Don Valentine

I just caught this interview with Don Valentine, thought I'd fisk a few points, especially where he takes aim at SAP:

Which technology or company is most overhyped at the moment?
Nanotech anything...

I won't explicitly disagree with this statement, but it's hard to suggest that the technology is invalid because of the hype it's received. Think about it for a second, later in the interview he says that everything is evolutionary, but here he fails to acknowledge that nanotechnology is the penultimate example of evolution in science combining diverse scientific disciplines into one package. I wouldn't invest in this area mostly because I don't have the background, but I also won't dismiss it as a fad just because it's getting a lot of attention.

You have this huge amount of press coverage and no market problem that needs solving.

you got to be kidding me, no market problem to solve? How about better lubricants for industry (along with a thousand other examples of industrial products that utilize the technology), therapeutic delivery mechanisms for healthcare, smart sensors for machinery, and don't even make me bring up the smart pants.

What new Internet trend most fascinates you now?
I think the first phase of the Internet is established. We think of it here as the Internet, phase two.

What is phase two?
To us, it's merely the reality phase of something that happens that's overhyped, like nanotech. Now we're really into solid applications,...

This isn't a trend, it's the realization of an previous trend. He later opines about broadband, and quotes John Chambers to boot, but that's not a new trend by any measure.

What about the claim by (Oracle CEO) Larry Ellison that the industry will consolidate around a few big players, namely Oracle, Microsoft, IBM and SAP?
I'm in the Marc Andreesen camp against the Larry Ellison-Hasso Plattner camp. If you look at their offerings, neither has a flagship product in the customer relationship management market--10 years later. So I think they are like all big companies, filled and riddled with not-invented-here. They are unable to recognize innovation and they are very late to do what they claim they're going to do. DiCarta, iMany--there are all these small, flourishing companies started in late '90s that are doing very fine, thank you very much. That said, Oracle is interesting and one of my favorite companies.

"aside from the fact that they are arrogant, difficult, incapable of innovation, and always late, I like Oracle. Yeah, aside from all that bad stuff, Oracle is one of my favorite companies."

I also wasn't aware that Andreeson was against Plattner/Ellison?

By the way, SAP is the number 1 provider of CRM applications in the world so it's a little hard to credibly suggest that we don't have a flagship product.

Why?
Because we financed it and made a lot of money. But also, I'm a great admirer of the kind of raw-boned entrepreneur that Larry Ellison is. He is willing to speak out even if he's wrong occasionally.

oh okay, now I get it... it's always about the $$.

update: What is ironic about this statement is that the qualities of a "raw-boned entrepreneur" who is brash and competitive is exactly the set of qualities that contributes to big companies being difficult to work with, which Valentine later criticizes these groups for being. Put another way, you are never going to become the top dog in this business by being benevolent and docile... and I've never heard a VC justify an investment by saying "and they are such a nice bunch of people to boot!", but I have heard "and if you get in their way they are going to take your head off" used as a compliment.

What about Germany's SAP? It seems to dominate the global market.
It's an interesting company, located intellectually in central Germany. It has the historic flexibility of the Teutonic character. They do it their way, and the customer has to do it and buy it the way they make it. They are a "do it my way or forget it" company and the prices are astronomically high. They're hard to do business with, and when in doubt they deal in FUD (fear, uncertainty and doubt). SAP is the noisiest non-participant in the business.

However, the founders are largely out of that company. It will be interesting to see how or if they change with those guys gone. The same with Microsoft when Gates and Ballmer are gone.

Central Germany? The line about the Teutonic character is a good one, but the "do it my way or forget it" is a little misplaced, if that were the case then I would wonder how we ever could have gotten to 12 million users and 87,000 installations. As far as prices, we price what the market supports, and the value that customers get out of SAP applications is beyond debate, even when confronted by Oracle effectively giving their applications away at no cost in order to compete with us. SAP owns the enterprise market despite the best competition from some very tough companies, including Oracle. Noisiest non-participant? I don't even know what that means.

It's actually a compliment that after 30 years in business, the company is functioning prosperously and aggressively without the day-to-day involvement of the founders. A public company like SAP should never be about one person.

Which technology CEO do you most respect?
Steve Jobs...

"because we financed it and made a lot of money"

----

there's more to comment on, but it's a little recursive. I don't know Valentine, but he is by any measure a giant in the venture business, but I have to say that after reading this interview I am underwhelmed, I expected something more insightful about where the industry is going as opposed to some minor bitching and complaining.

The comments about SAP really get under my skin because they don't reflect anything other than a headline level understanding of the company, and are no doubt fueled by the difficulties and failures that his own investments have had in trying to compete against SAP (e.g. Oracle). It's actually poor form from Valentine to spit into our eye and then have his portfolio companies (e.g. DiCarta) show up the next morning to pitch for a partnership, but in any case it is a mistake for startups and their investors to think that that they are not getting the attention they deserve from SAP when in fact they just aren't getting the results that they expected.

I sincerely believe that Don Valentine deserves due deference and tremendous respect for being a pioneer in the venture capital world, and by extension a force that enabled the high technology industry to become what it is today. However, Valentine should extend SAP the same level of respect for achieving what the company has achieved, and by extension give Hasso Plattner his due for doing to business application software what Bill Gates did to personal computer software. Even Larry Ellison has done that, hard as it is to believe.

I'm actually reluctant to post this because Valentine is a powerful person in the venture industry, but I'm doing it anyways because if you are going to hurl insults at another company and the people behind it then you should be prepared for someone to take exception to what you say.

The bit about Teutonic character was intended as an insult, but it also fails to acknowledge that fact that SAP has far more people outside of Germany, including 1,300 in Palo Alto (which is also home office of Shai Agassi, executive board member and definitely not Teutonic). SAP is one of a very small group of companies that can legitimately claim to be global in reach and footprint, and it is arguably the best managed company in the software business, if that's being "Teutonic" then I'll take it.

Comments

[Mark Finnern]

Excellent fisking. Here are my additional 2 cents:
https://www.sdn.sap.com/sdn/weblogs.sdn?blog=/pub/wlg/1048

Best, Mark.

[Craig Cmehil]

And my additional two cents:
http://cmehil.com/craig/blog/geoBlog/viewblog.php?id=24

[Shai Agassi]

Jeff,

I read the article, it got under my skin as well but for a totally different reason. I believe Don is one of the smartest men in the VC industry. I believe consistent results talk volume, and he has delivered on all his funds. I met him once, recently, and I believe he says what he believes. so why did it get under my skin...
I believe we did a terrible job over the years in putting SAP into the right light in the Valley. SAP supplies prepackaged processes that support what Geoff Moore calls Context (read his upcoming book...) or undifferentiated processes for our customers. We support too many companies to count, and we do it in the best mission critical fashion. So why is it that we can't get people to get excited about us?
For a couple of reasons, one it is never exciting to support the "undifferentiating" part of business; "differentiation" (smart analytics, fancy algorithms, etc.) is always exciting. Our claim to fame is mission critical, well...you only hear about us when it is not working. We have three or four of these cases (well within six sigma boundaries) but all have been highly publicized.
The other reason, is we did not do a good job in "platforming" ourselves, and attracting a solid supported eco-system. We are changing that. Hopefully at that point we will learn how to tell our story in an exciting way. We should take Don on his word and see what his opinion of SAP is in a few years.
So it got under my skin because I believe SAP is today at the best position to innovate this market, and architect it for renewed growth. It got under my skin because there will be many opportunities around SAP, and we must change the attitude towards SAP because companies that will find way to add value to our customers will enjoy a great market, and a great partner in SAP. It got under my skin because I believe we are participating in the most strategic of ways, we just haven't figured out whether (and for that matter how) to make noise about our participation. We shouldn't take it out on Don, we should fix our perception in the Valley.

[jeff]

Shai,
thanks for taking the time to comment. Believe me when I say that I know I am in no position to criticize Don Valentine for being an investor who has 'delivered the goods' for more than than 30 years and that is truly deserving of enormous respect. I am critical of Valentine for parroting a critique of SAP that I could easily have read in 1998, but like yourself, I myself am critical of SAP for doing a poor job overall of helping the market understand what is really going on inside the company, so the fault does not lie with Valentine alone.

Ironically, SAP and Sequioa Capital were founded in the same year, 1972, and over that history have been both witness and protagonist to an astonishing period of growth and change. Our respective organizations are not standing still, therefore I hope that Valentine will invest some time in understanding why SAP is so well positioned, rather than casting us off as lacking in innovation and always late to the party (the part about NIH is historically accurate but changing dramatically in recent years).

It is true that perception is reality in the Valley and you and I agree on the urgency and importance of changing that perception as it relates to SAP.