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Ted Schlein -- investing in the future

  • April 8, 1998
  • By Amy Oringel
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Ted Schlein is a modern-day guardian angel. With the competition for market share in the Java community quickly reaching its boiling point, start-up companies are searching frantically for money, a winning business strategy and a killer management team. And many of them turn to Ted Schlein for help. As the partner at successful venture capital firm Kleiner Perkins in charge of the Java Fund, Schlein takes a precious few companies under the prestigious KP wing and then takes them, hopefully, to the top.

In the wake of the media clamor surrounding Java, not much attention has been paid to those who are advancing its usage to solve today's real business problems. Ted Schlein is leading this charge. With 15 companies in just a year and a half benefitting from investments and counsel from the Java Fund, and about a dozen more on the way, Schlein has left others to duke it out in courtrooms or engineering labs. He focuses instead on building companies which make Java work to earn its share of the spotlight.

The Fund supports enterprise software companies in four areas: applications, infrastructure, development tools and services. Though the mere existence of the Java Fund is a testament to Silicon Valley's commitment to the technology, Schlein is quick to point out that, "This is not about financing everyone using Java, it's about getting a return on our investment."

Java's timeline, as Schlein describes it, began in 1995 with its birth, 1996 brought the hype, 1997 was about tools and ubiquity and 1998 is going to be about solving business problems, the necessary foundation on which to build a company. With 10-12 proposals crossing his desk every week, Schlein has well-defined criteria for determining who makes the cut. He reviews the market and how the company's products address that market. But the most important element is the people, which he says make up 70% of the formula. The right people, Schlein claims, will be interested in deriving benefits from Java, not using it for its own sake. "Some companies want to rewrite existing applications in Java, but it doesn't always make sense, while others want to automate applications which haven't been automated before and that is good business. I'm very customer benefit-focused from an investment philosophy perspective," he adds.

The bulk of Schlein's time is spent on those companies already supported by the Java Fund, such as Extensity and Netiva. In fact he says, "Venture capitalist is a big misnomer, because capital is a very tiny part of it. We write the initial check and that's when the real work begins." To give his companies the "unfair competitive advantage" they need to succeed in the market, Schlein helps them develop business strategies, secure strong relationships in the industry and recruit the best talent to staff the company's executive team. He also engages in public speaking to keep the Java Fund name visible and reviews about ten proposals per week from hopeful companies looking to join the Java Fund family. He names his operations experience as the key to his ability to do his job well saying, "I am degree-less. I don't have an MBA or any engineering degrees. What I've done all along is understand the technology from a market perspective. You've got to know enough to talk to engineers, as well as have an appreciation for the technology and how it will be used."

Ted Schlein's business acumen had a head start. Forget flipping burgers, as an undergrad at the University of Pennsylvania, Schlein used his Mac to start his first business, a resume company, which took a bite out of Kinko's' hold on the market. Back in 1986, before it became fashionable for technology-oriented easterners to defect to the sunny West coast, Ted Schlein spent his summers off from the University of Pennsylvania working for start-ups in the Bay Area. When the second semester of his senior year rolled around, Schlein took his academic career off-campus and helped start Reality Technologies which produced PC simulation software based on Wharton's business school program. Schlein sold the distribution rights to gaming giant Electronic Arts and, with the help of an obliging economics professor, earned the final credits toward his degree.

Ted Schlein had nothing to do with Java before running the Java Fund. Not that he wasn't qualified -- after graduating from Penn in 1986, Schlein was snatched up by Symantec as a marketing manager, where again his Macintosh ended up being the vehicle for his success. As the only Symantec employee using a Mac, Schlein came up with the idea to make Norton Utilities for that system. The move was a success and Schlein was chosen to head up the utilities division. Schlein's next project, Symantec's Anti-Virus for the Mac (SAM), ignited the virus craze and he headed further up the corporate ranks.

In mid 1996, Java was beginning to take center stage and, naturally, Kleiner Perkins wanted in on the action. As an investor in Symantec, many of the KP partners including John Doerr had worked closely with Schlein for years. They came calling with the opportunity to run the Java Fund and, in October 1996, Schlein accepted. Though the offer to join one of the most successful venture firms on a project which promised to be the next big thing was sweet, Schlein does admit the move was a risky one, "No one knew if it was a good or bad idea, but we had a strong sense that Java would be one of the main enabling technologies of the Internet."

In looking into his Java crystal ball, Schlein sees the answers to questions about Java's future coming from the customers. "If customers decide they want to live in a Windows-centric world, that's how it will be and developers will follow their lead. If they decide they will have multiple server platforms, then they'll use Sun's version," he explains. Following this philosophy, he encourages his partners to foster good relationships with both Sun and Microsoft and stresses staying out of the religious wars. "At the end of the day we've got to build businesses and if that means working with Microsoft so be it," he adds. But it's unavoidable to acknowledge where most developers' loyalty lies. "Sun has a huge chance to win and developers can help drive their chances by supporting Activator and HotSpot and showing customers why running on multiple platforms solves problems; in other words, show the true beauty of Java."

With the demand for Internet developers in Silicon Valley and elsewhere at an unprecedented high, Schlein offers this advice to job seekers weighing different opportunities, "The first two things to look for are the management team and the management team. These are the people who will have the vision, figure out the business model and raise the money." But you won't find Schlein himself pounding the pavement any time soon. He says, "I think I'll be happy if I only have two jobs in my life."

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