aQuantive. Capture Software. Clear Commerce. Although all of these companies offer different types of technology products, they have several things in common. They all got a head start with funding from Voyager Capital, an early stage venture capital firm, based in Seattle, Washington. All of these companies also got acquired by more established IT organizations. For example, in 2007, Microsoft paid more than $6 billion for aQuantive. In fact, many of the emerging companies Voyager Capital funds get acquired.

With funding dollars getting tighter and tighter, Voyager Capital has focused on funding companies in three technology areas: wireless, digital media, and enterprise software, and in three geographic locations: California, Oregon, and Washington, Bill McAleer, the co-founder and managing director of Voyager Capital, say that its go-to-market strategy involvement helps its portfolio companies to become very successful. He adds that a good part of this process includes the active involvement of CIOs, CEOs, and investors.

Enterpriseleadership.org recently sat down with Bill McAleer to discuss what technology areas he likes, how he works with CIOs, and how he handled technology decisions as a business executive. He has about 30 years of business experience and 20 years of senior executive and equity financing experience in the IT industry. Here is what he had to say:

EL: Can you describe your investment portfolio?

BMA: As an early state VC firm, we provide the company's first round of venture funds. We also fund growth stage companies that have about $10 million to $15 million in revenues per year. We've been in business since 1997. We like to work with our portfolio companies at the board level by setting strategy. We also help these companies pursue the typical venture model.

Our current allocated fund runs around $110 million. We have less than a half billion under management in about three funds. We come across many innovative technologies and entrepreneurs. The Seattle market, in particular, has grown dramatically over the past 10 years. It's my top ranking portfolio sector. Catalysts for growth in the Seattle area include Microsoft, RealNetworks, Nintendo, and three of the major wireless companies. We rank third in VC-backed companies that have created the most jobs in the country. The technology growth in Seattle outpaced more traditional technology areas such as in New England.

EL: Do you use technology to look at your overall success or failure of the companies in your portfolio? Do you automate that process at all?

BMA: Not too much! That's more of an art than a science. We'll generate some data summaries. As far as evaluating the portfolio, we don't use much technology other than communicating with the companies. We aren't running highly sophisticated financial modeling or analysis. We'll track our investments and do some of our reporting with a product that does some of the limited partnership accounting. We don't deal with a lot of sophisticated portfolio analysis. We have mostly early stage companies. Growth stage companies tend to track their key data. We do have access to databases. We use the Web for searching out companies and looking for deal flow and deal history.

EL: Are there reasons other than technology for why you've selected companies in your portfolio?

BMA: We tend to look, from an investment perspective, at companies that have strong fundamental technologies. Ideally, we like something that is innovative or differentiated. Most of all the deals we invest in have some technology elements in them. We look for market factors.  We also look at places where the market might shift and if a company is taking advantage of a paradigm shift. For example, we did an investment in a Portland healthcare company called Kryptiq. The marketplace for this company concerned a regulatory requirement related to HIPPA compliance. The healthcare environment wanted to connect its patients with the providers and the physicians. This company provided a connectivity layer which enables its applications to run on top of that layer, and, therefore, to connect those three pieces of healthcare. They had a good core technology. In that example, we also looked for specific market trends that could benefit us.

EL: Do you look for disruptive innovation?

BMA: Yes, we've looked at several of those. We typically look at a combination of technology and market shift. For example, we backed a Seattle company called aQuantive.  It came about as a result of the Internet and Internet advertising. It captured analytics on Internet advertising. IT had   unique technology that allowed it to apply analytics to measure the effectiveness of Internet advertising. That was a big win. Microsoft bought the company after it went public. The company went for $6 billion. We have another company in the video market. It has an innovative technology for manipulating media with an ad. Most of our innovations we've funded have been more transformational than disruptive. In hot technology areas, we tend to see many slight variations of products. To this end, we have to watch this scenario carefully.

EL: Can you describe some of the technology areas that are on your radar screen?

BMA: The Web has created a great opportunity to connect the participants of a company's value chain. Now companies can have a better understanding of both their customers and their suppliers. We've looked at a number of Web-based software applications that enable you to connect the supply chain or the value chain with the company. Typically, the various parts of the supply chain have existed as independent silos that are hard to connect. Web-enabled applications provide the opportunity now to really collaborate as a company.

EL: Do you have any type of an external advisory board, such as a CIO board?

BMA: We do. It is comprised of three types of people: CIOs, CEOs, and investors. For example, we have the former CIO of Bell South and Lehman Brothers. Our advisory boards trends to have more former or current CEOs of well-known companies than CIOs or investors. We look for people who can represent the three geographic areas we serve. We try to infuse customer insight into our investment strategy, try to update our investment strategy annually with our advisory board members, and look at certain sectors in that investment strategy.

For example, we call upon our CIOs to help us plan our annual off site investment meeting with CIOs. Speaking with CIOs gives us a perspective on what our portfolio companies will do to connect effectively with their buyers. After all, these folks and their staff look at innovative technologies. We ask CIOs about what trends they see in the marketplace, and what current critical elements they have to deal with.

We try to get outside perspectives on where certain markets are going. For example, we've had George Gilder, a futurist and author, speak at some of our venues. We also bring in some investors and bankers to hear about the things on their hot plate.

If you look at the food chain, VC's reside at the front edge of the innovation curve. CIOs reside at the end of the curve, while investment folks reside off to the side of the curve where the potential is.

EL: Because you're dealing with many early stage companies, are you interested in growing these companies or seeing that they get acquired?

BMA: Most VC firms will tell you they invest in companies to fuel their growth to become larger companies. The majority of companies that we fund get acquired.  In the enterprise market, we're seeing large IT vendors needing to augment their solutions. Of course, these large companies want to acquire companies with innovative technologies. Over time as paradigm shifts occur, you can go back and spot the trends of how companies grew through acquisition. VMware is a good example of a virtualization company that grew through acquisition.  If we hit the market right, we can create a big company. However, out of our portfolio, we have several that will make it all of the way through to become a big public company.

EL: Besides the advisory board, how do you help your portfolio companies sell their product successfully in their key markets?

BMA: One of our venture partners and advisors is the Chasm Group, a premier marketing firm in the technology industry. We spend much time with our portfolio companies on their go-to-market strategies. Before early stage companies can develop a focus, the CEOs have to experiment with the target segments or the way the solution works. To this end, it's okay for the management team to go out, to speak with potential customers, and to see what sticks and what doesn't.  They need to do this especially if they intend to sell to the enterprise and ultimately to CIOs. Our CIOs involve themselves in the application of some of the solutions from our portfolio companies. The CIOs we've meet will take risks with innovative products.

On the other hand, we've come across CIOs who are adverse to risk and who will only buy from established vendors. On the other hand, we've seen some organizations that have reduced the number of vendors in order to sample more innovative technologies from smaller companies. If an early stage company wants to go after the enterprise, you have to point them to the right target sectors. For example, the financial services sector tends to be more innovative and takes more risk on innovative companies.

EL: Of the boards you've served on, have you gotten involved with the strategy and the technology investment decisions the company made?

BMA: That's an interesting question. As a board member, I haven't been heavily involved in any technology strategies, unless it related to the company's product strategy. In the latter case, the focus was on some of the priorities for system implementation or technology implementation within the enterprise. I got involved in these discussions through audit committee meetings. A couple of the boards I was on had periodic presentations about CIO priorities, but it was rare to have the CIO at a board meeting, expect once a year. As senior leader of a company, I gave presentations to the board about technology investments and strategies.

EL: What challenge did you face in handling technology investments when you were a company executive?

BMA: I got involved in the tech business when I became an executive at a major hotel. I worked with a strategy group to figure out what technology innovations we wanted to use for that particular company. At the time, technology was an afterthought in the hospitality industry.  It has changed now. Look at what's going on with customer relations management, and customer tracking. Technology became a big enabler of frequent traveler program, which is an important industry segment. You now can understand what customers buy and what they prefer at a hotel. Back when we tried to determine this information, we looked at the customer to see what physical characteristics we could discern. Today corporate management has a higher awareness technology as a strategic asset.

EL: As a former CFO of a company, how did you CIOs to make investment decisions?

BMA: I had a period where a CIO reported to me. I worked tightly with the CIO because the financial organization as to be a partner to the business. We worked closely with some of the operating units to move some of their technology initiatives forward. We implemented CRM technology for tracking customer support. Typically, we worked the operating units and the CIO to define a proposal. Most of the funding came out of the capital budget. As a result, we worked with CIO to do an ROI analysis on major projects. We had our annual review of IT priorities and the capital required to support those priorities.

The software as a service model has changed things a bit. In some cases, the operating units fund their IT expenditures out of their expense budgets as opposed to capital budgets.

Elizabeth M. Ferrarini - She is a free-lance writer and IT consultant from Boston, Massachusetts. Reach her at elizabethferrarini@yahoo.com