building long-term, value-based businesses that rest on core innovations,” Jadeja said. “Because the pressure is not there from investors to make money fast, gone are the bad ideas looking for a quick hit. We’re seeing long-term solutions to real problems. And entrepreneurs are more mature and realistic about what it means to be truly committed to the risky start-up environment.”
Dot Edu Ventures, located on Bryant Street, offers more than capital. The firm provides its portfolio companies with technical, business and management support. Through her network of contacts, Jadeja helps match engineering talent from academia with marketing talent from industry as well as pave the way to partnerships and other sources of capital.
Dot Edu also holds regular workshops that bring academics and businesspersons together to exchange ideas and learn from one another.
“Our mission is to sponsor good technology ideas,” Jadeja said. “We’re interested in technology first, and business second. That’s our point of difference.”
One young company benefiting from Dot Edu’s support is Centrata. Based on computer science research from MIT, Centrata develops software tools that help make companies’ computing resources run more efficiently.
Centrata’s original founders came to Dot Edu with little more than an idea and a fledgling business plan. Seeing promise in the proposition, Jadeja worked with the group to expand and refine the plan, and then convinced venture capital firm Kleiner Perkins Caufield & Byers to jointly fund the effort.
“Asha is a shrewd businesswoman. She holds us to our milestones and helps with business development. And Rajeev is an incredible technical and business advisor,” Centrata CEO Venkat Raju said.
Jadeja conceived of Dot Edu in the late ’90s when she became loosely affiliated with Google. That experience led to her involvement in other start-up activities at Stanford and elsewhere. Her work with faculty and graduate students made apparent the need for a firm with deep technical understanding that could provide funding as well as management support. Jadeja seeks to bridge the gap between researchers and later-stage venture groups.
“I really enjoy working with entrepreneurs,” Jadeja said.
“They’re the engines. We’re simply the facilitators.”
Dot Edu is a $20-million fund and has approximately 15 portfolio companies, all involving computing technologies. The technologies are usually based on two-to-three years of research on industry- or government-funded projects.
Like most venture capital firms, Dot Edu derives its revenue from a combination of management fees and a percentage of the earnings from the money it invests.
Jadeja finances about one in 20 ideas, and only after a deep evaluation of the technology, team and market. The firm typically invests between half a million and a million dollars in an initiative.
Ventures that approach Jadeja usually consist of one or two faculty members, and perhaps a graduate student, from electrical engineering or computer science departments, armed with a small handful of PowerPoint slides.
When Dot Edu finances a venture, it works with a nascent company for an average of two years, taking a board or technical advisory position.
“Then after about two years,” Jadeja explained, “a company gains a momentum of its own. It’s ready for a second round of financing, a Series B round. At that point, we offer little valueadd, and usually withdraw from the board.”
Dot Edu is currently focused on supporting business ideas in two areas of technical development: inventory management and computer chips. Inventory management — managing stock efficiently and securely — is a pain point in retail. Jadeja is working with technologies that will enable retailers such as Walmart or Target to manage inventory from computers in a central location.
Looking at the next generation of chips, Jadeja sees them replacing software as a better storage medium for user information on the Internet, making the user’s experience on the Web faster, more reliable and more secure.
So far, Jadeja’s passionate interest in technology is paying off. One company under her wing, Jareva Technologies, was recently acquired for $65 million. Other businesses are pointed towards similar success.
In its own short life, the niche VC firm has garnered respect from its sponsored companies.
Ramneek Bhasin, CEO of Vialto, said, “Dot Edu has been a critical element of our success to date. They’ve helped us find funding and made available a lot of business management resumes. When Asha calls, I listen.”