Flynn's Harp: Davis chose turnaround challenges over tranquil lifestyle (10-21-09)
Posted on 10/21/2009 by Mike Flynn
Alan Davis learned the simpler life wasn’t for him when, after moving with his wife to San Juan Island at the age of 47 to run a couple of small businesses following an intense career in Silicon Valley, he found himself in that pristine setting thinking “I can hear my brain cells dying.”
“I had two small retail businesses, but I didn’t like retail and I didn’t like the laid-back environment on a fulltime basis,” Davis recalls. So when an opportunity to take over a struggling Orange County software company came up in 1995, he says “I told my wife I’d be back in two weeks.
“I actually didn’t return home until 18 months later (except for weekends every other week),” he says. “By then we had taken the company public and I figured I could let someone else take the reins. They sold the company a short while later.”
The company was Starbase Corp., almost insolvent at the time Davis came in but listed on the NASDAQ by the time he left.
That launched him on an “entrepreneurial encore” doing turnarounds, taking companies on shaky financial ground and bringing them back to the point where the businesses were again on a healthy footing.
Ever since Starbase, Davis, whose Silicon Valley career had included serving as general manager of Intel’s software division then director of worldwide marketing for its microprocessor division, has been a turnaround expert.
He sums up that focus with: “Once you do one turnaround, you want to do others.”
Davis, who makes it clear that while the quiet life wasn’t for him, he loves his San Juan Island home as a place to get away, joined forces with two other turnaround experts in 2003 to create Revitalization Partners LLC, which is based in Bellevue.
He met Bernee Strom, who was COO of Infospace when it went public, and Bill Lawrence, who guided Garden Botanika and Jay Jacobs through bankruptcy, at an investment bank in town. They got to talking and decided that “single shingle” activities, in which they were all engaged, wasn’t ideal.
“Basically, joining forces meant collectively we had a bench strength of support for our activities, and two other minds with which each of us could strategize,” Davis says.
Davis now finds himself not just called upon to do turnarounds, but to handle planned disposals of companies whose alternative would be a Chapter 7 bankruptcy.
He thinks that he’s found a legal tool, called Assignment for Benefit of Creditors, which can be employed for small businesses headed for Chapter 7 bankruptcy proceedings that can provide more benefit to creditors.
The process, referred to as ABC, “is something everyone considering a Chapter 7 should absolutely take a look at,” he said.
He’s been called upon to do two so far, basically taking over as an assignee acting as CEO, which permitted him to do what was best for the creditors. In one case that meant selling a key asset to a vendor of the company’s and thus providing creditors more of their money would otherwise have been possible.
I hadn’t heard of the Assignment for Benefit of Creditors, a state court process rather than a federal proceeding. But in discussing it with several attorneys, I found it’s a device being increasingly viewed as a viable alternative to Chapter 7 liquidation.
I asked Davis how he thinks business will emerge from this economically challenging time and he said “I think we’ll emerge fundamentally changed. Parts of the economy, like Wall Street, may go back to the old stuff. But venture capital and small business will be changed.”
I asked him to describe what he meant and he said he thinks “there will be a lot more focus on starting smaller and growing slower.”
“I work with small companies a lot and one thing I see is an obsession with valuation and control,” he added. “Entrepreneurs who are obsessed with those things aren’t going to do well in this climate – and probably shouldn’t.”