Sandvine CEO named "Entrepreneur of the year"

Perhaps it was bound to happen. But if you don’t see these things yourself you would never believe it.

Last evening in Halifax, several hundred people watched as the Canadian Venture Capital and Private Equity Association named Sandvine’s Chief Executive Officer, Dave Caputo, as Entrepreneur of the Year. I think we were all delighted for the four venture capital firms that financed Sandvine (BDC Venture Capital, Celtic House, Tech Capital Partners, VenGrowth), as the $600 million market cap. signifies that the deal was a major success in the VC world.

And I know that the audience was extremely happy that Mr. Caputo was lauded for the success he has had at Sandvine (SVC:TSX), when it wasn’t always clear that things would go the way they’ve gone — 3 years of no basically revenue can occassionally put a management and board team on their heels, and that never happened here.

But the evening took a turn for the worse when the honouree decided to settle his scores with the North American venture capital community in his acceptance speech. He had some great punch lines, and the audience enjoyed the mild teasing and were only too happy to laugh at themselves.

But the fun stopped there when Mr. Caputo felt it necessary to go beyond the gentle teasing category and crossed the line from gracious to ungracious in the space of a few minutes.

I’m not sure it was the statement that “half the room turned him down” for a round, as so many successfuly management teams could tell a story about their victory having been accomplished despite the fact that one or more VCs didn’t provide the funding on the precise terms sought by the entrepreneur.

The whining about term sheets proposing a “down round” didn’t seem necessary as even Mr. Caputo would acknowledge that the team hadn’t met their 2003 / 04 targets, despite $20 million (or was it $28 million?) in spend at that point. There is no shame in VCs “resetting” the price when a company needs more dough and hasn’t yet achieved real traction with mainstream customers after multiple years.

And the specific complaint that VCs like to tie high valuation demands by entrepreneurs to their business plans caused many of us to shake our heads. If you want $XX million in pre-money value for your 2nd or 3rd round, and the funders of a business don’t see how that is deserved, one way for VCs to bridge the gap is to agree to the valuation, subject to “fixing” the price if the forecast presented by management to justify the high valuation isn’t met. Or even 80% achieved.

And it went downhill from there.

Most of us didn’t get the point of it all. If you don’t want to accept a major award from Canada’s VCs, don’t fly to Halifax to pick it up. Politely decline. Or even impolitely decline. But don’t eat the lobster that the platinum corporate sponor paid $20k for all of us to enjoy. Don’t stand in front of a room of 450 people and say “I’m here despite the VC industry”, when it was the first $20 million (in August of 2001 btw) that gave the 5 founders the time to dream up a product and get it to the point where Newbury could come in for the 3rd round in May 2005 and get the story to the final stage.

Save yourself the drive to the airport and the flight to Halifax. Just stay home.

I have no problem if someone wants to bite the hand that fed them, that’s their business. But to use an award ceremony to settle scores that don’t need to be settled is another matter. It’s ungracious, and the tens (if not hundreds) of millions of dollars of unrealized gains sitting in the 5 founder’s Sandvine shares is more than enough compensation for whatever hassles that came with raising venture capital.

MRM