The tech startup | A conversation with Peter Murray, founder and chief technology officer of Portland-based Quantrix
Peter Murray grew up in Portland, attending Portland High School before enrolling at Stanford University in Palo Alto, Calif., where he majored in symbolic systems with a concentration on artificial intelligence. Graduating in 1992, Peter worked as a programmer in Silicon Valley for Next Computers, then joined a startup productivity software company called Lighthouse Design, which was later sold to Sun Microsystems. Peter returned to Maine in 1995, initially founding an internet service provider, New England Internet Services, before joining a business-to-business venture called GoFish.com in 1999.
Like many B2Bs at that time, GoFish was able to raise a good deal of venture capital — more than $40 million — based on its strategy to bring together buyers and sellers in the wholesale fish marketplace. Also like many B2B startups in that era, GoFish suffered from the boom and bust and was ultimately unsuccessful in its original intent.
After doing some software consulting, Peter formed Quantrix (www.quantrix.com) in 2001. Today, Quantrix employs 11 and provides business analytics software to customers and resellers in 45 countries around the world.
Peter also is working with a group of entrepreneurs and industry leaders to encourage Maine’s Legislature to create a venture capital fund-of-funds that would evaluate potential investment opportunities in Maine companies. (The bill, passed by the House and Senate but not signed by the governor, will be re-introduced next year.)
Venture Builder spoke with Peter about early round financing, the difficulties of the dot-com market and the importance of funding industry clusters. An edited transcript follows.
Venture Builder: Tell me about your GoFish experience.
Peter Murray: GoFish was an early exciting venture. The theory was to help reduce friction in wholesale seafood market and match buyers and sellers more efficiently than was possible in the absence of automation. Like many of that era’s dot-coms, it was an idea before its time. We underestimated the intransigency of the current system and overestimated our ability to change that system. The technology worked — we booked over $100 million of transactions. But, in the end, big seafood players didn’t want to come on board.
So apart from building a company during a period of “irrational exuberance,” any lessons learned?
We’d preserved quite a bit of the money we’d raised, providing investors the option of simply taking a return of what capital was left. Had we spent more of it, they and we might have chosen a different path, such as re-inventing ourselves with a business model that wasn’t so broken. There was some talk of going public to raise a bunch more money — something that other companies in our position were doing, despite having just launched. But I was very opposed to that on the basis that it was just wrong, given our stage of development. The decision not to go public — and the decision to raise as much money as we did and to be conservative about spending it — resulted in our investors making the choice they did, which was to essentially take their money back and sell the remaining assets to management.
In the end, it was a great experience, but it made me realize that motivations of pure investors are not always in line with founders or management. It did influence how I chose to raise money for Quantrix.
So tell us a bit about Quantrix.
We financed Quantrix with founder money. We then got a Maine Technology Institute development award, matched with capital from founders, friends and family. We built out the prototype and business plan, then examined opportunities for venture capital, both nationally and locally.
Nationally, West Coast investors were uncomfortable doing a deal too far from their home state. Local investors perceived markets as small and, as they all knew one another, tended to view the opportunity as a group — i.e., they all took a single view as to valuation. Without a larger, more diverse venture capital market, we just weren’t comfortable with the value implications and so elected to bootstrap, doing smaller investment rounds with friends, family and founders.
Most recently, we closed a financing led by a customer/partner — more of a strategic deal. That’s worked out okay for us. We continue to grow strongly if more slowly given the constraint of capital. That said, we’ve maintained greater control over our business and our destiny.
I assume this local dynamic is what got you involved in working toward a fund-of-funds.
Yes. The local and national stories are vignettes I’ve shared with the Legislature. I believe this is a gating factor for the success of innovation in Maine. We’ve done some good things at the R&D level at the state—incubators, MTI, et cetera. But ideas generated from these institutions need a capital source to fund the next stage of development. Without a large number of funds focused on Maine, there’s simply not the diversity of experience and sector specialization that is necessary for a robust technology-venture market. Additionally, a fund-of-funds could reinforce the state’s interest in developing clusters, such as software/Internet and composites.
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