Though they may not part with cash, some leading technology companies find other ways to take an interest in startups' work that might benefit their own businesses.
The big Silicon Valley vendors, such as Cisco Systems, Hewlett-Packard, Intel, and Oracle, and those with a large stake in the area, including Microsoft, which has a Mountain View campus, and IBM, which has three San Jose labs, have their hands in the startup business, too. With the exception of Intel, they don't necessarily fund ventures, but they help move things ahead in other ways.
Take IBM, which in 1999 launched a venture-capital unit in Menlo Park that briefs select startups on what IBM is doing in specific technology areas and encourages them to fill the gaps. IBM doesn't invest money in the startups. But if one produces a valuable complement to its product line, IBM may buy it. In 2004, IBM acquired five startups in Silicon Valley, a number matched only by Cisco.
IBM snapped up Trigo Technologies Inc. a year ago as a result of the unit's work. In 2000, Trigo built a data-management system for manufacturers and retailers bringing products to market, based on feedback from Unilever N.V. By 2003, it had leading expertise in the field, had a growing list of customers, and was profitable.
Deborah Magid, director of strategic alliances at IBM's venture unit, saw that the Trigo Product Center helped companies manage unstructured data, but it needed IBM's WebSphere or other integration software to collect data out of disparate systems. Meanwhile, IBM's Software Group had a goal of its own: find technology that would let it extend its data-management capabilities deeper into the enterprise. By grafting the unstructured and scattered product data onto the more structured data tree that IBM had already established, Trigo was extending IBM's data-handling reach.
In four years, Trigo's software went from concept to mainstream IBM technology. In April 2004, the Trigo Product Center became the WebSphere Product Center as IBM completed its acquisition of the company. IBM reportedly paid a good price because the company was already profitable and on track to go public.
"We found this untapped market," notes former Trigo CEO Tom Reilly, now an IBM VP of strategic planning whose job is to scout promising opportunities both inside and outside IBM. "The investors were very happy."
"We know our own business. We just play matchmaker," Magid says of the 30 members of the venture unit, which includes representatives from other parts of IBM, including Global Services. That broad representation allows information on startups to be fed deep inside the company, she says.
Today, leadership of the WebSphere Product Center is the responsibility of Pariac Sweeney, IBM's VP of product information management. Customers of the former Trigo Product Center, who are now users of WebSphere Product Center, work with a product that's been "blue washed," as veteran IBMers call it. The product got the standard IBM look and feel, with full IBM documentation, and it was integrated with WebSphere Integration and WebSphere Portal.
At Corporate Express Inc., the online provider of office supplies, Chuck Coleman, director of product support systems, remains happy with Product Center. What he likes about Product Center after the acquisition: "I'm dealing with the same people" that he previously knew at Trigo, including his technical support contacts, Coleman says.
Of Trigo's 70 employees, only three didn't join IBM, Reilly says. Now the Product Center group within IBM has more than 210 employees.
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