An Interview with Izhar Armony of Charles River Ventures
Q: What is your position at Charles River Ventures? How long have you been there?
A: I'm a general partner; I've been here for four years.
Q: How might you advise companies that invest in supply chain or companies
that develop supply chain deliverables?
A: I can share the current sentiment of our industry right now, but as you know, these things are very fluid. Currently, there is almost a backtobasics sentiment within the venture community and investment banking. We are interested in companies that have fundamental value propositions that can come up with a very, very compelling story, as well as a very defensible technology. This is a dramatic change from two years ago when many people were investing in B2B companies that had impressive business models but no defensible technology.
The other recommendation I'd make is to focus on a couple of emerging areas that are of great interest. First, there is clearly a move toward some of the "unexplored" parts of supply chain, namely the design in new product development. Another exciting area is with companies that are leveraging the Web to enable global visibility. In many regards, in transportation, in manufacturing, in inventory, global visibility has become an important theme.
Q: Key channel partners get together and form business alliances to provide a total solution for companies looking to enhance their supply chain and delivery mechanism. Do you see this as a successful approach? What makes a good channel partner? How are those decisions made?
A: Well, it's natural in the early market for no one to have a complete solution; you'll always have to partner to succeed. For young companies, startups, I think the logical partners are some of the large integrators and not necessarily other software vendors. The integrators have lots of influence on the big accounts, and they are among the few that see the big picture beyond the functional silo of my software or your software.
So I feel that an alliance with Accenture at this point in time to be of great value to supply chain startups. The other observation, of course, is that procurement vendors like Ariba and Commerce One are quickly gaining a similar position like SAP, Baan, and PeopleSoft had in the ERP market in the early 1990s, so everyone wants to partner with them. I just don't see how they have the bandwidth to make much of a difference.
Q: Does it seem to you that alliance patterns are changing? Ariba acquiring Agile is an example. What do you think that's going to do to the trust module in the collaborative community space?
A: Patterns are definitely changing. I don't think anyone thought those alliances made any sense; they seemed at the time like more of a response to Wall Street than anything else. In my opinion, the Ariba/IBM/i2 alliance was basically done because someone realized that their names together create B2B with the "B" In IBM, the "2" in i2, and the "B" in Ariba.
The truth, as I see it, is that the ERP guys of the early '90s are being reduced in importance because they cannot seem to play outside of the enterprise. Hence, there is an emergent class of providers that can provide a big chunk of the functionality that an extended enterprise needs. These I think are i2, Ariba, and, interestingly enough, Commerce One, which is becoming a very strong player. You are of course acquainted with others. I don't think that any of the corporate mergers makes sense. I think that it's war and that those alliances are shortlived.
Q: Are there any new business models in particular that excite you? Which upandcoming companies do you feel will be successful?
A: As a venture capitalist, I have to put my money where my mouth is. Right? We have made many investments to date that are quite successful. These investments have been along the lines that I identified earlier as emerging important sectors, like new product development. For example, we invested in a company called Proficiency, which is practically in stealth mode. They may be the first company to allow true collaboration within the design chain. They target organizations like Ford, which is their first customer, Vistion, Boeing, and others. They place a strong emphasis on core technical excellence. On top of that, they've built the necessary collaborative application, but it's not just a thinclient application environment. I believe companies must focus on returning to core technology, going back to the universities, to the research centers, and finding technologies that can create hundreds of millions of dollars worth of savings. This is what it will take to be successful.
