MD entrepreneur does a 180, switching from start-up to VC fund

Daily Record, The (Baltimore), Mar 15, 2003 by Ezra Fieser

He is clearly excited, albeit a controlled, sedated excitement, but it is easy to see. The reason -- a breakthrough that makes life a little easier for a couple of covert military agencies.

That breakthrough, actually a gadget, is in the process of transferring from the government into the private sector. Steve Walker is excited because the mechanics of the gadget enchant him.

"What these guys have done is totally fascinating," Walker said.

The discussion on the device's tech transfer, which he vaguely refers to as a black box, is one hat of many he wears. The tech transfer hat is in conjunction with the Maryland Technology Development Corp., where he sits on the board of directors.

Walker has been involved in Maryland's technology community since his days as a computer scientist at the National Security Agency in the 1970s. Since then he has found and sold a multimillion dollar business, participated in the historical tech boom then bust of the late 1990s and started a venture capital firm.

Most of his time is spent now at Walker Ventures in Glenwood, a venture fund that focuses on investment in early stage companies with a high tech concentration.

In February, the fund received $4 million from the West Virginia Economic Development Authority. The Small Business Administration forked over another $8 million. In total the fund is at about $120 million, said Walker.

Phillip Singerman, executive director of Maryland's Technology Development Corp., called Walker not just a player in Maryland's tech scene, but a leader.

"I wish we had more people like him. Instead of retiring to Florida after being a CEO he started a venture fund. More people need to follow his example," said Singerman.

Speaking from experience

As of late, Walker said managing the fund has been very challenging with the downturn in the industry. Still, he said it fares much like the role of CEO, which he was from 1984 to 1998, where he ran Trusted Information Systems.

"The transition from running a company to running your own venture capital fund is like the move from being a parent to being a grandparent. I have a lot of grandchildren and I nurture and spoil them but eventually they go home," said Walker.

"Often times they are desperately seeking advice. And that's one of the things that differentiate us from other funds. Because we have been there and done that it's a lot easier to give advice."

One of the first businesses Walker invested in was a firm that was similar to his former company. BioNetrix, which produces Internet security and authentication management software, was started in 1998, and from day one Walker was involved.

"He was the first major angel investor, yeah there were lots of mom-and-pop and for that matter brother-and-sister investors, but he was the first major investor," said Karl Ware, BioNetrix executive vice president and founder. "In every round of investment he has played a role. Steve has had faith in the company when others were wondering."

BioNetrix is still funded by Walker Ventures as well as Columbia Capital and the Carlyle Group. Ware said he expects the firm to reach profitability within the year.

Walker has played a significant role in the company, courting customers as well as helping with the direction of the firm. He admits the versatility he displays comes directly from being CEO of his own company.

Trusted Information Systems was a vanguard company that created security software for IT networks. The company found a niche with Internet firewalls and took off when the Internet just began to catch on. Walker said a crucial decision to give a simple version of the firewall away for free was what really propelled the company forward.

Businesses took well to the software and began to order it anyway they could. At that time TIS did not have a sales force and all employees had to take orders, some were even sent via fax, he said.

Going to the other side

When he sold the firm to California-based Network Associates, the deal was reported to be for about $350 million. After the deal, he decided that he did not want to start another company; rather it would be a good idea to start a VC fund. When he started the fund it was during a very crazy time.

"You really had to work hard to find something that was of good quality," he said. " I mean literally you would hear about a venture and days later it was gone. It reminded me of a time in 17th century Holland where there was a craze for tulips. The tech boom was almost the same thing and then finally it was as if people said, 'this is dumb' and Frump!!! The market tanked."

He said his fund was able to survive, where many others have floundered, because of his familiarity with technology. Now, the climate has changed, with an abundance of small startups searching for cash but VCs have significantly slowed the rate they carry out business. The VCs have slowed, said Walker, because of losses during the boom as well as difficulties raising capital for the fund.

"There is still money out there and I have to admit it is tough to find an investor. And it probably will be like this the entire year, but one piece of advice I would give is to encourage people to find someone who specializes in the particular field and bring their ideas to them," he said.