October - 2001 - issue > Cover

As he sits in his office exuding poise and self-confidence, it is hard to imagine that Parmeet Chaddha ever doubted his own abilities. Chaddha, a senior vice president at Corio, runs the firm’s engineering team. And while Corio’s stock may have tanked Chaddha has seen harder times. The economic recovery will be “slow and painful,” he says. Quite like his own experience a few years ago.
In late 1998, a bitter, disgruntled Chaddha resigned as CEO of a startup he had founded. He had given two and a half years of his life to build Zanza Software, a Web-based business intelligence company. But the end was not something he had either anticipated or prepared for. Investors in Zanza suddenly decided to change the management team completely. That meant Chaddha had to leave.

“Their take was that they needed a more seasoned professional to run Zanza,” Chaddha says. “I was open to letting someone else take over if I could continue to build the product, but they wanted me to leave.”

And so he did. But he did not join another company; nor did he start a new one. His faith was so deeply shaken that it was as if he vanished from Silicon Valley circles altogether. He took six months off and spent it exclusively with his family and newborn baby.

“There was a lot of soul searching,” Chaddha recalls. “I was asking myself questions like, ‘What is the role of an entrepreneur?’ and ‘How closely should he get attached to the company he builds?’”

It was not easy to bear the unexpected setback. Zanza, after all, was his “baby.” He had given up a comfortable job at Oracle to become an entrepreneur. Two startups that he was involved in were acquired and then Zanza happened in 1995. He raised $4 million in venture capital. The company was also well received by the analyst community, according to Chaddha. It had major customers such as Motorola and AOL. But after he left, the company failed to get additional funding and eventually went under.

What hurt Chaddha most was that the venture capitalists did not acknowledge his contribution to the company. Although he declines to name the VCs involved with Zanza, an independent search found two: Canaan Partners and Adler & Co.

Sources on Zanza’s board say the VCs essentially wanted Chaddha out of the picture. Calling the VCs the “board that mattered,” a former director says the VCs were keen to bring on one of their own to ensure returns. By 1997 they were pressuring Chaddha and the entire management team to leave. But once they left at the end of 1998, the VCs could not find anyone willing to be the CEO of a company that was losing money at a rapid rate. The marketing people had already left before Chaddha resigned.

“The VCs were naïve,” the former director adds. “They did not realize that the startup market was just heating up and nobody wanted to be in a turnaround situation.”

It was a classic situation of people being rubbed the wrong way, bruised egos and greed.

Yet, Chaddha is no longer bitter. Only wiser, he says with a smile. He has come to realize venture capital is a useful tool for growth, and although a company’s board of directors should be allowed to function freely, the entrepreneur should protect himself or herself by entering into a clear business agreement with investors. Since investors did not give him any credit, the blow struck harder and longer.

“You are not necessarily very wise when you are in the middle of it,” he says laughing. “I did not cut my losses and move on sooner.” si