Every VC wants his or her portfolio company to be the next Virsa.
While the VCs motives may be self-serving -- insiders tell me the deal was a very sweet one for both buyer and seller -- the impact of all this newfound love definitely promises to be broad indeed. Once SAP can motivate the VCs to turn their investment dollars towards SAP's ecosystem, the momentum behind SAP's transformation from applications vendor to applications-plus-infrastructure player moves from slideware to reality. At that point, SAP's investments in NetWeaver and its aggressive competitive posture against Oracle start to make tremendous sense, as well as a lot of money.
The transformation has been remarkably quick.
Last year at this time, SAP hosted a series of meetings between its board members and the VC community. At one of these confabs, a VC stood up to praise SAP's efforts to seed the market with NetWeaver, but then asked how good this could be if there was no ''billion-dollar'' exit for his companies. The bottom line, this VC was saying, was that SAP's plans didn't make sense for the VC community, and there wasn't enough payback in NetWeaver for the VCs to pay it much heed.
Fast forward a mere 12 months to a dinner SAP held right after announcing the Virsa acquisition, and there was every VC in the Valley schmoozing their hearts out with the SAP brass. Everyone in the room was wondering who the Cinderella of the ball would be... whose glass slipper would be picked up at the end of the evening by the handsome prince. It was part pep rally, part debutante ball, and very much an exhibition of SAP's newfound status in the software industry.
All this is no small feat for a once German software company whose roots in Silicon Valley culture are only a few years old. To their collective credit, SAP has worked diligently to make this transformation a reality. And it didn't hurt that two external market factors have played right into SAP's eager hands.
The first is that SAP has moved in the last year to an increasingly important position in the industry. While Oracle has been consumed by its acquisitions and has continued to lose market position, SAP's has grown. If there's one thing that unites Silicon Valley, it's a collective love for being in the winner's circle. And SAP looks, and acts, very much like a winner these days.
The other reason for all the VC love is the IPO market, or lack thereof, and a throttling back of expectations by investors. Getting good money out of start-ups has been hard in recent years, to say the least, and other than Salesforce.com, going the IPO route isn't really on the table. Also gone, in one short year I will add, is the notion that a ''billion dollar exit'' is the only exit that matters. I think it's safe to say that the Virsa acquisition was not in the billion-dollar category, and, it's abundantly clear that no one really minded too much at all.
So what's next for SAP and the Valley?
Keep your eye on Zia Yusuf, the new point man at SAP whose job is to build on the ecosystem momentum and keep the SAP NetWeaver flag flying. Yusuf, a long-term SAP insider, is in the unenviable position of being a former internal consultant to SAP's board who now has to actually execute a strategy he helped create. As a fellow consultant, I feel his pain.
But as a deal maker whose job will be to speed up the creation of a broad community of partnerships, Yusuf's Prince Charming act promises to be one of the most enviable jobs in the industry. The Virsa deal is literally on every start-up CEO's lips these days, and the number of companies that want to partner with SAP -- and hopefully have Prince Charming offer them that glass slipper -- has just gone through the roof.
Your move, Oracle.