There is wisdom gained in building a billion dollar business that can’t be acquired in any other way. Once someone reaches the finish line on such a journey, the natural question is what to do with this wisdom. There are really only two options. The first is to get back in the game with a new venture and attempt to draw on your prior experience to drive a bigger and more successful outcome. The second is to take a step back and coach other entrepreneurs as they try to chart their own course.
Former oDesk CEO Gary Swart is choosing the latter path, and today announced that he will join Polaris Partners as a West Coast Venture Partner. It’s a largely unsurprising next step after oDesk agreed to merge with its chief competitor Elance and Swart’s counterpart, Elance CEO Fabio Rosati, assumed the senior-most position in the combined entity.
“I started even before the merger by talking to my old friend (and Polaris managing partner) Dave Barrett about what I would do next,” Swart tells me in an interview. “He asked if I would ever consider venture. I had to ask myself what I’m good at and where I thought I could be successful. I’ve been angel investing and advising for a number of years and I’ve really enjoyed it. I feel like I’ve learned a lot in my career and I have a lot of value to add.”
But once Swart warmed up to the idea of switching sides of the table (to borrow Mark Suster’s turn of phrase), it wasn’t a sure bet that Polaris would be his final destination.
“Once Dave kicked that door open, I walked through it and decided to look around,” Swart says. “I met with more than a dozen other firms over a five month period. After plenty of discussions about each firm’s investment thesis and what each role would look like, ultimately, I decided that Polaris was the best opportunity and the best fit. It would certainly be more comfortable being at a big name firm with a West Coast bias, but the growth and impact wouldn’t be as big.”
As Swart points out, Waltham, Mass.-based Polaris is heavily weighted toward the East Coast. While some 20 percent of its technology deals are based in California, none of its investment partners (save for life sciences partner Brian Chee) have called the West Coast home.
“It means partners have been spending a lot of time on planes,” Swart says. “Being based in San Francisco, I can be much more accessible and hopefully have a more immediate impact on our existing and future portfolio companies. Therein lies the growth opportunity. I don’t officially start until September, but founders have already started calling me to ask to for guidance. It’s great because I’m the kind of guy who doesn’t know how to not work.”
Polaris is currently investing out of its $375 million sixth fund – this after a $1 billion fifth fund proved too large for its liking. The 18-year-old firm has a total of $3.5 billion in capital under management. Polaris has had successful investments in Akamai, Allaire, Automattic, LogMeIn, PowerSoft, QuantCast, and SolidWorks among others. It’s current portfolio includes standouts Art.com, Egnyte, JustFab, InsideSales.com, Ironwood Pharmaceuticals, Quantcast, Trulia, and Xactly.
Given his experience at oDesk, Swart’s investment focus will naturally include a heavy focus on marketplace-based businesses, he says. He aims to bring to bear tactical (and just as important, recent) experience solving classic problems like “chicken and egg,” liquidity, fraud mitigation, international expansion, and so forth when evaluating and subsequently advising prospective and existing portfolio companies.
“Polaris is a team of former operators like myself that is really committed to walking the walk,” Swart says
Beyond the marketplaces category, Swart expresses an eagerness to work with companies where he can leverage his experiences around sales and go-to-market strategy. In addition to oDesk, he was previously a sales executive with Intellibank, IBM, Rational Software, and Pure Software (later Pure Atria), meaning he has nearly two decades of technology operations experience to share.
“Interestingly, SaaS with a go-to-market focus was already a Polaris thesis before I was ever involved,” Swart says. “Insidesales.com is a perfect example of such a business. I think there is a lot of opportunity in this space.”
In terms of stage and scale, Swart will look to get involved with companies in their early stages, meaning Series A and occasionally Seed.
“I took oDesk from the jungle, onto the dirt road, and merged it onto the highway – so I’ve seen it all,” Swart says. “I like to think I would have been a good superhighway guy, but I’m not as excited about it as I am the earlier stages. I think I can have the biggest impact in helping companies navigate the dirt road phase.”
Swart will look to leverage his valley relationships and his strong reputation as a capable operator to get Polaris into more premium West Coast deals.
“It’s not going to be easy. It’s going to be hard and very competitive,” he says. “But I think there’s an opportunity to differentiate based on people. Good companies and good entrepreneurs want to work with good people. Sometimes the hottest deals go to the firms with the biggest brands, but I’m not sure I want to work with founders who that choose investors based on what it says on their business card.”
One thing that may make Swart’s job easier, at least in terms of deal sourcing, is that Polaris has a reputation for backing repeat entrepreneurs. Across its history, more than 50 of its investments have been into companies whose founders the firm had previously backed.
“The quality of the team is really important to me. It’s critical to make sure to get the right people involved,” Swart says. “Writing checks is the easy part. Being passionate about an opportunity and working with great people to help build something meaningful, that’s a lot harder.”
Speaking of his longtime friend, Barrett said in a firm statement today:
[Gary] understands transformative models and disruptive technologies, how to identify them, how to innovate around them, and how to manage and scale them. Having known Gary for 20 years, I can say with certainty that he will make a huge contribution to our portfolio companies, in building relationships with special entrepreneurs new to Polaris, and to our partnership team.
Swart has some experience, albeit informal, with investing and advising startups beyond his own. He’s written angel checks into more than a dozen deals over the last five years and advised many more. While hesitant to name names, he did reveal that he was an early advisor to AirBnB, covering topics like payments, complaints, international expansion, and even recruiting the company’s first CFO. It will be these kinds of insights that he’ll look to deliver to Polaris companies going forward. In a similar vein, he’s been a regular lecturer over the years at Stanford, Cal, Santa Clara, and Harvard.
“The feedback has always been positive. I feel like I have a good teaching or coaching style,” he says.
The transition from star player to coach isn’t an easy one, and has proven difficult for just as many would-be investors as it’s has natural. It’s often harder than it looks from the outside to let go of the reins, and similarly to translate years of accumulated knowledge and instinct to someone who’s never had those experiences first hand. Swart will have to prove to Polaris, prospective portfolio entrepreneurs, and most importantly himself that he’s capable of driving the same level of results as an investor as he is an operator.
Polaris may have two decades of pedigree, but in Silicon Valley, the firm’s brand is still in that same dirt road phase that Swart’s describes as his ideal deals. The question is, whether he can help navigate a venture firm onto the ROI superhighway the same way he did oDesk.
[Image via Fromthelittlethings]
- Polaris PartnersTech and Life Science Venture Capital
Since 1996, Polaris has been guided by the fundamental beliefs that people come first and true partnerships make all the difference.
Rooted in mutual respect and a shared passion for innovation, our relationships with outstanding visionaries principally in technology and healthcare have helped to change the world for the better.