Why Anyone Who's Anyone in the Valley Took Some Profits on eBay
The political elite of Washington, D.C., shows up at that oh-so-special
White House
gala. The top of the heap in Hollywood snags an invite to
Vanity Fair's
Oscar-night party. But in Silicon Valley, the Who's Who is identified on a more obscure but far more precious list: the roster of selling shareholders in
eBay
.
Look, there's Roger McNamee of investment funds
Integral Capital Partners
and
Silver Lake Partners
selling shares on March 17 and 29 worth a total of almost $1.4 million. Oooh, there's
Sun Microsystems
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Chairman and CEO Scott McNealy ditching 7,666 shares on Feb. 5 for proceeds of $1.7 million. And isn't that Mike Homer, chief of
TheStreet Recommends
Netscape's
Web site unit, cashing in $992,213 worth of eBay shares on Feb. 11?
These luminaries have one thing in common besides knowing each other and most everyone else who matters in Silicon Valley. They are all friendly enough with someone at
Benchmark Capital
, the Menlo Park, Calif., venture-capital firm that turned a grubstake in eBay into the investment of a career.
A typical venture fund has two types of investors other than its principals. Limited partners generally are major institutions or fabulously wealthy individuals who can write a check for more than $1 million in one sitting. But the supreme backscratching tool in Silicon Valley is the "sidecar fund." That's where the merely well off -- but exceedingly well-connected -- can pony up for a measly $100,000 or less.
Either way, when a single venture investment has paid off the way eBay has, the VC firm may quickly distribute all or part of the stake to the fund's investors. At Thursday's close of 169, eBay's shares are up 28-fold from their September initial public offering price.
Benchmark handed out a third of each investor's eBay shares in early February. That's when the selling began.
"They have a huge sidecar fund," says Donna Dubinsky, co-founder of
Palm Computing
, who's now running software upstart
Handspring
in Palo Alto, Calif. Dubinsky sold her shares as soon as Benchmark distributed them, reasoning that she'd still be getting two-thirds of the stake in the future. "A lot of us looked at it and said, 'We've got a great deal here,' " says Dubinsky, who donated some of the shares, worth $318,864 on Feb. 10, to charity.
The insider-sales data on
Yahoo!'s
(YHOO)
financial Web site requires some deciphering. The untrained might not recognize "Komisar Rarely" (sic), who sold 3,066 shares worth $734,307 on Feb. 17, as Randy Komisar, the former president of
Lucasfilm
in Marin County, Calif., and currently an adviser to technology start-ups.
Komisar says he had just returned from a cycling trip in Asia ("living on so little money that I could live off this distribution in splendor for the rest of my life") when he had to decide whether to sell the stock. After watching the shares yo-yo for about two weeks, he bailed out at about 240. (eBay shares split 3-for-1 on March 2.)
Other Silicon Valley hotshots to boost their net worth by selling eBay shares include Tim Haley, a partner in Benchmark competitor
Institutional Venture Partners
but formerly an independent headhunter; Steve Perlman, the outgoing CEO of
Microsoft
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subsidiary
WebTV
; Stephen Luczo, the investment-banker-turned-CEO of disk-drive maker
Seagate Technologies
(SEG)
; and Bill Campbell, chairman of personal-finance-software maker
Intuit
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.
Not everyone to benefit from the out-of-nowhere rise of eBay, the San Jose, Calif.-based online auctioneer, is a Silicon Valley player. Tiny
Pomona College
, a 1,500-student liberal arts institution in Claremont, Calif., got out of its one-third stake in eBay almost as soon as it could and raised $10.6 million.
"This was just the luck of the draw," says Controller and Assistant Treasurer Robin Aspinall, who says Pomona's $700 million endowment is invested in 32 VC funds. For better or worse, the eBay money won't be going toward a new library or gym on Pomona's campus because the proceeds must be reinvested in the endowment. That means the eBay largesse won't help Pomona's recently launched $150 million fundraising campaign.
Perhaps the college should approach its fellow eBay shareholders for a handout.
Human Resources -- More Name Dropping
There actually is a party for the "in" crowd of Silicon Valley, but it's open to anyone and takes place every morning of the workweek. It's breakfast at
Buck's Restaurant
, the Woodside, Calif., meeting place of choice for tech land's power schmoozers.
Buck's isn't the place to do a secret deal. But it is the venue to see and be seen, where billion-dollar dealmakers compete for tables with real live cowboys from local ranches.
On one morning this week Netscape executive Jennifer Bailey dined with Deepak Kamra of
Canaan Partners
, Bailey's VC husband John Zeisler ate with several pals (Bailey and Zeisler say they didn't drive there together), and angel investor Ron Conway broke bread with the management of
EventSource
, an Internet start-up in which he's invested.
Also spotted: John Boyle of
Worldview Technology Partners
, David Roux of Silver Lake Partners, and Steve Douty, the Microsoft hotshot who joined the company with its
HotMail
acquisition.
The food at Buck's is fine, but forget about getting some quiet time. Conway, whose new fund is called
Angel Investors
, says he tried escaping to another part of the strip mall to be alone.
"I had to sneak off to the
Woodside Bakery
to get some work done," says Conway, "and I saw Tony Perkins," CEO of
Red Herring Communications
, where Conway is a board member.
No rest for the connected here.
Adam Lashinsky's column appears Mondays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a monthly column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at
alashinsky@thestreet.com.
