As it continues its journey from being a hardware company to a more agile software-based company, Cisco wants to get a jump on early-stage startups by investing in a new venture capital firm called Decibel.
Decibel will allow Cisco to spot, nurture and develop enterprise technologies before they attract the attention of other venture capitalists. On the flip side, Decibel benefits from a symbiotic relationship with Cisco's more than 750,000 customers, according to its website.
Cisco's corporate venture group, Cisco Investments, invests up to $250 million a year in later-stage companies and plays a part in its deal-making, according to a story by CNBC, but Cisco wants to find entrepreneurial startups sooner.
"Decibel is designed to bring together the best of both worlds—the capabilities of a best in class, early stage VC firm with the resources only a company like Cisco can offer," according to a blog post Tuesday afternoon by Rob Salvagno, Cisco's vice president of corporate development and Cisco Investments. "With Decibel, Cisco is adding another dimension to its multifaceted approach to innovation—a relationship with entrepreneurs and the startup ecosystem at their earliest inception and with this, a lens into the people, technologies and trends that will shape the enterprise (sector) in the decades to come."
Over the past 30 years, Cisco has bought more than 200 companies with more than one in eight of Cisco's employees coming from those acquisitions.
Last year, Cisco bought cloud monitoring vendor AppDynamics for $3.7 billion and Duo Security for $2.35 billion. Salvagno said both of those companies were market-defining acquisitions for Cisco, but both companies were close to 10 years old when Cisco bought them. Cisco "realized we could do even more by engaging with the startup community earlier in its life cycle," according to Salvagno.
Salvagno said his team began to explore how to put Cisco in a position to play a more foundational role in starting the next AppDynamics or Duo Security.
"My team explored every option we could imagine to elevate our strategic investment capabilities for early stage engagement to the next level," he said. "We quickly aligned around the notion of starting with a blank sheet of paper—what could we do if Cisco removed all constraints? Thus began the process of finding the right partner to help us begin filling out that sheet of paper."
Jon Sakoda is the founding partner and head of Decibel. Sakoda founded his first company in 2001 and has been a venture capitalist for 12 years.
"This is the first time a major tech company has co-founded an independent firm outside of its corporate structure in order to focus on the unique needs of today’s entrepreneurs and founders," Sakoda said in blog post on Decibel.
Cisco didn't disclose how much it has invested in Decibel, but a Securities and Exchange Commission filing from October showed that Sakoda is looking to raise $500 million, according to a story last year by CNBC. Decibel is set up as an independent firm and it will take on other investors, although Cisco is the founding investor and the largest limited partner.