Magazine / Cover Story

Being successful in business is about breaking the rules. Whether the rules are formal and documented or only just implied. Every successful business venture has in one way or another crumpled the traditional rules governing the business world or society, and tossed them away.

Take, for example, the case of Lucent Venture Partners, a wholly owned subsidiary of Lucent Technologies founded in 1998 to form venture capital partnerships with emerging technology trends.
No rules broken yet, right? Okay, here goes. Of the five partners in the company, three are from very diverse parts of the world.

Arie Litman, originally from Israel, came to the United States 22 years ago to pursue his career. Hassan Parsa, originally from Iran, came to the United States to go to high school and eventually attended college and graduate school in the United States. And Neil Vasant came to the United States from India almost 30 years ago to go to graduate school. In today’s world, it is rare to see a combination like this working so well, which is where the first set of rules are broken. While it is rare to see a combination like this, what is impressive is the ability of this team to excel –– proving the combination is one that works.

What is the combination working to achieve? The founders started the company because Lucent as a company recognized that "innovation is not exclusive to Lucent," according to Parsa. Lucent wanted to invest in technologies that it would eventually have a strategic interest in pursuing, either through acquisition, partnership, or collaboration. Lucent wanted to have access to new trends and technologies that would prove valuable or useful in the future. Lucent Venture Partners was a way to achieve this objective.

Broken Rule One: Part of a Big Company But Without the Bureaucracy
The team of founders seemed to be a natural fit for the new company. Each has a unique set of skills and experiences useful for a collaborative working environment. While all the partners have a degree of general technical expertise, each has his or her specialty. With Litman, it is wireless, voice over IP, and unified messaging. Vasant’s specialty is semiconductors; Maureen Lawrence’s is operations and software; John Hanley’s specialty is strategy and consumer products, and Parsa’s area of expertise is optical systems and components.
The original three founders of Lucent Venture Partners (Parsa, Litman, and Vasant) spent many years with the company originally known as AT&T Bell Labs, a.k.a. Lucent Technologies.

Parsa was working in the mergers and acquisitions (M&A) division of the company on minority investments (small investments like Juniper Networks!) and was in the best position to realize that, to have access to the most leading edge technology developments, the company needed a separate subsidiary that would operate just as a venture capitalist (VC) would.

One can easily imagine that handling M&A for a company the size of Lucent with the bureaucracy inherent in a big company would be no simple task.

Parsa, himself, says that one of the things he wanted to avoid in founding a company was incessant bureaucracy, and his partners echo this sentiment.

On the other hand, one very important aspect of being a VC is having the ability to raise money for investments into new companies. With the brand equity of a big company name like Lucent, Lucent Venture Partners has the best of both worlds: brand recognition of the Lucent name along with the autonomy and lack of bureaucracy of a small company.

Broken Rule Two: Thrive in a Lack of Structure
The business world is continually changing, and so, in turn, are the traditional modes of doing business. Even so, decisions must be made every day that can have a major impact on the success of a business.
It is with this in mind that Parsa states, "Making decisions quickly, although informed, without an inflexible chain of command, works." Parsa believes that to be successful today a company must be able to thrive without the barriers of rigid structures. Further, it must make decisions in the presence of ambiguity.

One such decision the partners made during the past four years was to take a conservative approach in choosing the companies in which it would invest.

The partners had a great deal of ambiguity present when making this decision. At times they even doubted if they had made the right decision. In fact, Vasant says, "There were times when we thought, why didn’t we invest in this company or that company? We could have made so much more money?"

In the long run, however, the team has realized that taking the cautious approach was the right decision. Lucent Venture Partners has funded more than 55 companies in the last four years, and the company enjoyed three multi-billion dollar exits in the past year.

Broken Rule Three: Not being an expert is okay
Both Parsa and Vasant readily admit that neither of them has the full expertise in any one subject. In fact, Parsa considers this one of his strengths, and with his job, it is easy to see why. In a world where people who have deep technical knowledge about specific areas are revered, it is refreshing to see a different point of view, Vasant says, the team is the critical element of a successful company –– having the right combination of skills and talents is key.

As long as the people in charge can "connect the dots" to see what needs to happen and can recognize people who have the right skills to implement, the team will work. The person in charge, in this view, should not be limited to deep technical knowledge in one area, but should have a little knowledge about many things.

In fact, Vasant says, this is one area in which Lucent Venture Partners finds its biggest challenge. He says it is not difficult to find people with amazing levels of creativity and technical expertise. What is hard to find is people who have that technical expertise who can also take a product to market, or make a product out of the technology.
Vasant says that one dead giveaway of a potential challenge when working with founders of a company who have deep technical knowledge and little understanding about how to run a business is when a founder says to him, "We don’’t need a CEO right now; we’re okay for the time being."
Parsa and Vasant agree that to be successful, a company must have a strong leader who can identify needed skills in building a team and who has experience or knowledge to take a new technology through production and get it to market.

The Company’s Companies
Each partner has one or two companies that he or she regards as a special achievement, for one reason or another. Asked which projects were favorites, Parsa, Vasant, and Litman responded differently for different reasons.

Summing It All Up
One way to measure success beyond the broken-rule philosophy is the basic, ordinary method: setting objectives and measuring whether the objectives have been met. With this in mind, it is not difficult to see why Parsa feels the company is successful –– the partners agreed on basic objectives, and together they have achieved those objectives. According to Parsa, the opportunities are still out there, and he continues to see amazing new technologies every week. With the new challenges facing the company, the partners will have to be

even more willing to break the rules than they have been in the past.
Since this article was written, Lucent Venture Partners has decided to discontinue investment in new companies. They will however continue to work with current investments and participate in follow on rounds as appropriate. The partners Ari Litman, Hassan Parsa and Neil Vasant are now on to their next opportunity in venture capital as a team capitalizing on their operational backgrounds and investing track record.

How the Partners Work...
The Partners reviews thousands of business plans each year. The partners split these among each other and generally readthe executive summaries first to determine if further reading or a meeting is warranted.

To obtain funding, a company must meet four well-defined criteria:

Although each of the partners is involved in all projects, there is usually one partner that takes the lead in each investment.

Most of the Lucent Venture Partners investments are either in the first (Series A) or the second (Series B) round of funding.

One or more of the partners will usually act as a board member or at least as an active observer in the companies in which it invests.

The partners split their time between board meetings, meetings to hear company pitches, and dealing with various crises facing the companies. The biggest crisis today is typically raising money.

Each of the partners spends a significant amount of time learning about technologies and keeping up with what is happening in the market. One of Parsa’’s favorite aspects of his job is learning about new technologies from the technical experts he meets every day. He says, "I am in class every week. This is the best education in the world."