8/4/2019 395 Lesson 3 Vermeer ABC
1/32
Vermeer (A, A-1, B, C)
STC 395
(C) Jeffrey A. Martin
If I were to wish for anything, I should not wish forwealth and power, but for the passionate sense of thepotential, for the eye which, ever youngsees thepossiblewhat wine is so sparkling, what so fragrant,what so intoxicating as possibility?
-- Soren Kierkegaard
8/4/2019 395 Lesson 3 Vermeer ABC
2/32
Jeffrey A. Martin, PhD 2
Lets Vote on the VCs Offer
YES Take the Offer NO Dont Take the offer
8/4/2019 395 Lesson 3 Vermeer ABC
3/32
Jeffrey A. Martin, PhD 3
What is the opportunity? What have they done tocreate value?
8/4/2019 395 Lesson 3 Vermeer ABC
4/32
Jeffrey A. Martin, PhD 4
What do the Entrepreneurs think
Vermeer is worth?
8/4/2019 395 Lesson 3 Vermeer ABC
5/32
Jeffrey A. Martin, PhD 5
What do the VCs think Vermeer is
Worth?
8/4/2019 395 Lesson 3 Vermeer ABC
6/32
Jeffrey A. Martin, PhD 6
What do each of the stakeholders get out
of the deal?Charles Randy Frank Employees VCs
GET?
Want?
Risk
Manage-
ment?
8/4/2019 395 Lesson 3 Vermeer ABC
7/32
Should Charles Accept the Deal?
Jeffrey A. Martin, PhD 7
8/4/2019 395 Lesson 3 Vermeer ABC
8/32
VERMEER A-1
Jeffrey A. Martin, PhD 8
8/4/2019 395 Lesson 3 Vermeer ABC
9/32
Jeffrey A. Martin, PhD 9
Candidate #1
VP of marketing of a reputable west coast database company, in hislate 30s, he has strong marketing skills, and relevant experience inclient/server technology. In his current position, he manages 25people. Prior to joining the database company in its startup phase,
he was the proprietor of a small advertising business.
he projects tremendous enthusiasm about Vermeers future, and hasoffered numerous ideas about leveraging the companys lead in themarketplace through strategic partnerships. The VCs have really likedhim as a magnetic, gregarious, smart, and down to earth person. ButRandy isafraid this person may be a little to slick[T]he candidate
doesnt possess a deep understanding of the technology. I amsomewhat concerned that he has never held profit and loss responsibilityin the past. Also, he doesnt seem terribly enthusiastic about relocatingfrom the west coast.
8/4/2019 395 Lesson 3 Vermeer ABC
10/32
Jeffrey A. Martin, PhD 10
Candidate #2
VP of systems management products with a large East coast-basedsoftware company, in his early 30s, he has the reputation for beingan extraordinary team builder and earning the loyalty of employeesat all levels. In his current position as the manager of a business
unit, he has increased revenue from $1 million to $50 million in 30months. Hes been the vice president of engineering for thecompanys subsidiary. Yet he has limited experience in sales andmarketing.
He is a trustworthy consensus-builder and has a low-stress demeanor.He is very smart, thoughtful, and careful, but does not exhibit the forcefuldemeanor of someone who will get up and rouse the troops. He has avery good understanding of the product, but doesnt have muchexperience in marketing shrink-wrapped software.
8/4/2019 395 Lesson 3 Vermeer ABC
11/32
Jeffrey A. Martin, PhD 11
Candidate #3
President for five years of an East coast-based software company, in hisearly 40s, he took the company from startup to IPO. The company producesa high end graphic user interface, programming language, and client/servertools. It sells directly to customers, often entering into long-termrelationships with them. The IPO lead to a management change and, as a
result, he hasnt been active in software for approximately a year. He isinterested in reentering the industry.
He has a strong, polished style. References are universally of the opinion that heis someone who can do the job, and he has the track record to prove it. In hisprevious organization, he had created a flat structure, and encouraged purposefulcompetition among subordinates. However, some of his ex-employees feel thathe was a bit aloof with others, which led to lack of clarity in the organization aboutmanagement agenda. He has an extensive marketing background, but no in
shrink-wrapped software. Although he has a fairly good knowledge aboutVermeer and its product, some of us are concerned about the depth of histechnical ability.
8/4/2019 395 Lesson 3 Vermeer ABC
12/32
Jeffrey A. Martin, PhD 12
Vermeer CEO Candidates
1. VP of marketing of a reputable west coast database company, in his late30s, he has strong marketing skills, and relevant experience in client/servertechnology. In his current position, he manages 25 people. Prior to joining thedatabase company in its startup phase, he was the proprietor of a smalladvertising business.
2. VP of systems management products with a large East coast-basedsoftware company, in his early 30s, he has the reputation for being anextraordinary team builder and earning the loyalty of employees at all levels. Inhis current position as the manager of a business unit, he has increased revenuefrom $1 million to $50 million in 30 months. Hes been the vice president ofengineering for the companys subsidiary. Yet he has limited experience in salesand marketing.
3.
President for five years of an East coast-based software company, in hisearly 40s, he took the company from startup to IPO. The company produces ahigh end graphic user interface, programming language, and client/server tools.It sells directly to customers, often entering into long-term relationships withthem. The IPO lead to a management change and, as a result, he hasnt beenactive in software for approximately a year. He is interested in reentering theindustry.
8/4/2019 395 Lesson 3 Vermeer ABC
13/32
GETTING OFF THE BLOCKS
Jeffrey A. Martin, PhD 13
8/4/2019 395 Lesson 3 Vermeer ABC
14/32
Jeffrey A. Martin, PhD 14
Vermeer 1995 (B): Realizing the Dream
January: Secure first round financing Set up artificial deadlines, outward bound environment March: Threat from Navisoft (AOL Subsidiary) when they announce similar
product
April: Vermeer produces first working demo August: Netscape IPO September: New CEO Mandile joins Vermeer, Director of sales hired September: Netscape announces similar product for Q4 95 (not yet in beta) October 2: Vermeer ships first product Late October: Secure 2nd round ($7.2 million on $32 million pre-money
valuation)
8/4/2019 395 Lesson 3 Vermeer ABC
15/32
Jeffrey A. Martin, PhD 15
Vermeer (C): Negotiating the Future
Demo continuously downloadedlots of deal possibilities.
Second round of financingarranged of $7.2 million against a
valuation of $32 million
Marc Andreessen (Netscape)expresses interest
Microsoft calls; visit to Redmond isarranged: three scenarios offered:
joint marketing arrangement,licensing the source code oroutright acquisition
Subsequent meeting held in aCambridge hotel initial offer of$70 million cash (but stockpreferred for tax reasons.
Ferguson wants acquisition,Forgaard wants independence fast track IPO option the troopsare divided.
Vermeer people are deeper, moresophisticatedhave sufferedmore than MS people
Microsoft convinced that Vermeerwas the missing piece betweenthe individual user and the Webmarket.
8/4/2019 395 Lesson 3 Vermeer ABC
16/32
Jeffrey A. Martin, PhD 16
Vermeer 1995: Acquisition Negotiations
November 8th: Meet with Marc Andreesen of Netscape about possibleacquisition
November 8th: Call from Chris Peters, VP of Microsoft Office Early November: Spyglass offers to acquire Vermeer for $70mm in stock December 1: Meet with MS reps in NY and MS offers $70mm in cash December 4: Meet with Netscape's Andreesen and Barksdale December 7: Gates Pearl Harbor Day speech. Sleeping Giant awakes December 12: Receive significantly larger offer for MS, but team must
move to Redmond ($130mm Stock)
8/4/2019 395 Lesson 3 Vermeer ABC
17/32
Jeffrey A. Martin, PhD 17
What Should Charles Do?
Microsoft?
Netscape?Go it Alone (e.g., IPO)?
8/4/2019 395 Lesson 3 Vermeer ABC
18/32
NEGOTIATING THE FUTURE
Jeffrey A. Martin, PhD 18
8/4/2019 395 Lesson 3 Vermeer ABC
19/32
Lessons from Vermeer: Promoters out in
the big world
R&R was a simple, short-term opportunity
Vermeer is a more complex longer-termopportunityVermeer requires the skills from R&R plus an
additional set of skills related to managing anorganization
Jeffrey A. Martin, PhD 19
8/4/2019 395 Lesson 3 Vermeer ABC
20/32
Jeffrey A. Martin, PhD 20
R&R verses Vermeer: Opportunity
identification R&R: Quickly identified an opportunity, dropped
everything to pursue it
Vermeer: The same but needed to continuously refinethe idea
New information (WWW)
Eventually, new product generations
Both: Driven by opportunity, not current position
8/4/2019 395 Lesson 3 Vermeer ABC
21/32
Jeffrey A. Martin, PhD 21
R&R verses Vermeer: Team-building
R&R: Use contacts to create loose network of individuals,each doing what they do best
Vermeer: Use contacts to find initial individuals(Forgaard), then add other practices to build theorganization Employee references Headhunters
Once outside own network, need strict screen processes
Both: Need to obtain skills/resources outside of thosecurrently controlled
8/4/2019 395 Lesson 3 Vermeer ABC
22/32
Jeffrey A. Martin, PhD 22
R&R verses Vermeer: Team-Management
R&R: Simple financial incentives Vermeer: Asking employees for more. Therefore, a
tougher management task
Longer-term commitment. Need them to believe this opportunityis better than their current employment
Long working hours Dealing with personality clashes
Heterogeneity is necessary to get all required skills; but alsobreeds conflict
8/4/2019 395 Lesson 3 Vermeer ABC
23/32
Jeffrey A. Martin, PhD 23
R&R verses Vermeer: Financing
R&R: Low overhead, bootstrap and borrow friends line ofcredit
Vermeer: Start out with low overhead, no pay, no offices.But eventually need professional investors
Financial incentives do NOT keep people at jobs
Both: Use staged investment, use resources owned byothers
8/4/2019 395 Lesson 3 Vermeer ABC
24/32
Jeffrey A. Martin, PhD 24
R&R verses Vermeer: Harvest
R&R: Not an issue. Opportunity burned itself out
Vermeer: Next time: sell the company?
Timing, means of harvest adds another layer of
complexity
8/4/2019 395 Lesson 3 Vermeer ABC
25/32
R&R verses Vermeer: Big Picture
Entrepreneurial opportunities come in an enormousvariety of forms
The skills required to pursue these will vary, particularlywith the complexity of the opportunity
Hence, entrepreneurs come from many backgrounds and havemany different personalities
What kind of opportunity is the best fir for you?
But, the entrepreneurial mindset is a constant Future classes with revisit these skills in more depth
Jeffrey A. Martin, PhD 25
8/4/2019 395 Lesson 3 Vermeer ABC
26/32
Jeffrey A. Martin, PhD 26
The potential Role of Pattern
Recognition in Opportunity recognition
Source: Opportunity recognition as patternrecognition Baron, 2006
Events, Changes, Trends in the
External World
Changes in technology Changes in markets Trends in demographics Changes in government
policies and regulations Other events, changes,
trends in relevant business-related variables
Possible founding of newventures
Knowledge; Experience
Alertness
Search
Perceived patterns inthese events, trends,
changes
Patterns that suggest newproducts, services, etc.
Business Opportunities
Patterns that do notsuggest new
products, services,etc.
Cognitive
Frameworks
(prototypes,exemplars, etc.)
Perceived,interpreted
through
8/4/2019 395 Lesson 3 Vermeer ABC
27/32
Jeffrey A. Martin
Vermeer (F)(G): Epilog
What happened and where they are today
8/4/2019 395 Lesson 3 Vermeer ABC
28/32
Vermeer (F)
Enormous increase in sales,150,000 copies at $149
FrontPage 1.1 gets rave reviewsamong top ten sellers
Competition intensifies. Deathmarch continues. Dominance ofone sector not enoughGates
25 week cycle! Officedevelopment in 18 months!Driven, 80 hour weeks..
PMs critical, keep schedule, cutfeatures, facilitate communications
Soon slipped in timebehindschedulequality of processbegan to fail...consistentexcellence disappearedcrisis
mode took over
At Microsoft, a spec meansdelivery. At Vermeer, a deadlinecould change.
Lots of money-no time-tighteningthe handcuffs
Lots of firsts, 100,000 boxesshipped, 6 languages, stockdoubled in one year
Project finished! Specs Postedright away for FrontPage 98!
Forgaard retires Germanoleaves Jeffrey A. Martin
8/4/2019 395 Lesson 3 Vermeer ABC
29/32
Jeffrey A. Martin
Vermeer Update
Summer 1996: ship FrontPage 1.1 In first four months sells 150,000 copies Wins rave reviews
November 1996: ship FrontPage 97 Developed on 6 month schedule (vs. 12-18 moth cycle for MS Office) 1 million users download trial beta version. Launched in six languages. Ship date for FrontPage 98 set for July 6 1997 Forgaard and Germano announce retirement from MS
By 1999: FrontPage industry standard for Web site developmentsoftware 70% world market for Web page development software Nearly 3 million users Bundled with new version of Microsoft Office
February 2002: 40 million installed base
8/4/2019 395 Lesson 3 Vermeer ABC
30/32
Where are they now?
Andy Marcuvitz involved in Matrix III fund, with 22/24successful investments
Charles Ferguson wrote a book, High St@kes, NoPrisoners and later testified against Microsoft in its anti-trust case
Chris Peters left Microsoft in 1998, trained to become aprofessional bowler, and in 2000 led a group of investorswho bought the Professional Bowlers Association
Jeffrey A. Martin
8/4/2019 395 Lesson 3 Vermeer ABC
31/32
Chris Peters
Jeffrey A. Martin
Revenge of the Pinheads, Pacific Northwest, The
Seattle Times.
8/4/2019 395 Lesson 3 Vermeer ABC
32/32
WORK IN TEAMS ON BLITZPRESENTATION
Jeffrey A. Martin, PhD 32
Top Related