I’ll start our first post by sharing some good news about our fund, something rare in these dire financial times. We just announced the signing of a definitive purchase agreement for the sale of one of our portfolio companies, W&W Communications, to Cavium Networks (CAVM). You can read all about it at:

http://www.caviumnetworks.com/newsevents_Caviumnetworks_W&W-Communications.html

W&W was one of the first companies we invested in out of our first fund at Nueva Ventures, back in 2005, and our largest investment. Nueva led the investment round and created a syndicate with angel investor Don Hutchison and venture fund Hi-Tech Ventures. I have personally been on their Board of Directors for the past 3 years and it has been a pleasure to work with the team and company over these years.

W&W was one of those highly capital efficient ventures that bootstrapped the development of its leading H.264 video processing technology by leveraging a video processing board fabrication business it had developed since 2001 called DSP Research. When we invested, it was doing about $1M/year in revenues and cash flow neutral with this business. It raised a $1M series A round to add key talent to its team as the pipeline from licensing opportunities was growing rapidly.

The company’s business model evolved rapidly over the past few years, serving customers in video surveillance, conferencing, mobile and broadcast. It’s highly talented team designed an ASIC that to our delight worked on the first spin. The technology is a natural fit with the products offered by Cavium and I believe it offers Cavium a new avenue of high growth.

To me, there were a few important takeaways:

W&W’s founders were prudent – they avoided taking a traditional large venture capital round by maintaining a low burn mode while leveraging their base video board business and being highly focused on immediate revenue opportunities. By avoiding a traditional VC round, the team kept options flexible for a sale to a strategic buyer when the right offer and partner came around.

They were also opportunistic and quick to adapt their strategy. What started out as a licensing model quickly evolved into an ASIC model because this is what their customers were asking for. However, while it would normally take far more capital to produce an ASIC, the CEO Lars Herlitz hired a small exceptionally talented team that was highly motivated with incentives and struck a key partnership with an Asian fab to produce the chip, keeping capital needs to a minimum.

I’m proud of what we achieved with W&W and I wish the team well as they conclude their acquisition by Cavium and transition to take the company to the next level.