The Brenner Group Celebrates 25 Years

February 2, 2012 at 11:37 am 3 comments

As I reflect back on the past 25 years, the company and I have seen many changes in Silicon Valley. The types of industries that venture firms invest in has changed dramatically, and there have been a number of business cycles – both up and down. When we started the business, the heavy investment capital was going into mass storage systems for large mainframe computers: developing lower cost per megabyte was a major driver for innovation and investment capital. A number of these became early clients from the VC’s we represented, as the VC’s were beginning to realize that they had probably over-invested in the sector, and there were many companies which needed to be closed down without further investment dollars. So, these types of companies were some of our first clients.

Experience matters

In 1987, we were in a period when many of the younger investors had great educational credentials and could analyze how much to invest in a specific sector, but they lacked enough operational experience to understand what to do when the business was not succeeding. Many of the venture partnership funds were coming to the end of the lives of specific partnerships, and decisions on disposition needed to be made. If this sounds familiar, the same thing happened after the dot.com bubble broke, and again after 2008. Liquidity has become a big challenge even for successful companies, and thus many funds are again faced with critical decisions on how to gracefully exit companies that in good times could have had successful exits.

A memorable client

I remember one of our first clients, which was a little fair afield of technology businesses. We were called in to help a national RV dealership that had started the IPO process, only to find out they were almost out of business when the 1987 recession became a reality. They filed bankruptcy, and that is when we were called in by the debtor’s counsel. No one had been able to determine what the debtor’s financial status really was, as it appeared to be a moving target.

After analysis, we determined that the founder and his son had actually embezzled funds from the company. When I informed them they should not come back to the office, the son came back with an assault rifle to “take care of the guy who had fired him.” The federal Judge later said, “Mr. Brenner, I am not paying you enough for hazardous duty. Are you sure you can continue?” We did continue, and tried to find all of the money they had taken, which was in offshore bank accounts. This is clearly one of the most interesting memories over the past 25 years.

A difficult founder

Another interesting client was in the mid 1990’s, when we received a call on a Sunday from a large VC investor regarding a software company that the board thought was preparing for an IPO. The board had wanted to change CEO’s, but had to deal with a difficult founder. They had waited until the company needed a bridge loan to get to the IPO before telling the founder that the only way they would put more money in was for him to step aside as CEO, and serve as Chairman. We were asked to step in as interim CEO.

Once we got in, we found that the founder would try to undermine anything we tried to do, and that the company was far from any successful exit. The company had stuffed its customer pipeline full of product to the point that the distribution network had stopped paying for any inventory until it had sold through to their retail outlets. The average days sales outstanding in their accounts receivable was close to 200 days, and this was the reason they had run out of cash. When speaking with the customers in the channel, we found out the products just weren’t selling through to end customers. In the end, what was supposed to be an interim CEO position while the board looked for a CEO to take the company public, became an interim CEO position to salvage what we could, and sell the pieces of the business to interested buyers.

The last part of this story which is interesting is that the founder was needed when speaking with potential buyers of the software to explain the code, and the roadmap for the future. On the way to a major meeting with Microsoft, he informed the investment banker and me that no one would buy this piece of software because it was poorly written, and obsolete. But, he added, he could put a syndicate together to take it off our hands. At the end, one of the products was sold to a successful company for a reasonable amount, but the piece the founder wanted was sold to him for a very low sum, as he was never able to help us sell the technology.

A gratifying success story

I recall being called in to help a fabless semiconductor company. The company had been trying to develop too many different products, and had used about half of their available cash. The board decided that the company should focus on just one product, and one product only. We were asked to oversee the general operations and spending for the company. We immediately reduced their headcount by 80%, and brought their burn rate down from over $1 million per month to just over $150K per month. Then whenever someone wanted to spend money, we were the final say on whether it was necessary to complete the first product.

The first product was publically announced about 9 months after we started, and began shipping about 3 months later. Because of the low cash burn rate, the company was profitable within 4 months of shipping the first parts, and went public on NASDAQ 12 months later. When our assignment ended, the board passed a resolution stating The Brenner Group had single-handedly saved the company, and gave us a very nice bonus of shares in the public company. Clearly, this was a shining moment for our firm in our history.

Rich Brenner is Founder and CEO of The Brenner Group, one of Silicon Valley’s premier professional services firms. Rich is a veteran executive, entrepreneur, investor, board member, and philanthropist.


Read more about Silicon Valley news, trends, and commentary in The Brenner Banner

Original post permalink:
https://banner.thebrennergroup.com/2012/02/02/celebrating-25-years/

Entry filed under: Financial Advisory, Interim Management, Restructurings, Shareholder Services, Valuations.

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3 Comments Add your own

  • 1. Doug Yarrow  |  February 3, 2012 at 11:02 am

    Congratulations Rich on 25 years of success. Great war stories.

  • 2. Peter Geltman  |  May 10, 2012 at 8:04 pm

    Sounds like you enjoy what you do from all angles. Congratulations
    Rich.

  • 3. SIPPS investments  |  June 22, 2013 at 3:12 pm

    Incredible! I’m really enjoying the design of your blog. Are you using a customized template or is this readily available to all users? If you do not want to say the name of it out in the general public, please be sure to e-mail me. I’d absolutely love to get my hands on this
    theme! Appreciate it.

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