| Not just a whacky, conspiracy idea after all?
The guys who run these kinds of places are not stupid, so the first thing that goes through their minds is, "Microsoft has $50 billion in cash. If it's that good a deal, why aren't they keeping it for themselves?" The second thing is, "OK, then why are they bringing it to us? They must want something. If a guy who has $50 billion in cash wants something, there might be a way to make a buck here." Microsoft or not, smart VC's are not going to plunk down $50 million because some guy they never heard of called them on the phone and said they should. Companies like BayStar investigate high tech investment opportunities for a living, so they undoubdedly did that. If they did do that, they would have seen the high-tech equivalent of Salon.com... went public during the dot-com mania, failed to find its niche, has never made a dime, and is now running out of cash. Most venture capital companies already own all the stock in those kinds of things that they ever want to see. Their rec rooms are wallpapered with the stuff. So what's here? A lottery ticket on a lawsuit? BayStar doesn't do deals like that. They have a real nice portfolio of real companies with real products. That's what they know how to do: pick likely winners from 5,000 candidates. Bottom line, these guys knew they were buying a corporate shell that was either going to win the lotto, or go totally bust. There is no middle ground for this company... its products have never made money, and now they are even in revenue decline. They went ahead with this anyway, which means that they saw it as a way of getting their nose in the tent at Microsoft. They probably wrote the $50 million off — in their minds at least — the day they wrote the check. Now they are waiting to see what they are going to get in return for their favor. Microsoft plays this same game at the same level. They know very well that they owe these guys one, and the last thing they'll want to do is leave BayStar hung out to dry if Microsoft's "tip" turns out to cost BayStar $50 million. The easiest way for Microsoft to fix this is to decide that it needs to acquire some essential technology that just so happens to be owned by one of BayStar's mistakes. So Microsoft acquires some defunct startup company for $100 million, and BayStar says, "Nice doing business with you." |
This story just gets weirder every day. If I had just fallen off a turnip truck, I might believe that the principals of this Marin County venture capital house were sitting around one day when the phone rang, and lo and behold, it was some mid- to high-level muckety-muck at Microsoft. He had called them — out of the blue, to hear them tell it — to tip them off about a really great investment opportunity.