Solid Works
In August 1994, 12 months after Jon Hirsctik left a great job to found a new venture in the software industry, SolidWorks, the deal was looking good. The seed capital discussion had shifted into high gear as soon as Michael Payne joined the SolidWorks team. After working on the deal for nine months, Axel Bichara, the Atlas Venture, vice president originating the project, finally got a syndicate excited about it: Atlas Venture, North Bridge Venture Capital Partners, and Burr, Egan, Deleage & Co. presented an offer sheet to SolidWorks two weeks after Michael was on board.
This process was practically interesting because Jon and Axel had worked together for most of the past eight years. They met at MIT in 1986 and cofounded Premise, Inc., a ccomputer aided design (CAD) software company, in 1987. After Premise was bought by Computervision, they joined that team as managers. Now, they sat on opposite sides of the table for Axel's first deal as the lead venture capitalist.
Jon and other founders thought the valuation and terms were fair, but the post-money* equity issue was unresolved. They had to decide how much money to raise. Did they want enough capital to support SolidWorks until it achieved a positive cashflow, or should they take less money and attempt to increase the entrepreneurial team's post-money eqiuty?
If they took less money now, they could raise funds later, when SolidWorks might have a higher valuation. But they wouldbe gambling on the success of the development team and the investment climate. If their product was in beta testing with high customer acceptance, raising more money would probably be fast and fund, but if they hit any development snags, the process could take a lot of time and yield a poor result.
Jon Hirstick: 1962-1987
Jon grew up in Chicago in an entreprenurial family. He foundly remembers helping with his father's part-time business by traveling to stamp collectors' shows across the Midwest. In highschool, he was self-employed as a magician.
The entreprenurial impluse continued during his undergraduate years. Jon recalls the blackjack team he played with at MIT:
we raised money to get started. At the same time, we developed a probabilistic system for winning at blackjack. The results were amazing! We tripled our money in the first six months, doubled it during the next six moths, and doubled it again in the next six months. We produced a 900 percent annualized return. I learned a useful lesson: you really can know more than the next guy and make money by applying that knowledge. We tackled blackjack because people thought it was unbeatable; we studied it, and we won. The same principle applies to entrepreneurship. Opportunities often exist where popular opinion holds that they don't.
Jon's introduction to CAAD came from a college internship with Computervision during the summer of 1981. Computervision was one of the most successful start-up companies