Ramesh Mehta still has the more than 100 PowerPoint presentations he pored over as an investor during the dot-com era.
“Now, it’s all spreadsheets,” says Mehta, demonstrating the emphasis that investors are placing on cash management and revenue.
Mehta endured the era of business plans on napkins that fetched millions in venture capital, but not without a scratch. Nonetheless, he has emerged chastened and wiser for the experience.
Valuations are down, he says, but that’s not a bad thing. Entrepreneurs have to demonstrate they can build a business, generate revenue and earn a profit, and that, says Mehta, is good for investors and business builders alike. Fundamentals like solid cash management and customer development are critical these days if a business owner expects to find investors.
Mehta concedes that he was swept up by the dot-com frenzy, but he managed to avoid the dustbin of investment history. Indeed, he was able to take MOAI Technologies, a dot-com lemon, and turn it into lemonade.
That wasn’t, however, before he wrote a check in a rush for “several hundred thousand dollars” and managed to get in just under the wire as the last angel investor to fund a tech company that had already lined up its first round of venture financing.
“I fashioned myself as a very conservative businessman,” says Mehta, who has run companies for Digital Equipment Corp. and Seimens Corp., and founded Medebiz Corp. and several other technology companies.
He currently is the president and CEO of MOAI Technologies.
“Would you believe that I got suckered in?” he asks.
Suckered in like lots of others, seduced by teams of fresh-faced Stanford University graduates with ideas like chimpanzee.com and grocery delivery services whose value proposition was that they were going to deliver groceries to their customers.
Mehta gained his perspective in time to realize that there could be value in rescuing a withering dot-com era business where some value resided, but the company had not yet had a chance to blossom. He found such a flower in MOAI Technologies, an e-sourcing technology and consulting company that got caught in the capital crunch of 2001.
In February of that year, the picture for MOAI Technologies, then headquartered in California, was rosy. It enjoyed a valuation of $1.8 billion and was poised to launch its initial public offering.
The scene changed rapidly, however, and MOAI Technologies fortunes shifted abruptly. The capital markets dried up almost overnight, and by December 2001, MOAI Technologies was careening toward bankruptcy.
Mehta saw value in MOAI Technologies’ model and moved quickly. In January 2002, he acquired the struggling company for $6 million in Medebiz stock. He renegotiated the company’s nearly $8 million in debt down to $700,000, reduced its burn rate and managed to retain its customers and key employees.
While Mehta espouses the virtue of bootstrapping your company to success, he acknowledges that entrepreneurs may have to make concessions to achieve their goals, so dilution of ownership may be required. How you approach the dilution issue depends, to some degree, on the growth potential of your business.
Mehta describes it this way: “Would you rather have 10 percent of a watermelon or 90 percent of a grape?”
Or, perhaps, all of a lemon. How to reach: MOAI Technologies, www.moai.com
The new B2B
For entrepreneur Ramesh Mehta, B2B has a new meaning — back to basics.
Mehta, founder of Medebiz Inc., president and CEO of MOAI Technologies Inc., and an angel investor who got burned during the last gold rush, draws some contrasts between the way investors viewed companies in the dot-com era and how they are likely to evaluate them now. Before, if you could get validation from one of the large research companies like Forrester Research or Jupiter Research, that was a stamp of approval. Now, you’d better be able to show that you can produce revenue.
Building a brand was the rage in the dot-com era. In 2003, a company that expects to get funding needs to build a business with a team, traction in its market space and relevant technology.
* For venture investors in the dot-com boom, the first money made the rules. Today, the last money in makes the rules, and the first investors get crammed down.
* MBAs were the key employees for dot-coms. Now, engineers rule.
* Large advertising budgets fueled by big investments of venture capital have been replaced by smart public relations and customer references as marketing tools.
* Term sheets were plain vanilla in the dot-com boom. Now, they’re more like rocky road.
* Experience counts. At least one person in the company had to have an earring at a dot-com. Now, it’s better to have someone with a cardiac stent.
