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This article by Barbara Fox was prepared for the October 15, 2003 edition of U.S. 1 Newspaper. All rights reserved.

Like a Kid at Christmas, Mort Collins Is Back

It isn’t just the $150 million that lures venture

capitalist Mort Collins back from retirement and into the game. It’s

the adventure — the opportunity, after five years of enforced

leisure, to channel his formidable energy into starting companies.

Oh, he did still sit on some boards while he was retired, and he was

still poking around in this technology and that, but for all intents

and purposes he and his wife, Donna, were focused on such recreational

ventures as sailing from Tahiti to Fiji, tripping around the world

with senior staff from National Geographic, and flying to visit the

children and seven grandchildren.

Even in retirement, Collins did everything 200 percent. He has been

doing that ever since he was orphaned at the age of 12, worked his

way through the University of Delaware, earned an engineering PhD

at Princeton, started his first venture capital fund with DSV Partners

in 1968, and pioneered investments in several fields, doing more than

170 deals in all to help found such firms as the Liposome Company

(now Elan), PD-LD (in Pennington), Tandem Computers (now Compaq),

and Epitaxx (now JDS Uniphase).

At age 67 he’s back, picking up almost where he left off, supported

by the crew he has worked with before, but toting a fresh bag of money

and a treasure trove of technology from which to choose.

The money comes from the Battelle Memorial Institute, the not-for-profit

in charge of supervising the U.S. Department of Energy’s national

laboratories: Brookhaven (in Islip, New York), the National Renewable

Energy Laboratory (Golden, Colorado), Oak Ridge (Tennessee), Pacific

Northwest (Hanford site, Richland, Washington), and the headquarters

of Battelle in Columbus, Ohio. Four out of five of the funded companies

will be based on the laboratories’ technology. Collins will look first

for seed, start-up, and first-stage inventions in the areas of homeland

security, life sciences, information technology, materials, and energy.

The already-assembled fund, called Battelle Ventures LP, is expected

to have an overall 25 percent return and to attract $4 to $5 in outside

investment for every $1 it has now. This means the total amount available

over the 12-year lifespan of the fund could be $900 million. The fund

might invest up to $12 million in a single company over its lifetime.

And though 80 percent of the companies supported must be based on

technologies from the national laboratories, the remaining 20 percent

can come from anywhere, including New Jersey, so lots of applicants

will be knocking on the fund’s door, an 8,000 square-foot sublease

at the Carnegie Center. Collins has signed up the cohorts from the

seven-year-old Early Stage Enterprises venture capital firm (ESE)

for his new venture, and they have moved from Route 518 to the new

quarters.

"Building companies has been my interest, all of my career,"

says Collins. "I am where I am and this is what I like to do.

If I didn’t get paid for it — I would do what I like to do. That’s

how I got here."

Venture capital investment, which started in the United

States and only recently spread globally, has been credited with fueling

American innovation. A venture capitalist is a long-term professional

investor who helps entrepreneurial teams to manage a company’s growth

and focus on strategic partnerships. In contrast to angels, who invest

under $1 million in one company, venture capitalists assemble partners

and start a fund to invest more than $1 million in each company. VCs,

who have a fiduciary responsibility to their fund’s partners, used

to strive for a 25 percent return on their investment, but the target

is usually lower now. Venture capitalists in the U.S. invested nearly

$3 billion in 1990, and their annual investment ballooned to more

than $100 billion in 2000, dwindling to $21 billion in 2002, according

to statistics released by the National Venture Capital Association

(www.nvca). At the end of 2002 just over 700 companies were getting

VC investment, and the average deal was worth $7 million.

In his first-person chapter of the book "Done Deals: Venture Capitalists

Tell Their Stories" (edited by Udayan Gupta, Harvard Business

School Press, 2002) Collins tells about the more-than-monetary contributions

that venture capitalists make and suggests that companies like the

drug company Liposome would not exist without this guidance. "Somebody

had to get hold of that company, put it in a rational format, and

put the right people in charge. It was venture capitalists who did

that. I was one of them. The products of the Liposome Company are

now saving lives every single day all over the world, and the company

is worth $1 billion in the marketplace. We’ve done that time after

time in companies — that’s the value we add. It certainly has

made a difference in many, many young companies as far as I’m concerned.

I worry that this kind of added value isn’t there in the venture capital

community anymore."

Not a loner, Collins works best with a team, and he does not shy away

from working with the "establishment," either in the government

or private sector. His late-in-life association with Battelle fits

right in to a career that includes being a former chairman of the

National Venture Capital Association, serving on the New Jersey Commission

on Science and Technology in the early days of that commission, chairing

President Reagan’s task force on innovation and entrepreneurship,

and serving as technology policy advisor to President George H.W.

Bush.

"My ego is driven in some modest way by understanding how the

world works," says Collins. "In business, you have to make

decisions with maybe one half of the data, and I like that challenge."

Though his reputation looms large, Collins is affable, unpretentious,

and has plenty of war stories. He will try to tell you that his own

self assurance is his failing. "My strength is that when one of

my companies calls me up in the middle of the night and tells me some

horror story, my response is `How can I help.’ My weakness is, I am

probably not hard enough on them. I’m an optimist. I need to have

partners who are pessimists."

Maybe someday down the road Collins will fund a company that can prove

optimism is determined by a gene, because if so, he must surely possess

that gene. His parents, both German-born, met each other in Atlantic

City, and his mother died when he was just two years old, so he was

raised in Pleasantville by his mother’s twin sister, with his father

visiting on weekends. When his father wasn’t working as a billing

clerk he was out fishing on the bay to bring in extra income. But

his father died as a result of a boating accident, and shortly after

that his aunt died. At the age of 12, Collins was a ward of the state,

living on his father’s social security with three other orphan boys

in a boarding house.

A grammar school principal took a long-term interest in this bright

young fellow who had an avid interest in biology and was always out

collecting butterflies, that is when he wasn’t going fishing to make

money, or caddying, or working in a flower shop. Grateful for that

encouragement, Collins makes it a point to offer his formal and informal

services as a mentor. "I try to do everything I can for young

people to make a difference, it certainly made a difference in my

life," he says. He established programs for high school and college

students to work as interns in businesses. "I talk to a lot of

those students about where they are going and what they think will

happen." On another level he mentors personnel in his portfolio

companies who are impatient with their career achievements.

The grammar school principal, an alumnus of the University of Delaware,

drove Collins to interview for admission there, and the university

gave him work/study jobs and floated him some loans. The summer after

his freshman year Collins organized his fraternity brothers into a

fishing/crabbing fleet and made enough money to pay off that year’s

debts and get a head start on next year. The next summer’s job, doing

quality control in a refinery, gave him a head start as a chemical

engineer.

"Had I not been of significantly low economic circumstance, and

had I not loved math as I do, I would be a surgeon or a pilot,"

says Collins, "because I would have the confidence to take people’s

lives in my hands and the ability to make quick decisions and do the

right thing instinctively. I had this enormous love of biology. I

was always out in the field with my homemade butterfly net." (He

says he finally "scratched the itch" of biology when he did

his first biotech deal, the Liposome Company, in 1981.)

Graduating in 1958 and heavily recruited for graduate school, he chose

Princeton University for his engineering PhD. Later he gave lots of

money to both colleges, admitting that his real "fiscal loyalty"

is to the University of Delaware, but noting his contributions to

Princeton’s engineering school. "I would not have had the opportunity

to do what I did at DSV if I had not been at Princeton. Because I

went to Princeton, I was able to raise money from the Rockefellers,

the Rothschilds, and the Warburgs. If I had not had the imprimatur

of the PhD from Princeton, it would never have happened."

Bob Johnston, himself no slouch at starting and growing companies,

disagrees with Collins’ self-assessment. "Mort got where he is

because he has all the characteristics you would like to see in an

entrepreneur. I’m not even sure he needed the PhD. He is very smart,

he had the tenacity, and he got there early, but other people who

got there early have not survived."

Collins fell in love with computers at Princeton and pioneered in

the area of using mathematical models to simulate refining processes

and analyze their return on investment. After earning his degree in

1963, he was frustrated by how the university balked at partnering

with industry. He did some consulting for Esso and American Cyanamid,

worked on weapons systems at Livermore National Laboratory, calculated

statistics for opinion polls, and built a company (Scientific Research

at Princeton), and sold it at a profit.

With that money he took flying lessons and gathered a group of pilots

to buy shares of his first plane, a Piper Cherokee. In 37 years he

has owned 12 planes, some in partnerships, and now he has three. At

Princeton Airport he keeps his cherry-red Waco biplane with an open

cockpit and a 1930s design, a collector’s item, equipped with all

the latest electronics. He says he bought it to do aerobatics but

uses it just as a "fun" plane now. At Mercer Airport he keeps

a Beech Bonanza for small groups and short trips, and in November

he and a partner will take delivery on a 10-seat jet for business

trips, a Citation Bravo.

For someone with a frugal childhood, Collins does not stint on certain

expenditures. "Where I grew up," he says, "if a piece

of string was more than two inches long, you saved it. Through my

teenage years I didn’t have enough to eat, I had a caloric deficiency.

When you can live through that kind of experience, it probably sets

you for life, so you are not wasteful, and you do not spend money

on a lot of things that would be considered excessive."

But what he really wants, he buys. Like his airplanes.

Or the big telescope he had always longed to have and bought when

he retired. Or the house he built on the five acre site of his first

house — tearing down the first one because it didn’t meet his

current needs — so he wouldn’t have to give up his gorgeous view.

But he is also a philanthropist. "I have given away far more money

than I spent myself," he says.

"Every significant amount has gone to education, particularly

helping children to be educated," Collins says. A major contributor

to the Princeton Regional Scholarship Fund, which focuses on graduates

of Princeton High School, he started the fund’s first endowment. He

gave $500,000 million to the University of Delaware for a building

and a similar amount to Princeton University engineering building,

where a room is named for him.

Collins is a fiscal conservative, but unlike many of his cohorts,

he doesn’t object to pumping 50 percent of his earnings in taxes to

the government. "I consider that to be a fair price for living

in a country where you can come from what I come from and become what

I have become. What does trouble me is when all this money gets pissed

away by stupidity or skullduggery. I don’t have much respect for politicians."

After he sold his first corporation, Collins intended to keep on doing

consulting and accumulate enough profits to start his own venture

capital firm five years down the road. A chance encounter with an

investment banker yielded an offer of $6 million so he could start

right away. So in 1968 he founded one of the first venture capital

companies (Data Science Ventures or DSV) that paid attention to early-stage

start-up companies. The first fund, known as DSV1, focused on electronic

data processing and yielded its investors 10 times their money in

two years.

"Collins was among the first of the old guard to set up a venture

capital organization outside of Silicon Valley and Massachusetts,"

writes Gupta in "Done Deals." "His attempt to create a

venture fund specializing in electronic data processing ventures was

one of the first specialized venture funds in the business — on

either coast."

Actually Collins was among the first anywhere. Venture capital as

a general concept started with the Medici, and it was also first practiced

in 20th century America by wealthy families. Gupta’s timeline is as

follows: Laurence Rockefeller started to use his share of the family

fortune to develop new enterprises in the 1930s with the creation

of McDonnell Douglas and Eastern Airlines, but not until after World

War II was the first formal venture capital firm established. In 1946

General Georges Doriot, who taught business at Harvard, helped to

set up a company called American Research and Development as a testing

ground for his theories of entrepreneurship.

Also that year, 1946, J.H. Whitney formed a fund and bought a company

that eventually became part of Gulf Oil. The federal government got

into the act in 1958 with the Small Business Investment Company (SBIC)

Act, to use tax-advantaged capital to kick-start the economy.

In 1964 Warburg Pincus was established as a venture bank. The Rockefeller

family’s venture capital firm, Venrock, debuted in 1969. Another well-known

firm, Robertson Stephens, got started in California that year and

Kleiner Perkins did its first deal in 1972.

Against this timeline, Collins — starting DSV Partners in 1968

— was a true pioneer. Here in Princeton, Bob Johnston had founded

Johnston Associates in 1967. But whereas Johnston was focusing on

one company at a time (one of his notable efforts was College Road-based

Cytogen, founded in 1981) and would be hoping to attract money from

venture capital firms like DSV Partners, Collins would accumulate

a fund and then find the right companies. Says Johnston: "He

was `running money’ then and operated more in the traditional venture

capital style."

Until the mid 1980s, newly minted MBAs did not yearn to be venture

capitalists; investment banking was the get-rich-fast job of choice.

"Venture capitalists didn’t have a whole lot of visibility almost

until the late ’80s," says Johnston.

"Mort was there early," says Johnston. "I think it’s terrific

that Mort’s back in the game, particularly today where, candidly,

a lot of young guys saw only the good times, until three years ago,

and frankly they are shellshocked. Mort has seen good times and bad

times and can lend a little perspective."

"Mort is the right person, particularly for what he is doing —

to get technology out of Battelle and commercialize it," says

Johnston. "It is not easy work, to find the right entrepreneur

and the team to drive it. Plus, all those companies will end up being

where the national labs are and Mort can fly his plane to get to those

places."

Collins is certainly excited about getting access to an amazing array

of technology and recalls his years working in fluid dynamics at the

national laboratories. "When I would go to Los Alamos, I was always

sort of stunned by the amount of technology that was there, and almost

no commercial application of these technologies has ever occurred.

I feel like a kid on Christmas morning — to have all of that to

select from and decide what to choose to build companies."

In addition to getting his hands on the technology, he is also looking

forward to working with dedicated people. "I have had the great

good fortune in my career of essentially spending some very large

percentage of my total time with people who are highly motivated,

usually highly educated, and who are always people of integrity. I

have lost any idea of what normal or average is. I just don’t know

and I don’t want to know." He likes cohorts to "under promise

and over deliver," or over promise and drive to reach that goal.

"As I began to meet more and more people of Battelle, they were

all that kind.

Collins has no illusions that wresting the technology

from these motivated scientists is going to be easy. Like university

scientists, the Battelle researchers are under no pressure to produce

commercially useful technologies or to subject themselves to the aggravation

of setting up a company. "People in the national labs are living

their dream, and they love their work, they love that they have the

money to do their work, and they just aren’t interested in other stuff,"

says Collins. "But the Department of Energy and Battelle would

certainly like to get some of this technology into the public sector.

That effort has not been very successful because those who do contract

R&D just don’t have the right skills to build companies."

Giving lots of credit to his team, Collins attributes his success

to it. "I made the money in investments, largely controlled by

my own team. I didn’t do it clamming. Take the me out of it and make

it the team." Likewise, the management team is his prime consideration

when evaluating a company. "I’ve seen thousands and thousands

of business plans and worked in hundreds of companies."

Collins emphasizes that he would never have come out

of retirement if he had not been able to convince his old friends

and coworkers to comprise a team that would be effective right from

the start. "We know each other’s strengths and weaknesses, and

we can behave like an integrated family. To start with a new group

would take five years or more and I don’t have time for that."

The "old group" came from Early Stage Enterprises (ESE), an

early stage venture fund that Collins had helped to put together by

working behind the scenes for a dozen years to get the state to chip

in some money for early stage companies. About the time ESE began,

DSV was winding down, distributing the proceeds from it last fund,

and being replaced by a new firm, Cardinal Partners (www.cardinalpartners.com).

Like ESE, it would be partly staffed by a DSV alumnus (John K. Clarke).

In 1992 this project finally thrust past the red tape. "I asked

Ron Hahn (Occidental College, Class of 1966, MBA from UCLA) to think

about running it from my office. It was not a done deal when he came.

He finished it up, and Jim Millar joined him." Millar (Yale, Class

of 1988, Wharton MBA) had come straight from graduate school to apprentice

with Collins. Collins teases that he taught Millar "everything

he knows," quickly adding, "but he learned some stuff, and

is even better than that now. At DSV he was the person who got to

be partner quicker than any other."

In 2000 Hahn and Millar had recruited a third ESE partner,

Kef Kasdin. A 1985 engineering graduate of Princeton University with

an MBA from Stanford, Kasdin had worked at Booz Allen and 3M and had

been a consultant to Sarnoff; she is married to an engineering professor

at Princeton. The seven-year-old ESE has invested $44 million and

has some companies still active. Also on the team is Tammi Jantzen,

the controller, Tracy Warren, an associate, Josephine Bair, Collins’

executive assistant, and Maria Binder, executive assistant. "We

all are working together very well, even better than I thought,"

says Collins.

Collins’ emphasis on long-term relationships may be rooted in his

childhood, when he lacked, not just money and enough food, but also

family ties. For the rest of his life he focused on cementing close

ties and he emphasizes the importance of a family atmosphere for his

portfolio companies. "My way — to run the company like a family

— works until the company is a certain size," he says. "In

an extended family environment, if you have to work 24 hours a day,

you work 24 hours a day. We always had very long term involvements

at DSV."

At first DSV accepted funds from a small number of professional investors

who wanted the DSV partners to be involved. That model became DSV’s

style. "It took five to seven years to build a company from zero

to $100 million," says Collins. The biggest company he was ever

involved with, Tandem Computer, was sold after 24 years to Compaq.

"I have been on some for more than 15 years. And these companies

have created more value in their later years than in their early years,

so it wasn’t a dumb idea."

Market timing is another strong reason for him to enter the fray.

After three years of doom and gloom the venture capital world is in

disarray. In "Done Deals" Collins writes of the changes over

35 years: "Then, venture capital meant high-risk, high-reward,

early-stage, long-term, high technology investing. Now the words seem

to cover almost any from of investing. The change has two major origins

— the huge influx of capital form the pension funds, and a wildly

exuberant stock market. As a consequence of the new source of funds,

venture capitalists have been transformed into mouse hunters. They

formerly were elephant hunters." The pension funds are eager for

liquidity to achieve 16 percent per year and the (formerly) exuberant

stock market offers returns without the underlying intrinsic values.

"Each of these things is a force acting against long-term commitment

and long-term investment," he wrote.

For instance, Amazon.com is one of the most successful dotcoms but,

with no profits, had exactly the same valuation in the marketplace

in 2002 as Anheuser Busch, which had more than $1 billion in after

tax revenues. "This can’t continue," Collins wrote, "unless

the market tells us the public will give up beer drinking and take

up book reading."

Lack of real value was one reason why Collins made it a point not

to invest in dotcoms. When dotcoms were hot, the fourth and final

fund at DSV was coming to an end. By the end of 1998 most of the equity

in those companies had been distributed. "I had no other source

of income. I was selling securities, which it turned out was a good

time to be so doing."

Yet another good reason for a 67-year-old man to get back into harness

is the personal one: He has never been good at sitting around the

house. At graduate school, when he was working long hours, he and

his first wife had two children and lived in Princeton Township. After

he left school, his work called for him to travel a lot. The marriage

ended in 1967.

Collins was doing investment banking deals when he met his future

wife, Eva, at an investment banking firm in Manhattan. They dated

casually until one night he saw her at a party with another man and

then, as he puts it, "I was struck by lightning. I lay awake all

night, perspiring." They had arranged to meet the next day at

the Rockefeller Center skating rink. The minute she arrived he blurted

out a proposal "and we spent the rest of the day figuring out

how to tell her mother. She was from Budapest and a Catholic, and

I was 13 years older and divorced. Like Eva, her mother is very strong."

The couple had two daughters and Eva carved a place for herself in

the community, serving on the school board among other activities.

Then in 1989 she was diagnosed with leukemia. Mort found an aggressive

treatment plan. After five months she had a good chance of survival,

but the day before she was to go home for good, some mysterious something

struck and wiped out the entire floor of patients at Sloan Kettering.

By his own account, Collins collapsed. "I just sort of withdrew

from everything. I couldn’t function. I couldn’t focus. What I have

learned since is that everybody has tragedies. It took me about a

year to come to my senses. A year after Eva died, I did my first deal."

Almost a year later a friend invited him to a singles

party. He said he was not interested. She persisted. She was inviting

12 professional men and 12 professional women, all single because

of death or divorce. Men would bring wine, women an hors d’oeuvre.

Finally Collins agreed to attend. He was 53, hated cocktail parties,

stood in the corner, and thought it was a hokey idea to write his

favorites (movie, pastime, place) on an index card. Then a slim, pretty

brunette named Donna started a conversation about how her son and

his daughter had gone to school together. They discovered that, on

his card he had written "Top Gun," scuba/skiing, and Fiji,

and on her card she had written "Hunt for Red October," skiing/scuba,

and the Great Barrier Reef. They had more than "something"

in common.

"Then I saw that the car she was driving car was the same make,

model, and color as Eva’s car, sitting home in my garage," he

says. It was too much of a coincidence to be a coincidence, and he

invited her over for drinks.

That meeting, "was like we were 13. I had been married for 32

years, she for 25 years. We were like little kids," says Collins,

who clearly is still madly in love with Donna. "Two years later

we got married, and now it has become one happy family."

In order to get to the one happy family part, they had to find a new

house. His house overlooking Stony Brook had a wonderful view but

didn’t work for both sets of children. They searched and searched

but nothing matched his wonderful view. So he tore down the house

he had built for Eva and erected an 8,000 square-foot dream house

for Donna, designed and built by Marc Brahaney and Janet Lasley (U.S.

1, October 8, 1997). Set serenely in the woods overlooking (literally)

a babbling brook, its plantings are protected from deer by a perimeter

fence and a cattle crossing bridge at the driveway, and there is a

greenhouse for Donna’s orchids.

In his home office Mort Collins is surrounded by stacks of manilla

folders ("Prague, 2002, Take With"). Overhead he has a vaulted

ceiling, and from it he has hung several dozen brightly colored model

airplanes, a mammoth mobile to fuel creative thoughts.

"Battelle Ventures has renergized me in a terrific way," says

Collins. "Translation: my wife Donna would like to get me out

of the house. Retirement ages are foolish. Some should retire at age

50, others never. And I don’t have anything eating at me. There is

nothing I would rather be doing."

Battelle Ventures LP, 103 Carnegie Center, Suite

200, Princeton 08540. 609-921-8896; fax, 609-921-8703. www.battelleventures.com


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