The Lesson of Jim Goetz: Great VCs Make Their Own Luck

Jim GoetzPeople may be surprised that low-profile Jim Goetz of Sequoia Capital just landed the largest-ever acquisition of a venture-backed company. They shouldn’t be.

Researchers have shown that superstar investors are remarkably consistent over time. In fact, when it comes to predicting which startups will be successful, individual VCs are roughly five times more powerful as leading indicators than the firms for which they work, according to a study published last May by Harvard and Carnegie Mellon academics. (The study controlled for all kinds of deviations, including industry, investment amount, the amount of experience of the VC at the time of the investment, and the age of the startup itself.)

As one of the study’s authors, Matthew Rhodes-Kropf, told me when the study was first published, “The guys who know how to get big exits get big exits no matter where [they’re employed]. The guys who fail are pretty consistent about that, too.”

Goetz is clearly one of the guys in the first camp. An entrepreneur who later became a general partner at Accel Partners, Goetz scored numerous hits for the firm, including Perbit (sold to Juniper), Rhapsody (acquired by Brocade Communications), and Entrisphere (sold to Ericsson). Goetz was so good, in fact, that in 2004 Sequoia Capital hired him away from Accel.

Lucky Sequoia. Facebook’s $19 billion acquisition of WhatsApp could mean as much as $3.4 billion for Sequoia’s LPs, given that Sequoia invested a reported $60 million in the company across three separate rounds for an ownership stake of as much as 19 percent. And it’s just one of the big exits that Goetz has provided Sequoia. He led the firm’s investment in AdMob, which raised less than $50 million and was acquired by Google for $750 million just three months later; and he was also the force behind Jive Networks, Nimble Storage, and Palo Alto Networks, all of which have enjoyed successful public offerings.

Another Accel partner, Peter Fenton, has followed a remarkably similar trajectory as Goetz. At Accel, Fenton quietly amassed a portfolio of 10 startups, later helping to sell two of them — JBoss to Red Hat and Wily Technologies to Computer Associates — in hugely successful outcomes for Accel.

In mid-2006, Fenton was also headhunted by another VC firm – in this case, Benchmark Capital. At Benchmark, Fenton has continued to knock the ball out of the park. Two of his more prominent investments include Yelp (which went public in 2012); and New Relic, which was valued at $750 million in a funding round a year ago. In addition, Hortonworks and Zendesk are expected to go public in the near future. And did we mention Twitter? Fenton sits on its board and will reportedly net hundreds of millions of dollars personally alongside Benchmark, which owned 6.7 percent of the company at the time of Twitter’s November IPO.

Goetz and Fenton aren’t lucky; they’re consistent. And their success may encourage more firms to poach star players, particularly if their LPs have anything to say about it. Brian O’Malley, a rising star at Battery Ventures, was recently lured over to Accel. With Goetz’s big deal, other firms are surely poring over other firms’ rosters in search of their own superstars.

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