Cisco pedigree wins over VCs

Ex-Cisco executives attract network start-up funding

Having Cisco pedigree plays a large role in whether a technology business plan gets funding, venture capitalists say.

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The breadth of exposure – development, operations, sales and marketing and distribution across a range of technologies – at Cisco is unmatched, some say. It's probably no coincidence considering Cisco acquired nearly 140 companies, mostly start-ups, in 16 years to achieve its $40 billion size.

"The coolest thing about [start-up founders from] Cisco is that they didn't actually start at Cisco," says Carl Stjernfeldt, general partner at Castile Ventures, an investor in Agito Networks, which was hatched by two executives from Cisco's wireless division and has raised $20 million in venture funding.

"There's a lot of people at Cisco with that [start-up] gene still in them," Stjernfeldt says. "Which makes it a great place to recruit people from."

Cisco is also good at fostering a start-up like atmosphere that keeps key people from an acquired company around for a few years, Stjernfeldt says. That way, they get immersed in the operations of a $40 billion behemoth before the start-up bug starts itching again.

Cisco also funds its own internal start-ups when it identifies a potential billion dollar emerging market. The company is, quite literally, an incubator of network start-ups.

If faced with two identical business plans and all other factors being equal, would the Cisco graduate get the funding over a non-Cisco presenter?

"Yes," says Jason Matlof, a partner at Battery Ventures. "Everything else being equal, yes."

And that's a big edge these days considering how tough it is to secure funding. The latest MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association found that in the third quarter, network vendors secured $1.2 billion in venture investments, slightly less than their second quarter investment level. As recently as 2007, network companies were pulling in about $3 billion per quarter.

"It's not a coincidence that two of the four companies in my portfolio are founded by Cisco people," Matlof says, admitting a bias. Matlof spent five years at Cisco, and led a project management team for fixed-configuration Catalyst switches.

The two companies in Matlof's portfolio founded by ex-Cisco executives are Agito and Redwood Systems, which makes energy control systems for "green" buildings.

"I'm a strong believer that it gets into your DNA," Matlof says. "When you're in a machine that's well run, well oiled, well executed, has good leadership, has good management – you learn by example, you learn through experience. You absorb that.

"I very much believe that hiring and recruiting people from successful teams is important," Matlof says. "And I think Cisco is at the top of the list."

Matlof is not aware of any structured or formal or organized network of ex-Cisco developers and investors that regularly meet to hash over ideas and business plans. But at least informally, you can bet they are in touch.

"Historically, Cisco has shown that it can build strong executives," says Charles Beeler, general partner at El Dorado Ventures. "The network that comes from that is significant."

El Dorado is an investor in Storspeed, a storage connectivity start-up founded by ex-Cisco storage router executive Mark Cree. Cree went to Cisco when his start-up NuSpeed – also funded by El Dorado -- was acquired in 2000.

The Cisco pedigree, in Beeler's view, "really makes a difference."

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