By Allan Maurer
DURHAM, NC—Kip Frey, a partner at Intersouth Partners, one of the most influential venture firms in the Southeast, headed three technology startups that managed highly successful exits. “I’ve found it helpful to have lived on both sides of the aisle” in terms of company exits, he tells TechJournal South.
Frey is among the many leading venture capitalists, business luminaries, and startup CEOs speaking at the Second Annual Southeast Venture Conference in Tysons Corner, VA, Feb. 27-28. The conference has only about 75 seats left (for more information see: www.seventure.org).
Frey, an attorney, served as executive VP and general council to Ventana Communications Group, which sold in 1994. In 1998, he took the helm as president of Accipiter, an Intersouth-backed software company that sold to CMGI Inc. Intersouth then recruited Frey to lead OpenSite Technologies as president and CEO. Siebel Systems acquired OpenSite and Frey served as VP and general manager of dynamic commerce applications for Siebel until June 2001.
He joined Intersouth in 2000 as a venture partner and has been a full-time partner since 2003, focused on the IT, mostly on software and media.” Intersouth invests about 50-50 in life sciences and technology startups.
Currently, he also serves on the boards of four Intersouth companies and Inspire Pharmaceuticals, a former Intersouth portfolio company now public. He teaches at Duke University as an adjunct in the Sanford Institute for Public Policy Studies.
More fun with a tailwind
“Running a company in the late 1990s was the most fun,” Frey says. “I’m not sure running one today would be as much fun. When you have a tailwind, everything seems easier.”
Although Intersouth has invested in a social networking company Frey likes, MIXX, which allows people with common interests to rate content, he notes, “There are probably too many social networking companies in particular spots. Once something gets that popular, you’ve probably missed the boat [for timely investments].”
Frey says he hears some pundits predicting a recession and others nay saying it, but the key for Intersouth is to focus on companies that may exit because they’ve reached the cash flow positive point where “They’re real companies with significant revenues.” Or, on a second set of companies that may find near-term exits because “They have really good conceptual ideas” and may exit on the value of those ideas.
For others, portfolio companies, he says, “We need to be patient now and position them for the next wave of liquidity.”
At SEVC, Frey will be talking about exits and how company management and investors can work together to consider exit opportunities and maximizing a company’s ability to be in position to exit.
Interesting sectors
“I’ve found it helpful to have lived on both sides. I’ve thought about it from both perspectives,” he says.
On current investment trends, Frey says he sees a lack of traditional enterprise software activity right now. “That might be cyclical, but we’ve gotten pretty far into what bits and bytes can do to improve productivity.”
Emerging sectors that he says interest him include the human-computer interface issue. “We’re finding much more evolved ways for humans to provide input to machines and machines back to humans. That includes sophisticated voice recognition and ultra highspeed processing that allows an algorithmic approach to solutions in real time.
“Around here we’ve seen many materials and energy-related deals, which seem to be a theme now.
Frey also sees the ability to understand the production and effects of development efforts as a theme. Intersouth’s 6th Sense Analytics, for instance, which evolved because the founders traveled the world to coordinate software development efforts and decided, “There has to be a better way.”
“There’s a big difference between an entrepreneur who thinks he sees a market opportunity and one who has lived with a problem for years and has a burning desire to solve it,” says Frey.
Through all market swings, though, Frey says one thing remains a constant at Intersouth. “We continue to do what we’ve always done in what we’re looking for,” he says. “Basically, we believe there are three legs to the stool—great management, a large market, and interesting technology to go after it.”
Frey says that now that he’s the parent of boys aged 10 and 12, he sees that we are raising a generation “at home living in a virtual world,” such as the World of Warcraft game.
“The whole world of virtualization and Second Life is not just a technology change issue, but a society change issue. I’m not sure there is a consensus on just how large the impact is going to be.”
On the Web: www.intersouth.com; www.seventure.org
Southeast Venture Conference, February 29 – March 1, 2012 at the Ritz Carlton in Tysons Corner, VA – Where Smart Money Meets Smart People.
www.seventure.org
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