Chuck Rozwat's resignation announcement

This is reputed to be the text of the e-mail Chuck Rozwat sent out to the company yesterday (7/14) morning, announcing his departure from Oracle.

Subject: Time for a change
From: Charles Rozwat
To: crozwat_org_ww@oracle.com
CC: [CC list redacted]

It is time for a change. After 15 years at Oracle (following 17 years at Digital Equipment) in software development, I have decided it is time for me to step away from my current role and broaden my knowledge and skills in another dimension. As of August 1st, I will be leaving my current position and taking a 12 month leave of absence to study public policy at Harvard University. Thomas Kurian will be assuming responsibility for overall Product Development.

I will take the next twelve months to gain a perspective different from my years developing software as part of the high tech, private sector world. I have accepted admission to a 1 year Masters program in Public Administration, at the Kennedy School of Government, which I begin this September. This program, designed for established, international leaders from both the public and private sector, will allow me to study a number of the issues that face public/private enterprise at a time when almost every policy area is being reevaluated. I look forward to a year from now, to see how I can add value to Oracle with an additional set of skills and an enhanced perspective.

This has been a long-considered and difficult decision in many respects, but one thing is extremely clear. The future is brighter than ever for Oracle. We are at the beginning of a new product cycle, with major new products and versions in Database 11gR2, FMW 11gR1/2, Enterprise Manager, Exadata V2, our Collaboration and Integration products and all of our Applications, now including Fusion. With the pending acquisition of Sun, we add yet another dimension.

The Oracle leadership team is the strongest it has ever been. I extend my thanks to every member of the Executive Committee and their teams for their support of our product efforts. It is impossible for me to express my gratitude to Larry for what his overall product guidance has meant to the product development organization and also the life changing experience it has been for me to be allowed to be part of his team. I thank Charles and Safra, not only for the skills and success they have brought to their roles, but also the support and direction they have brought to our product efforts.

I thank you for your commitment to our mission and your excellence in building and integrating the greatest software products in the industry. I also thank you for your personal support. Since joining Oracle as the head of our first "major" acquisition, I have been amazed by the talent and dedication of our people. We are the best Software Development organization on the planet. We have delivered the most functional, industry-leading products across all major enterprise software categories. You can be proud that the world runs on the products we have built. The world runs on Oracle.

Chuck

Polachi VC Survey: Pulse on the Industry

Interesting results in a survey of over 100 venture capitalists, run by Polachi.

According to the survey:

• Worries:

69% worried/very worried about ability to hold syndicates together

56.1% worried/very worried with new deals, no one in hurry to act

83.3% worried/very worried "Portfolio-it is all about survivability"

92.7% worried/very worried about when exit markets will return

• Hot areas:
  

Cleantech/Energy: 62.8%

Consumer Internet/Web 2.0:44.2%

Internet Marketing: 40.3%

Med Tech: 22.5%

Infrastructure: 17.8%

Biotech: 16.3%

Enterprise Software 10.9%


• 
  
• 52.9% of respondents believe the VC industry is broken
• 60% of VCs not more confident about state of VC industry compared to 6 months ago

So, what's broken here?

1. For the moment, there is an exit problem, which brings with it a lot of other problems. But what is causing the exit problem? If the start-ups were working on things that had high barriers to entry, significant and sustainable competitive differentiation, and which efficiently solved important and valuable problems for some buyers, then the start-up would become profitable and have no trouble with exits (or with staying independent and running off cash-flow). In other words, too many companies are starting with the hope that they will find a business model eventually; some may find such a business model, but it is unlikely that they will be able to have a significant and sustainable competitive advantage without figuring it out at the outset.
   
2. Because there are few exits, there are few investors clamoring to put cash into the asset class. As the value of other asset classes has collapsed, investors have not shifted cash to the venture capital asset class, as there is no reason for them to believe that performance will be worth the risk. Venture has delivered a zero or net-negative return for most investors in this millennium.
3. Venture capitalists were very quick to pull the "extend your cash" ripcord (after Sequoia's "memo of doom" became public), but very few followed their own advice. Many VC firms tried to keep existing portfolio companies operating, rather than winding some down while there was still cash to recover, and in some cases extended or reserved more cash for existing firms that had little hope of a successful exit. With few firms able to raise new funds, and with all existing funds committed to portfolio companies, precious little capital has been available to new start-ups.
   
4. This would be the perfect time for a start-up to get going; there is little chance of twenty other start-ups entering the same field, many costs are very low right now (e.g. developers, rent), and the economy should be in better shape for revenues and exits in a year or so when the company has built a product or service offering. Unfortunately, there is little or no funding available from venture capitalists, and so the valuations and terms being offered tend to be very unattractive to entrepreneurs.
5. I don't believe many people think of VCs as "unfair" to entrepreneurs, but the traditional VC funding system is broken for entrepreneurs. Here's an example. Assume a group of entrepreneurs work hard together, using their own money or obtaining funding from angels or "friends and family," to produce some IP and a team that has value after one year of work. To continue the example, if they were to sell the company at that point, they may be able to get $5 million, of which perhaps $4 million would be the value of the IP, and $1 million would be the value of the team. The acquiring company would presumably have some earn out for the employees (in the amount of $1 million), but they'd immediately receive $4 million for their IP and begin to get paid a market rate for their work. Three years after starting the company, they might receive a total of $7 or $8 million after returning the money to their investors (with interest and some share of the proceeds) - plus, the team would be on the forefront of some very important initiative for a larger acquiring company. The traditional VC funding approach would offer the company $5 million in common stock for the same IP and team, and typically a below-market compensation package going forward. The chances are very low that the team would ever realize the $5 million in returns for the work they did prior to funding. Thus, the smart strategy for many technology entrepreneurs would be to avoid the traditional VC funding approach.
   
6. Anecdotally, I hear from many colleagues that they will stay with a larger company rather than starting a start-up at the moment because they don't see much potential upside in a traditionally funded approach. Others I know are moonlighting, starting a start-up with friends while all are still employed "full time" at a company, drawing a salary and benefits and working in free time. Still others I know are raising money from those few friends and family members, and setting their sites on building a profitable business that may probably remain private forever.
   

This topic has been worked over to death by many people smarter and with far more experience than I. Most of the analyses I've read focus on the problem from the VC point of view, and thus don't focus on the final three points from the entrepreneurs' points if view. I'd be interested to hear back from readers on their thoughts, things I've missed, or ways to improve the analysis.

Update on Oracle Applications leadership change

Here is the text of the e-mail sent out at Oracle by Chuck Rozwat announcing Ed's departure. This note confirms Ed's departure at the end of the month, and indicates that the "legacy" ("Applications Unlimited") team will report to Chuck after Ed's departure (although it has been widely rumored that the legacy apps will be reporting to Thomas Kurian).

Ed Abbo will be leaving Oracle as of June 30th. He has decided that his next career objectives can be best met outside of Oracle. Ed’s contributions and presence will be missed.

Some of you may not be aware of this, but Ed has had two separate “tours of duty”. He joined Oracle out of graduate school as part of the winter class of '86, and was part of the team that built Oracle's first internal customer support system. He also worked in Oracle Consulting when it was first established and later in the Sales organization as part of the Strategic accounts team.

He joined Siebel Systems in early 1994 where he held a number of positions leading to CTO and head of engineering, where he was at the time of the Siebel acquisition in late 2005. Ed led the effort to secure Oracle’s clear leadership in the CRM market through the Siebel Product Line and the fast growing CRM On Demand business. In 2007, he was asked to take on the additional responsibility to run the Applications Unlimited group. During this time, Ed has been the “face” of Oracle Applications to our customers, analysts and press, delivered on the Applications Unlimited commitment to continued product releases and innovation across Oracle's Application product lines, and established a strong organization and leadership team that will ensure our continued success.

Please join me in thanking Ed for his significant contributions to Oracle, and in wishing him good fortune in his future endeavors.

As of July 1, I will be directly managing the Applications Unlimited Group.

Chuck

Good luck to Ed (and Thomas, and Chuck, and all the team)!