Jain: Venture capitalists probably "the antichrist"

Excerpts from the blog

Naveen Jain was on a roll Tuesday night at The Indus Entrepreneurs annual funding forum, needling venture capitalists at every turn.

More than 100 startup types, investors and big-company employees attended the event, sponsored by the Harvard and Wharton business schools. Companies pitched their businesses to a panel that awarded cash and service prizes.

Everyone at TiE knows Jain, who left Microsoft to start and run InfoSpace during its turbulent years before founding Intelius in 2003.

So Jain had some fun when he was introduced by moderator Todd Dean of the Keiretsu Forum.

Jain said he thanks God "for keeping me away from VCs," drawing a roar from the capacity crowd at the Courtyard by Marriott in Bellevue.

Jain turned to the audience, flashed a big smile and kept on going.

"They are probably the Antichrist of entrepreneurship," he said, adding that "they like early-stage investing because they can take the most of it."

He also suggested that TiE consider having a "No-funding forum for entrepreneurs" and later said that "anybody who takes $120 million — they're fat pigs and they deserve to be slaughtered."

A colorful caution, but remember that Jain made buckets at Microsoft and was worth $8 billion before InfoSpace tumbled in the dot-com crash.

Jain was sitting across from panelists Mark Ashida, managing director of OVP Venture Partners; Greg Gottesman, managing director of Madrona Venture Group; and Andy Dale, managing partner of Buerk Dale Victor.

Next to Jain was Raghav Kher, who left Microsoft to start Rendition Networks and Seventymm, a Netflix-like service in India.

Kher gamely came to the defense of venture financing, saying it made sense for him.

Finally, the venture capitalists responded, with Gottesman taking the lead. Gottesman objected to the Antichrist reference, but said he agreed with some of what Jain was saying. Venture capital isn't for everyone, he explained, especially if an entrepreneur can go it alone and doesn't need cash flow.

"This is not something you go into lightly," he said.

Venture capital should be more for companies that need to really grow and pursue big markets, he said:

"Most companies shouldn't take venture capital," he said. "Our capital is expensive. It's preferred stock. We get it out first."

Gottesman's final advice: People should ask around for advice, since a lot of TiE members had worked with Madrona and other venture firms, but "please, don't call Naveen."

Here's the pitch

Protelus, a Bellevue data-mining company you've probably never heard of, was deemed the most promising startup at the TiE event.

The firm also won the event's "best pitch" award for the five-minute spiel by its president, Craig Chelius, who earlier co-founded Primus Knowledge Solutions.

Protelus, which beat out five other companies that presented to a panel, helps mortgage companies better monetize customer data, charging them to capture and clean the data.

Sales are expected to double this year to $1 million, and the company expects to reach $68.4 million by 2010, if it's not acquired before then by a big financial services company.

Meanwhile, it's looking for funding, beyond the $2,500 in prize money it took home last night, to expand sales and marketing.

A third prize, for "most innovative" company, went to SpringStar, a Woodinville startup developing nontoxic pest-control products.

SpringStar already sells such products as yellow jacket traps through Molbak's, Fred Meyer and other retailers, but panelists were intrigued by new technology that founder Michael Banfield called "bio-mimicry" because it uses "natural biological communication to repel and attract pests."

Dubbed the SpringStar Sonic System, the product is based on research into pheromones and "songs" bugs use to communicate. Banfield said it's "the iPod of pest control."

Banfield is raising $900,000 in Series A funding that values the company at $2.7 million. He's expecting sales to rise from $1.4 million to $20 million a year after the sonic system gets going, and predicts SpringStar will be acquired by one of the big industry players.

Also presenting were:

• JDL Digital Systems, a Bellevue company that has developed software for video surveillance systems it provides to government and businesses, particularly casinos.

• TeachStreet, a Seattle company aiming to connect people with instructors, replacing bulletin boards, catalogs and Craigslist ads people generally use now.

• CondoCompare, a Seattle company building a site for searching and listing condominium listings.

• Artemisia BioMedical, a Newcastle company developing anti-cancer drugs based on old malaria drugs, drawing on research at the University of Washington and Johns Hopkins University.

This material has been edited for print publication.

Brier Dudley's blog appears Thursdays. bdudley@seattletimes.com.