PlaceWare positioning key to Microsoft deal

In the startup mergers-and-acquisitions market, sometimes a fierce independent streak is the easiest way to attract a mate.

When Redmond Wash.-based Microsoft Corp. wrapped its $200 million cash buyout of PlaceWare Inc. of Mountain View last week, company management and board of directors say they worked for years to be a stand-alone company; a position that ultimately attracted the world’s largest software maker.

Microsoft says it plans to use PlaceWare as its entry into the Web conference market and many analysts predict PlaceWare technology will be incorporated into Microsoft’s Office suite of business software.

“The Microsoft stuff happened pretty fast within the last six months,” says Rory O’Driscoll, PlaceWare board member and managing director of BA Venture Partners in Foster City. “But it’s the positioning — not so much positioning PlaceWare to exit, but positioning the company so it was running well enough so we had options. That’s the most important part.”

Part of that positioning involved replacing key staff, including CEO B.J. Folsom who departed a year ago. He was replaced by George Garrick, who barely had time to get his feet wet at PlaceWare before Microsoft started courting the company.

“B.J. Folsom came into PlaceWare relatively early, was a super guy and did a great job of identifying the business model and got the thing out on the right track,” BA’s O’Driscoll says. “But when we started scaling into a larger company, it made sense to bring in someone who had that experience who probably wouldn’t have been a good startup guy,” he says.

Folsom agrees that PlaceWare grew beyond his skills and main management interest. Although he still is on PlaceWare’s board of directors, he left the company and joined San Francisco-based Internet media startup Laszlo Systems Inc. in December.

“I’m a serial entrepreneur. I like to be involved in companies that are developing a new category or a new segment that ultimately will become ubiquitous,” Folsom says.

“You can put your mark on the creation. You not only helped make it happen — you influenced it,” he says.

Folsom has a long track record of innovation. He was involved with the first desktop PCs in the 1980s, launching the Rainbow personal computer. Before joining PlaceWare in 1998, Folsom also helped develop Sun Microsystems Inc.’s networking strategy and helped move Exodus Communications Inc. (now owned by Cable & Wireless plc) to focus on the Internet data center market.

One of Folsom’s hardest challenges when he started at PlaceWare in 1998 was helping the company, … which was split between two focal points: Web conference software tools and a conference product, to focus on its business model.

“I put a process in place saying a startup had to focus on one or the other, but could not have two agendas,” Folsom says.

In 1999 Folsom convinced PlaceWare’s founders that software services was a viable market for the company.

That focus helped PlaceWare to become the No. 2 Web conferencing firm next to WebEx Communications Inc. of San Jose.

“So what did we have to do to attract Microsoft? What we didn’t have to do is spend all our time trying to get them to buy us,” BA’s O’Driscoll says.

“What we had to do is prove the category mattered. Microsoft decided to enter the space once it reached critical mass,” he says.

The journey to Microsoft ownership changed PlaceWare.

“In many ways, PlaceWare has changed dramatically over the years as you could expect for a company that started with half a dozen people,” Pavel Curtis, a PlaceWare founder-turned-Microsoft employee who is still with the company says.

“Last week I couldn’t spell Microsoft,” Curtis jokes. “Now I am one.”