Carl Everett comes across as a polite and unassuming guy, the kind who would barely cause a stir as he goes about his job.
But Everett has a tough, politically sensitive mission: He acts as ``Mr. Offshore'' for one of the valley's most established venture firms, Accel Partners. He's the guy who goes after Accel start-ups that are slow to move and tells them why and how they need to outsource work to other countries. And he's pretty busy these days.
Accel is leading a growing trend among venture capitalists to urgently -- and mostly quietly -- push their companies to tap into larger markets and cheaper labor abroad.
Lately, droves of venture capitalists have boarded planes for flash visits to China and India to test the waters for alliances, investment opportunities and potential employees. Silicon Valley Bank, for example -- which underwrites loans to local start-ups -- arranges such visits.
John Doerr, a leading venture capitalist at Kleiner Perkins Caufield & Byers, is also courting the Indian community. At a recent appearance before an Indian business group in Santa Clara, he said a good number of his firm's start-ups now have operations in India.
At Accel, though, the push is in overdrive.
``Rarely does a board meeting go by when we do not have some focus on being more aggressive about either offshore development in China or India,'' said Jim Breyer, a venture capitalist at Accel.
Most venture capitalists shy away from the ``offshore'' word, with local unemployment numbers still high. Not Accel. The firm takes the stance that venture capitalists are responsible for preparing their companies for global competition, and that includes offshoring. It's all part of a strategy to keep Accel's investments bringing in maximum returns.
A recent internal survey of 45 of Accel's portfolio companies showed that 38 percent had undertaken moves to hire abroad. By 2005, the plan is to knock that up to 75 percent.
Accel saw the advantages of offshoring years ago, when it backed companies like Agile Software and Actuate, both of which undercut rivals by hiring cheaper software programmers abroad. Breyer has a seat on the board of Wal-Mart Stores, the company now known for beating rivals on price in part by moving quickly to exploit lower costs abroad.
Pressing the issue
Accel has turned up the heat on start-ups. It prodded DataSweep, another start-up, to hire eight programmers in India and China. In March, it made a $10 million investment in Maven Networks -- but only after Maven's chief executive agreed with Breyer that he should open an office in China. And last week, Accel joined Intel and Matrix Partners to pump in another $10 million into JBoss, a Java application company that employs half of its 30 workers abroad.
The challenge for smaller venture-backed companies is that they are often blinded by day-to-day operations and lack the wherewithal to quickly hire and manage cheaper workers. That's where Everett comes in.
Hired in December, Everett is a New Mexican who lived close enough to Texas to have the drawl. His career has been shaped by global competition.
He's seen the personal toll of offshoring. He worked as a director at chip giant Intel in 1986, when then-President Andy Grove decided to move labor and factory processes to Israel to build the 386 chip -- at the same time Intel was downsizing.
``I was fearful for my job,'' he says.
Instead, Everett thrived.
As he explains it, each move by Intel abroad brought more business back home. The Israeli investment cut costs and helped spur a personal-computer revolution that created ``many more times'' of jobs back in Silicon Valley, he says. Intel benefited because it was the biggest supplier of chips for those PCs.
Everett rose up the ranks in Intel and found himself pushing for more offshoring. As head of worldwide sales in 1990, Everett visited customers in Taiwan and noticed they were offshoring to China. He went home and helped lobby for launching Intel's newest chip, the Pentium, with a marketing and sales team in China.
He's been involved in other aspects of global competition, providing the variety of experience Accel was looking for. At Intel, he helped to lead a political campaign against ``dumping'' by Japanese company Hitachi in the mid-1980s. Hitachi pegged its prices of so-called non-volatile memory technology to Intel's prices, only 10 percent cheaper. Later, at Dell, he ran worldwide development and marketing of Dell desktops.
Everett doesn't like naming the Accel companies he counsels, citing political sensitivities. But he pays start-ups a visit every so often to prod, armed with pages of elaborate profit-and-loss tables to prove his point that hiring abroad saves costs and boosts profit margins. Those profits, he notes, help companies hire at home and create more jobs in the long run.
Lessons learned
That's not to say hiring abroad comes risk-free -- something Accel has learned through experience. In 2001, one of its start-ups, recruitment-software company BrassRing, outsourced a version of its software to an Indian company. In part because of mismanagement, key testing was never done and the project was delayed, wiping out any cost savings and frustrating customers.
That's why Everett wants to make sure start-ups hold to his time-worn tenets for offshoring the right way. First, senior people need to manage the foreign operations, and should report directly to the chief executive officer. Second, the foreign engineering teams should work only on a mission-critical project. If they compete with a domestic project, they're bound to founder because of backbiting or neglect.
Finally, both local and foreign teams need to communicate with each other, including regular in-person visits from both sides.
Any move to hire abroad should be a long-term one. It should not be a short-term move for cost reasons alone, he says, because that doesn't take into account the high initial cost of making the investment.
