IBM Recruits VC Heavyweights For Advisory Council
By JONATHAN SHRIEBERMay 22, 2005
NEW YORK -- In an effort to increase the adoption of open technology standards and improve its relations with venture capitalists, International Business Machines Corp. (IBM) has created an advisory council composed of leading investors from some top venture capital firms.
Called the Venture Capital Advisory Council, this new board will help guide IBM's efforts in shaping the growth of technology in emerging markets, according to Drew Clark, a director with IBM's venture capital group. "VCs have come to us in an advisory capacity to help us help our start-ups make the right choices," he said. "The reason for the council is to concentrate and make more effective that dialogue between IBM and the VCs."
Already the Armonk, N.Y., computing giant has seen growth of over 25% in the emerging markets of China, India, and Russia, according to Clark. Representing around $4 billion in revenue, that growth shows just how much of an impact increased adoption in these new technology battlegrounds can have on a company's bottom line.
The work IBM will do with the advisory board, which is to meet quarterly in different regions of the world, is intended to support open standards adoption through IBM's strategy of providing technology and sales and marketing channels for the start-ups with which it partners.
In particular that means working to ensure that companies develop their vertical applications on a platform that can integrate easily with the open standards that IBM supports, rather than the proprietary systems that are the purview of Redmond, Wash.-based Microsoft Corp. (MSFT).
Members of this new advisory board include the head of venture capital for global ventures at 3i, Jo Taylor; a general partner with Accel Partners, Peter Fenton, who has invested in the open source companies JBoss Inc., Xensource Inc, and Zimbra Inc.; the former managing director for the World Bank overseeing Latin America and South Asia, and current chief executive with Darby Overseas Investment, Richard Frank; Tim Draper, whose Draper Fisher Jurvetson ePlanet Ventures fund made $1 billion this month off the IPO of its Chinese search engine portfolio company, Baidu.com Inc.; founding Hummer Winblad partner, Ann Winblad, whose portfolio includes one of the first ERP software as a service firms Intacct Corp.; and Lip-Bu Tan, the chairman and founder of Walden International, one of the leading U.S. venture firms in working Asia.
These days, infrastructure players like IBM, Sun Microsystems Inc. (SUNW), and to an extent, Microsoft, depend on a broad portfolio of smaller companies offering more specialized services to win customers. Customers, according to IBM's Drew, see the software application that affects their business, and not the IBM technology that runs the software application.
"I sort of explain it as armies of mercenaries fighting on your side," said industry analyst and IBM consultant Judith Hurwitz, president of Hurwitz & Co. "There is quite a bit of struggling for power, whether it's Microsoft, SAP, Oracle, or IBM. They're all struggling to win the hearts and minds of customers." And having a better portfolio of secondary software applications for those customers is a real selling point.
It's for that reason that IBM is enlisting these investors. Each represents a different skill-set that falls within IBM's broader strategic initiatives of developing opportunities in emerging markets and along open standards. Fenton, at Accel, and Winblad, with Hummer Winblad, are both proponents of open standards and software as a service. Taylor, from 3i, has an extensive knowledge of the European investment landscape due to his position with one of Europe's largest private equity shops. Jurvetson has had a big win in Asia, but is mostly focusing his attention on opportunities in Eastern Europe and Russia through a new fund. Meanwhile Lip-Bu Tan is famous for his knowledge of the venture capital industry in Asia.
"What you have is a composite of firms that focus on the U.S. and are very focused internationally," said Hurwitz. "It's important that [software] companies that want to create an ecosystem get to those firms early."
(VentureWire, published by Dow Jones Newsletters, covers venture capital and high-tech start-ups.)
-By Jonathan Shieber, Dow Jones Newsletters/VentureWire; 201-938-4305; jonathan.shieber@dowjones.com