Cisco has a new strategy to make investments in the hottest start-ups, even as other investors flood the zone
In his first meeting last year with Cisco CEO Chuck Robbins, venture capitalist Jon Sakoda had something important to admit right away — he'd never invested in a networking company.Robbins was interviewing Sakoda, then a partner at venture firm New Enterprise Associates, for a job that was brand new to Cisco: investing in early-stage start-ups, including those far away from networking.
Cisco shareholders have been rewarded for the company's expansion efforts, even with annual sales growth stuck in the mid-single digits, well below Amazon, Alphabet, Salesforce and Microsoft. The stock price is up 24 percent in the past year, and last week climbed to its highest since the dot-com bubble in 2000.
Cisco is setting up Decibel as an independent firm with a separate pool of cash, an unusual model for corporate investors, who typically make investments off their balance sheet. The fund hasn't closed yet, so Cisco isn't talking publicly about the numbers, but a Securities and Exchange Commission filing from October indicated that Sakoda was setting out to raise $500 million.
"I remember going home and telling my wife this is a really great idea, I'm just not sure if they're going to do it," Sakoda said."Every step of the way you wonder if Cisco has the courage and conviction to do this because it's the first time it's ever been tried." "Sometimes, the earlier you get involved the more important it is that you are a director and the more important it is that you're setting a course for having the right culture and corporate governance at a company," said Sakoda.
Venture arms from companies like Alphabet, Salesforce, Intel, Qualcomm and Comcast help start-ups plug new technologies into their sales and marketing engines and give them a ready-made slate of customers. In Sakoda's view, one of Decibel's biggest advantages is access to mentors. Cisco employs a ton of founders whose start-ups were acquired over the years and who plan to act as advisers to entrepreneurs in Decibel's portfolio.
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