Bessemer Venture Partners

In the spring of 2001, with the telecom market melting down, wireless-broadband startup Flarion was out raising cash. And having a pretty tough time of it.

“We were on thin ice,” recalls former Flarion CEO Ray Dolan. “We were down to two payrolls or three.” To make matters worse, one of the company’s major strategic investors was balking at ponying up more money for the untested venture.

But two of Flarion’s other investors, Bessemer Venture Partners and Charles River Ventures, stood by the company, providing it with credibility as Flarion battled much larger, deep-pocketed players, according to Dolan. Despite the tough environment, Flarion was able to close its funding round—and convince the strategic investor, a big Silicon Valley tech company, to participate, too.

Bessemer and Charles River “could easily have blinked, and I would have been playing a weak hand,” Dolan says. “Cisco wouldn’t have closed.” Instead, Flarion raised the money, and it proved a turning point for the company. Flarion was able to invest in its business and immediately hired a new vice-president of engineering and a head of sales—key positions that helped Flarion move forward with its business and product plans. In early 2006, Flarion was acquired by Qualcomm for $805 million.

Bessemer Partner Bob Goodman, who originally invested in Flarion as a spinout of Bell Labs and recruited Dolan to the company, says he stuck with Flarion because it was making a real “breakthrough technology.” The company was risky, he says, but worth taking a chance on.

“I had looked at a gazillion proprietary wireless standards and turned them all down,” Goodman says. Flarion was different: “I knew I was ready to make this particular bet.” Goodman had the confidence to back Dolan and his team because he had studied the wireless-broadband market exhaustively as part of a Bessemer investing “roadmap”, the firm’s rigorous process for identifying promising industry sectors and companies.

Once he invested, Goodman helped Dolan negotiate complex deals with carries like Nextel and T-Mobile. Goodman had that expertise because he previously had been CEO of two wireless companies himself.

Rajiv Laroia, Flarion’s founder, says he had heard negative stories before starting Flarion about how some venture capitalists operate, but was pleasantly surprised by his dealings with Goodman and Charles River’s Bruce Sachs. They asked tough questions but didn’t interfere too heavily in the company’s day-to-day affairs.

Both those investors also were “the only two guys who actually came out to Bell Labs to see me” as part of their due-diligence process, Laroia notes. There, Goodman and Sachs got a first-hand look at Laroia’s initial work building a brand-new wireless standard specifically designed for Internet protocols, which Laroia felt was a better alternative than the 3G standard being developed by wireless-phone companies for cellphones.

“Lucent apparently didn’t want it. They didn’t think it was very valuable,” Laroia recalls of his technology. But Goodman and Sachs did. Working with the two VCs “was just an eye-opening experience,” and a very positive one, Laroia says.