B2B2B2B
Back in late 1999, my buddy Bruce, who was a partner with me at Bankers Trust for many years, introduced me to two guys from Madison Avenue. One (Sam) he had known as a family friend for years and the other was his partner (Terry) for years. We thought of it as two Wall Street guys meet two Mad Men. Bruce and I had run our course with Bankers Trust, which sold to Deutsche Bank for $93/share that year and we were stumbling our way through working for The Germans. Bruce disliked the Germans more than I did, perhaps because I was really working for a Brit, who had run Morgan Grenfell when the venerable old British firm had sold itself to Deutsche. I always said I didn’t need to dislike the Germans because the Brits disliked then enough for all of us. So, the four of us and some other of our colleagues connected first by investing in Sam and Terry’s business. Then we decided to form a venture capital fund together with our foundational investment being their business, which was a data aggregator about online commerce, which made a perfect research hub for our venture fund.
This was early 2000 and business-to-business online was hot. So, when the time came to name our new venture fund, naturally we turned to our marketing wizards from Madison Avenue and Sam came up with a doozy. That was the birth of the wold’s newest and most creatively named new venture incubator called B2B-Hive. Friends from all around sent us each all the strange and wonderful bee paraphernalia you could imagine. There are apparently certain animals that the world wants to replicate in chatchka, and bees seem to make that list. But the name, B2B-Hive, which initially sounded so cute, very quickly became too cute by half. Try answering the phone, “B2B-Hive, how can I help you?” Then try doing is multiple times each day for a year while the tech world bubble has burst (as it did when the NASDAQ died in March, 2000). Cute goes out of fashion very quickly when money and value are being lost every day.
So, we changed the name to Beehive Ventures. It was a more serious and hardworking name that was more mainstream sounding while maintaining the whole bee theme so we didn’t have to throw out all the bee chachka or toss out the stationery with the yellow and black color scheme and logo. We ran Beehive Ventures as a stand-alone fund without any follow-on or successor funds since the market went pretty sour on venture funds unless they had meaningful realized performance gains. Unrealized gains and all the coulda-shoulda stories don’t work for raising new funds if your fist fund is laying there flat as a pancake. And in 2002-2003 even Aunt Jemima syrup wasn’t going to help sell our Beehive pancake.
The first good thing that happened was that the largest investor, one that I brought in with the help of my Deutsche Bank friends (that would be Deutsche Bank itself) decided that it needed to get out of all the questionable private equity investments it had made. This wasn’t just us, in fact, another Bankers Trust friend used that “market trough” moment to do a deal to buy out a large swath of the Deutsche Bank portfolio of private equity investments and subsequently made a fortune. For Beehive it meant selling the existing investors about half the interest of the fund for pennies. It effectively doubled our bang for our buck. There were a few additional sales at par back to the investors that wanted to stay invested (institutions do this to clear their books of vestigial deals).
Beehive invested in eleven deals. They say that in the venture capital orchard, the lemons always ripen first. Sure enough, we had a half dozen lemons and that lemon tree bore very bitter fruit for us. We had two that broke-even, two that are lingering even still and may or may not ever ripen. But then there is that one winning deal that makes the whole portfolio sing. As it happened, that winner was Sam and Terry’s company, our foundational investment. The last five years was all about building the franchise of that winning company and teasing the various prospective buyers to the surface.
Whenever one forges a partnership, there is an inevitable evaluation at some point as to whether the partnership splits reflect value added. We entered the partnership with an even four-way split. At times it’s probable that each of us four felt the splits were off. But the test of time served us well. One had secured the all-important funding. One strategically created the winning company. One managed that company to success. And another did the deals that brought us the final successful outcome. My imprecise math tells me that we all contributed to success equally. That’s my assessment and I’m sticking to it.
Today I found myself reliving my B2B and Beehive history. That happened as I wandered around lower Manhattan on this warm and muggy day. As I walked up Broad Street towards Wall Street, I got to Exchange Place, directly across from the New York Stock Exchange building that is recognizable to all. Rather than walk down Exchange Place to the salon that Kim and I used to frequent, I found myself drawn to Bobby Van’s Steak House. I hadn’t eaten yet today,so on a whim. I went in and took the first table of their lunchtime clientele. As soon as I sat at the white tablecloth and stared at the mahogany paneling, I knew that I was in my element.
It was less about the steak sandwich I ordered and everything about remembering the countless B2B-Hive and then Beehive Ventures partners dinners following our monthly board meetings that we held at that very Bobby Van’s steak house. I could feel Bruce, Terry, Sam and occasionally James sitting with me at the table. Each of our retirements hinged disproportionately on B2B-Hive and then Beehive and now we were all off enjoying those retirements. None of that was so assured while we sat at Bobby Van’s in those days gone by. It felt good, but hardly certain that we would prevail.
I have many friends from my working days. Friends from Bankers Trust, friends from Bear Stearns, friends from AFI and Friends from LERC. Don’t tell Bruce, but I even have friends from Deutsche Bank. But none of those friends feel as special and intense of the friendships forged at B2B-Hive. Perhaps it was our ultimate success, but I have a stronger belief that the intensity had to fo with the fact that there was no institution underlying that success. We had no one to blame or praise but ourselves. If you are ever faced with the opportunity to go out on your own, seize it. Like me, it may be the defining moment of your career. To be or not to be, that will always be the question.