The Other Dell's Silicon Venture

April 23, 2000

The Other Dell's Silicon Venture

Issue in Depth
The New York Times: Your Money

By JENNIFER FREY

s he sets out with the stated aim of showing New York how big-time, West Coast venture capital is done, Adam Dell can't imagine why anyone would want to do anything besides start a dot-com.
One day this month, Dell, who left Silicon Valley only last November and soon founded Impact Venture Partners in New York, faced a crowded classroom as he taught his Columbia University business school course on starting an Internet company. Standing 6-foot-3 and dressed in dot-com attire -- khakis and a button-down shirt, sleeves rolled to the elbows -- Dell is a lot better-looking in person than in the geeky photograph on his company's Web site.

Adam Dell, brother of Michael, sees "a gaping hole in the need for early-stage venture capital in New York."

After almost a semester of indoctrination, he asked how many students still planned to work for Fortune 500 companies. When even a few -- perhaps made anxious by sagging dot-com stocks -- meekly raised their hands, Dell, gritting his teeth and running his hands through his wavy brown hair, exclaimed, "I've failed in every sense!"
Dell, at 30, has accumulated the credentials and the confidence to teach such a course. Having an older brother by the name of Michael has certainly helped create opportunities. But having a last name that has become a leading brand name, associates say, cannot account for his own ability to find and nurture promising companies.
Michael Dell himself says he has done little for his brother besides investing in his $100 million venture capital fund, which has already had two of its companies go public. "Adam opened the doors for himself," Michael Dell said. "The things he's done are his own. I can't take any credit or blame."
If anything, Michael Dell's near-conquest of one business has made Adam Dell that much more intent on conquering another. "I have an intense passion to win and to build colossal businesses that will survive and exist in the future," he said.
Late last year, Dell left Crosspoint Venture Partners in Silicon Valley (a backer of Ariba Inc., among others), where he was a partner, to shift his focus to Manhattan's Silicon Alley. Besides his brother, he has attracted marquee backers like Frank Quattrone, head of the technology group at Credit Suisse First Boston.
Dell specializes in fledgling Internet companies meant to speed transactions among businesses, especially in industries like textiles and trucking. "We're here to bring East Coast businesses to the Net faster," he said.

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Issue in Depth

The New York Times: Your Money

e started his fund with investments in companies he got to know on the West Coast, including OpenTable, an online restaurant reservation system based in San Francisco but operating in cities including New York. Two of his companies went public on April 7, even as the Nasdaq was well into its slide from its March peak: GoAmerica, a wireless Internet service provider that was issued at $16, now trades at $8.625. Opus360, an online employment service that was issued at $10, is at $8.25. Impact invested in both companies after they were founded.
Dell preaches what he practices. He urges his Columbia students to stay as wired as they can, encouraging them to surf the Web on their laptops while he teaches.
When West Coast colleagues send him e-mail messages at 2 a.m. New York time, they often receive responses within five minutes. "I think he has it connected to his bed or something," said Carl Bass, chief executive of Buzzsaw.com, a provider of goods and services to the construction industry that Impact Ventures financed.
As technology stocks took a beating this month, Dell managed not to flinch. "It's a hiccup, but also a wake-up call to reality on valuations and business models," he said. "The volatility is a part of how this cycle will play out."
His own investments, he said, are in industry leaders that can withstand a bear market. "These are not flash-in-the-pan, Internet hype deals," he said. "These are real businesses with real value. We are focused on long-term returns, not quick pops."
Why move from Silicon Valley, the hotbed of Internet activity, to New York? "I saw a gaping hole in the need for early-stage venture capital in New York, and I said, 'This is a no-brainer."'
But other, better-known firms say they are more able to fill the gap. Draper Fisher Jurvetson of Silicon Valley established a Manhattan affiliate in February, and a half-dozen other venture firms have sprung up in Manhattan in the last year.
"He's an individual venture capitalist who moved from the West to the East Coast," said Dan Schultz, a managing partner of Draper Fisher's New York-based fund, referring to Dell. "He's got relationships there, done deals there, but it's not like his old firm opened here with a bicoastal practice. It's a subtle but important difference."
Dell, who is single, was raised in Houston; his mother was a stockbroker and his father an orthodontist. Growing up, Dell was fascinated by computers. In 1982, in junior high school, he started an online bulletin board. "It had games, content, application, software packages," he said. "People could chat.".
He earned his B.A. at Tulane University in 1992 and a law degree at the University of Texas in 1995. He initially practiced corporate law in Austin but jumped to the business side in 1997, joining Enterprise Partners, a Los Angeles venture capital firm. A year later he moved to Crosspoint, where the chief executive, John Mumford, credits him with finding several successful companies.
The entrepreneurs he admires most? Bill Gates and his brother. "Michael has done an incredible thing," he said, though he shies away from going into detail about him.
Michael Dell, who is 35, does not see himself as Adam's mentor, saying "He probably gives me as much advice as I give him." They communicate several times a week by telephone or e-mail. So when did Michael stop seeing Adam as a kid brother and more as an equal? "I always see him as my younger brother," he said.

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