ATG Founders Aim To Turn Company-Building Into A Science With Their New ‘Venture Foundry’ Redstar

Posted: May 7, 2013 in Startup

20130507-084653.jpg. Jeet Singh and Joe Chung have already had a nice
exit, taking their enterprise software company Art
Technology Group public (it was acquired by Oracle
for $1 billion back in 2010). Now they’re hoping to turn
the act of building successful startups into a
“repeatable process,” through their new firm Redstar ventures. Singh and Chung, along with their third co-founder
Matt Beecher, said they became interested in angel
investing a few years ago, but at the same time they
were turned off by the randomness and risk of the
traditional model. So they developed their own
approach, a “venture foundry,” where the firm focuses on a few broad themes, develops companies
internally, and then spins them out if they seem to be
getting traction. Here’s how the model is described on
the Redstar website: We identify significant trends and growing markets,
and develop potential products and services for those
markets. We match very successful mentors with
young and experienced entrepreneurs and co-found
companies with them. Together, we staff these
teams, evaluate the market, build and test the product or service, establish partnerships, identify
sources of investment, and launch the enterprise. We
also fund these firms through their seed-stages. What are those themes? The firm has three so far,
namely underemployment, the “grey market,” and the
present/future of media. Apparently Redstar has actually been around for a
couple of years, but didn’t really publicize its
existence — it’s only starting now because it has
launched its first company, social shopping startup
LoopIt (I’m assuming that’s one for the grey market
category). The goal is to launch about three companies per year, Beecher said. “We might spend seven, eight, nine months on the
concept before we launch it,” he added.
“The core tenet of our business is knowing which
[concepts to focus on] better and earlier through our
network and research.” Redstar describes this as a “top-down” approach to
building companies. That makes it sound like the firm
is going against much of the received wisdom in
Silicon Valley, where entrepreneurs are encouraged to
launch their products as soon as possible and adapt
based on customer feedback, and where team and execution are valued over ideas. Chung said he definitely expects companies to adapt
and change, but he said that too many startups
overvalue execution: “In the early days of ATG, there
were so many company- killing decisions that we had
to undo, but we were able to get away with it. … One
of the great fallacies is that startups are really good at executing.” Not that Redstar is relying entirely on its thematic
approach to guide its investments. It’s also a
question of building the team — the partners said
they might be excited about a given idea but decline
to pursue it if they can’t find the right executive to
lead the company. The firm aims to make investments of $500,000 to $1
million. Ultimately, Singh said the partners are hoping
that half their companies will be successful. That
would be pretty remarkable if it happened, but he
noted that with a higher success rate, Redstar doesn’t
need “billion dollar successes” to pay off. “We don’t have to swing for the fences,” Singh said.
“We’re trying to build good, solid companies that
eventually sell at a reasonable valuation.” REdstar itself is self-funded so far. The partners said
they’re looking to raise money this year, but it might
be structured less as a traditional venture fund and
more as an equity investment in Redstar.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s