May 9, 2016
[Investor Q&A] Jamie Goldstein of Pillar - Aligning Goals Between Investors & Entrepreneurs

Jamie Goldstein has almost 20 years of experience as a venture capitalist in Boston.

Until recently, his career as an investor had been at North Bridge Venture Partners where he led investments at Actifio, Plexxi, Soundbite Communications, AppIQ, Cognio and others. Goldstein has launched a new fund focused on Boston companies called Pillar, which is taking a creative approach to investment.

A key objective of the firm is to align the goals between investors and entrepreneurs, so everyone is incentivized the same. Many VC investments include preferred terms that are all focused on downside protection versus upside enhancement. Plus, he has a team of 16 very successful entrepreneurs and founders in Boston, who are investors in Pillar's fund and are accessible to their portfolio companies for mentorship or any other requests for help.  

Learn more in my Q&A with Goldstein below.

Keith Cline: Tell us about your background?

Jamie Goldstein: I grew up in Weston and went to the public schools. We were a family of engineers. My dad worked his entire career at a water purification company in Watertown called Ionics. My brother was a biologist and chemical engineer and my sister was a mechanical engineer.  I was electrical engineering and computer science.  It was a household where we never hired anybody to do or fix anything.  We did it ourselves.  Truth is, my mom is the brains of the bunch.

Our family discussions at the dinner table would revolve around either sports or inventing stuff. As a child, I remember my dad, who was the CEO of a public company at the time, asking me for my legos. He had an idea and used the Legos to build the prototype of a reconfigurable water pump.  Ionics ended up getting a patent and it led to millions of dollars of sales.  There was no commission to me for the use of my Legos.  I remain bitter to this day.

I was fortunate to get into MIT and was very involved in my fraternity and played varsity soccer. MIT is a surprisingly social place if you find the right group of friends.  Many of my best friends are fraternity brothers from MIT.

KC: What was your first role out of college and what led you to attend B-school at HBS?

JG: Upon graduation, I wasn’t sure what I wanted to do. I received job offers from Intel and Goldman Sachs. A friend of mine, Tim Collins, received a job offer at a startup company in Burlington called Symmetrix and referred me in. It was 1989 and the U.S. was getting its ass kicked in manufacturing by other countries, mostly Japan. They suggested I read a book called The Goal which had a bit of a cult following in the nerdy operations research world.  I couldn’t put the book down and leaped at the chance to work at Symmetrix for George Bennett. George was one of the founders of Bain Consulting and also Braxton.  He was an amazing leader and salesman and a great mentor.  We sold software to large manufacturing companies to help them become better operators.

Malden Mills was one of our early customers and I was assigned to work with them in Lawrence, MA run by a character named Aaron Feuerstein.  I remember the first time I met him I had to present some of our early findings.  “How old are you kid?” he asked me.  “22, I replied”  “I have corns that are older than you.”  He was funny and smart with a very good soul.  When others were moving overseas, Aaron was doubling down in Lawence.

Malden Mills was an interesting time.  In the mid 90s, they discovered polar fleece (somewhat by accident) and the world was crazy for fleece. Now a company that had recently emerged from bankruptcy couldn’t keep up with the demand for fleece.  We helped them streamline their order delivery.

Symmetrix grew from 18 employees to 200 people but over time it ended up being more of a consulting company and not a software company. The founders of the company paid for me to go to Harvard Business School, which led me to end up meeting my future co-founders of PureSpeech.

KC: Tell me some of the details about your startup, PureSpeech.

JG: I first met Ben Chigier, who was a speech scientist from NYNEX and Carnegie Mellon in 1993. He was a brilliant guy and had left his job to start a speech recognition company based on his research.  I visited his apartment in Brookline and he asked me to test out his technology.  He asked me to speak an order, as if I was going through a drive-thru restaurant. I said, “I’ll take a big mac, fries and a coke and I’d like an apple pie too.”  Boom!  The recognizer nailed it with perfection. It was absolutely amazing.  Remember, this was 1994, 22 years ago.  We went on to raise $5M from Highland Capital, Compaq, and seed investors.

At the time, we were competing against Speechworks and Nuance. Those two companies went on to become large, publicly traded companies, whereas our company ended up getting acquired for $20M. Our competitors built more experienced teams and more of a focus around their strategy.  It was a very important lesson that I carry with me to this day.  

Ben went on to start another very successful company called eScription which was sold to Nuance and I went into venture capital.

KC: How you did you get into venture capital in 1998 at North Bridge Venture Partners?

JG: After things wrapped up at PureSpeech, I had to think about what I wanted to do next. My brother, Jono, was working at TA Associates and I used to poke fun at him, since he wasn’t actually building anything. He was just pushing paper, making investments, whereas I was building a product and company.  But based on my PureSpeech experience, it wasn’t clear whether I was built to work in one company day in and day out.  I liked variety.  I liked the creativity of the beginning stages.  But getting a job in venture is always hard, so I interviewed with startups as well.

I was interviewing for a business development role at eRoom with Jeffery Beir. As part of the process, he asked me to meet with his board members and ended up connecting me with Rich D’Amore from North Bridge Venture Partners. Rich asked what I really wanted to do with my life and I told him I wanted to be a VC.  After literally 13 rounds of interviews, I ended up being the first hire at North Bridge, working for Ed Anderson, Rich D’Amore and Bill Geary.

I started on January 5, 1998, which was phenomenal timing as the internet bubble was blossoming and everything you invested in turned to gold. At first, I worked closely with Rich, helping him evaluate his deal flow and doing diligence.  I had lunch at the corner of his desk everyday and we just worked his pipeline, which was vast. He remains a great mentor to this day.  I then spent a year doing the same type of work with Ed Anderson, the managing partner at North Bridge. I learned a ton from both of them. They had different styles, but they were both phenomenal and highly effective investors.

KC: You have been an investor in the Boston tech scene for several years. How has the ecosystem evolved since then?

JG: Back in the dotcom bubble days, the whole thing was insane and crazy. Companies with no revenue would go public and you would see some companies’ stock climb 150 percent one day and then another 150 percent the next day. People with a history in the tech industry knew that it wouldn’t last. But the people who were new to the industry thought this was the new normal. The internet changes everything.  The truth is, while many of those companies failed -- it wasn’t that they were flawed ideas, it was that people burned through their cash too quickly.  

Today entrepreneurs know so much more about the whole process and doing a startup is far more accessible.  Campus programs like the Harvard iLab, Rock Center Accelerator, MIT Sandbox and Sloan GFSA all help students pursue their dreams.  I wished this existed back when we were getting started.

KC: You have a very impressive track record, with several investments leading to an exit including AppIQ (acquired by HP), Cognio (acq Cisco), & SoundBite Communications (IPO then acquired by Genesys). Can you highlight one of them as an example?

JG: Even though it wasn’t a massive exit, my investment at Cognio may be the most gratifying. Cognio had a great group of people who worked hard. If you combine that with a little luck, they were able to defy the odds. The company was building a semiconductor chip for indoor wireless for six different competing standards before Wi-Fi became the obvious choice. The market crashed and we had one of our co-investors back out of the next round of funding. I had to ask the CEO to leave and stepped in as their interim CEO. We got very lucky and sold some patents to InterDigital Communications. This gave us $9M in cash and helped us pivot the company toward a different, less capital intensive business.  We hired a new CEO and I got to go back to my day job.  We ended up building a spectrum visibility and management system for enterprises. Cisco acquired the company for $75M.  

KC: Can you share a current portfolio company from North Bridge?

JG: I was the first investor at a company called AppIQ along with David Skok from Matrix, which was founded by Ash Ashutosh. The company was acquired by HP and Ash became the CTO of their storage group and then he joined Greylock for about a year as a partner.

Ash is a brilliant entrepreneur. He noticed how enterprise storage budgets were growing at a massive rate and there was an issue around them having too many copies of the same stuff, which led to him starting Actifio. We invested in the company’s A round and a few months later, Greylock joined the syndicate.

Copy data was a new concept that was hard to explain at first. Even a lot of VCs couldn’t get their head around it but our long history with Ash gave us faith that he would get the market right and build a big company.

I connected Ash with Mike Troiano, who was at Holland-Mark at the time to help with their messaging, marketing, and branding. Ash was very impressed with Mike’s work, which ultimately led him to bringing him on full-time as the company’s CMO.

Its not often a company creates an entirely new category but Actifio has done that with Copy Data Management.  Analysts like Gartner and IDC now write reports about Copy Data and CIOs now see line items on budgets for copy data.  That’s an amazing accomplishment.

KC: What prompted you to start Pillar?

JG: My responsibilities with North Bridge Venture Capital came to an end last fall. Investing and working with entrepreneurs is what I love to do. There was a lot of discussion from the LP community that Boston is dead. You can’t make money there anymore. Everything has shifted to other markets. Being a local investor, I didn’t feel like that actually was happening and I didn’t like hearing this misconception.

To me it felt like we were in a new era for Boston. The rear view mirror view of the last 10 years was not consistent with what was happening on the ground right now.  I met with 30 of Boston’s most successful entrepreneurs and got feedback from them. I asked them about their experience with investors: what help did you get? What would you have wanted? What do you think of our VC community?

The result of this effort became Pillar. Sixteen of these unbelievably talented CEOs and founders are now part of the Pillar team as co-owners and investors.

KC: How does Pillar differentiate itself from other VC firms?

JG: Based on the 16 CEOs and founders who are part of Pillar, it is very clear that giving our portfolio company founders access to these people will make them better entrepreneurs. They will benefit by learning from their mistakes and having access to their connections.

It was also important to all of us that there is proper alignment between the investors and entrepreneurs. The goal is to make sure we have a common goal of a successful company. Everyone says they want to be founder friendly, we wanted to prove it by getting rid of the usual preferred stock terms.

Our conclusions was that these protections don’t really matter in the big picture.  They might help spare a few extra dollars on a poor outcome, but if you are going to build a world class VC fund, the only thing that matters is being in the right projects and helping them achieve their potential.

So at Pillar our approach is buy common stock in these companies -- the same thing the founders own.  We want to align our terms with what’s best for everyone involved, so that we are all focused on upside enhancement, not downside protection.

KC: You are raising a $100M fund. Where do things stand with the raising of the fund and are you already making investments?

JG: We raised a large chunk of the fund very quickly from individual investors including the 16 CEOs.  We have started making investments and will continue fundraising through the summer.

KC: What stage of investments do you primarily target?

JG: As a rule of thumb, we like to be the first capital into a company, whether it is a seed or a Series A round of funding. This doesn’t mean that we won’t do a deal outside of this strike-zone.

KC: What sectors of technology, industries, or trends are of interest to you?

JG:  We are open, but here’s a general idea of what we’re currently focused on:

  1. The world is addicted to data and it is everywhere. So, technology that is somehow connected to the data ecosystem (moving, storing, sharing, securing)

  2. The analysis of all this data that is being created with machine learning and artificial intelligence

  3. The mobilization of that information with mobile first applications, and

  4. Extending its reach through IoT (Internet of Things), robots and sensors

KC: What excites you about the current market in Boston?

JG: Boston is bubbling with innovation and i don’t think there’s ever been a better time to be an entrepreneur or an investor here.  Our local universities, our long history of building companies - there’s a breadth and depth here this is substantial.  Massachusetts produces more Science, Engineering and Health PhDs per 100,000 anywhere in the country -- by far.  There’s intellectual horsepower here and a curiosity to solve the world’s problems.  

KC: What companies in Boston, outside of your prior investments, do you find interesting?

JG: There are many companies represented in our founding Pillar group that I wished we had backed -- TripAdvisor, Wayfair, DraftKings and Rapid7 to name a few.  If you are looking for younger companies, Drift and PillPack.

KC: Greatest misses? What companies have you passed on that you wish you hadn’t?

JG:  The one that pains me the most is Waze. I was doing some investing in Israel with a company called Fring. They were the first company trying to do Skype internet calls from your mobile phone back in 2008. We take this technology for granted now, but back then it was really hard on an old Symbian or Windows phone. Then the iPhone changed everything. It was no longer a tech game, it was all about building the best user experience for consumers. I made a mistake and passed on Waze because I didn’t think they would get the consumer experience right. I sure was wrong on that one. And I am reminded when I use it now, every day.

KC: Outside of being a VC, what are you personal interests or activities?

JG: My wife, Jodi, and I have three boys ages 17, 15, and 11, plus a yellow lab name Sadie. We’re a very active family. We spend a lot of time in Stowe, Vermont and do anything involving a mountain like skiing, snowboarding, hiking, and mountain biking.

Fat biking in Stowe, VT

While nowadays we do hire plumbers and HVAC people to fix our house, I have tried to give my kids the same love of making things.  I have a woodworking shop in the basement and a 3D printer from a local company called MarkForged.  It's amazing what you can do now -- find a product on GradCAD, modify it using Onshape (CAD in the cloud) and print it in 3D immediately.  

KC: What TV shows do you watch and what type of music do you like?

JG: For TV, I’m addicted to Game of Thrones.

I like all sorts of music.  Jodi is a metal head so we go to old school concerts like Journey and Styx when they roll through town.  Personally I like rap and have been listening to since high school.  In college everyone thought I was a freak -- listening to Run DMC, Kool Moe Dee, Boogie Down Productions and Public Enemy.  My friends thought rap was a fad and was going the way of disco - but I bet them that rap would still be going strong 10 years after graduation.  I cleaned up.  I learn about music now through my kids.  Latest favorite is Lil Dicky, a jewish rapper from Philly.

KC: Are you involved in any charitable organizations?

JG: I’ve been very involved in a charter school called Match Education for a decade and have been their Chairman and Executive Chairman for the past five years. Match is inspiring -- an organization of devoted people doing phenomenal work in education reform. They run schools grades K - 12, they run a graduate school of education to train new teachers and they run a program to help students get a college degree.  The organization’s was started by Mike Goldstein (no relation) and is now run by CEO is Stig Leschly.  Stig sold a company to Amazon back in the dotcom era and could now do anything in life -- be a professor, a lawyer, a CEO, a politician -- but he chooses to run Match.  We are lucky to have someone with his talents.

Keith Cline is the founder of VentureFizz. Follow him on Twitter: @kcline6.