Most parents would probably be delighted if their son earned an engineering degree from MIT, but Pravin Vazirani's were bummed: They wanted him to become a doctor.
Two decades later, his decision looks to have paid off. Vazirani is a managing director of Menlo Ventures, helping run a $4 billion investment portfolio and sitting on the boards of such startups as Fab, Lumos Labs and EdgeCast Networks.
In a recent interview, the 41-year-old talked about technology investing and the generational shift under way in the venture industry. Here's an edited transcript.
Q How'd you go from engineering to venture capital?
A I worked for a wireless startup after college that ended up getting acquired by ADC Telecommunications in 1998, the height of the telecom bubble. They were acquiring a company a month, and the stock price kept going up and up, and I remember thinking, "I'm not a business guy or anything, but I don't understand how acquiring all these disparate businesses is going to work."
Of course, it didn't work. (ADC saw its share price plunge when the bubble burst, and it was eventually acquired by Tyco Electronics.) That was sort of my first lesson in corporate strategy.
I decided to go get my MBA, and I really thought I was going to do another startup after business school. Then some of my classmates, who knew about my engineering background, asked, "Have you ever thought about venture capital?" I barely knew what it was, but I thought to myself, "It might be interesting just to learn a little bit about it if I'm going to do a startup." So I first came out to Silicon Valley in the summer of 2000 to do an internship with @Ventures, and I just got bitten by the bug. I like that you're helping people chase their dreams.
Q You moved to the valley full time in summer 2001, as the dot-com bubble was deflating. That must have been tough.
A I was lamenting, "Why couldn't I have gotten here two years earlier?" (laughs) But honestly, it was the best thing for my career. Because it was back to basics: Looking for real businesses that are solving real problems, and none of this, "Accumulate the eyeballs and the business model will come."
And from Menlo's perspective, we were able to get into a lot of good deals in 2001, 2002, because suddenly there was a lot less competition. A lot of investors were heading for the hills.
Q Menlo has traditionally focused on enterprise technology, but you've got some interesting consumer companies in your portfolio.
A I've kind of eased into it. I spent a lot of time in the storage space early on, but in 2007 I invested in (photo and data backup site) Carbonite -- which is kind of a hybrid because it targets consumers and small businesses. And in 2011, we did Fab (a daily deals-type fashion e-tailer). We had a thesis that there was going to be a rebirth of e-commerce, capitalizing on social networks for referrals.
Q There's also a generational change going on in your firm, and in the venture industry in general, right?
A I've been fortunate to have great mentors to learn from, guys like John Jarve and Doug Carlisle and DuBose Montgomery, who've been in the venture industry forever. The industry as a whole is really only about 35 years old. What's occurring now is kind of the first major generational shift.
Early in my career, I spent about 90 percent of my time sourcing new investments. Now I spent about 70 percent working with my portfolio companies. Part of that is, we have younger people in the firm who focus on sourcing. The younger generation, the ones who are coming in after me, are going to be the ones who come up with the next great investments.
Q We're more than 10 years out from the bursting of the dot-com bubble, and a lot of venture funds that were raised then haven't delivered returns. We've seen the number of venture firms dropping as pension funds and other investors focus on fewer firms. Have we reached a bottom, or will we see more consolidation as firms aren't able to raise new funds?
A I think we've more or less reached equilibrium. If you look at the dollar commitments into venture capital over the past two or three years, it's kind of stabilized at pre-1998 levels. And I can tell you that the number of companies with quality ideas out there is way more than in the early '90s, while the amount of capital is about the same. That's a good thing (for the venture ecosystem).
Q Because there's not so much money sloshing around and bidding up valuations?
A Right. There's kind of a 20-year cycle in venture capital. The '90s were a great decade; the past decade, from 2000-10, was a tough one. Over the next 10 years, I actually think we're heading for another golden age in venture capital.
Contact Peter Delevett at 408-271-3638. Follow him at Twitter.com/mercwiretap.
Born: Mumbai, India; immigrated to America with his parents at age 2, was raised in Edison, N.J.
Current job: Managing director, Menlo Ventures
Previous jobs: Engineer, Pacific Communication Sciences; product manager, ADC Telecommunications
Education: Bachelor's degree in electrical engineering, MIT; MBA, Harvard Business School
Family: Married; two children, ages 6 and 3
Lives: Menlo Park
FIVE THINGS ABOUT PRAVIN VAZIRANI
1. He's a rocket scientist -- really. His first job was working as an engineer for NASA's Jet Propulsion Laboratory.
2. Met his Indian wife at a Chinese wedding in Canada.
3. Learned guitar in secret in order to propose to his wife with a serenade (although he personally prefers heavy metal bands from the '70s and '80s)
4. Avid scuba diver and sailor.
5. Loves traveling to exotic locations with his family; his 6-year old daughter's passport has stamps from 10 countries.