MercuryNews.com | 03/17/2006 | PERSIAN RUGS

MercuryNews.com | 03/17/2006 | PERSIAN RUGS: "Posted on Fri, Mar. 17, 2006
VENTURE CAPITALPERSIAN RUGSBy Matt MarshallMercury NewsOnly in Silicon Valley, perhaps, can Persian rug merchants turn into venture capitalists.
For years, Saeed Amidi and his family have shown off elegant Persian and other Oriental carpets to customers of their store, the Medallion Rug Gallery, on University Avenue in downtown Palo Alto.
The upscale area isn't a bad place to run a rug store, given the number of affluent executives and entrepreneurs willing to buy nice carpets for their homes. The store became a base for networking with well-heeled venture capitalists, who whet the appetite of Amidi and his brother to navigate the VC waters themselves.
The Amidis have invested in more than 20 companies since 1998 and are now picking up the pace. In January, Amidi, 46, and his brother bought and transformed a 40,000-square-foot building in Sunnyvale into an incubator for high-tech start-ups called Plug & Play.
``We're very entrepreneurial,'' says Amidi, referring to himself and his brother, Rahim. ``We're big risk takers and didn't want to be left out.''
It is all part of the transformation of the Amidi family and their business, the Amidi Group.
Saeed Amidi arrived in the valley in 1979 with the rest of his family after the Iranian revolution. The Iranian government nationalized most of his father's 11 factories, which had employed 7,000 people.
Each member of the family set about opening a business in the United States. Amidi's father had the idea to open the carpet store, and Amidi and Rahim helped out.
Amidi left college before getting a degree and started a packaging business, exporting mostly non-technology goods. He later started a bottled water business that now rakes in more than $100 million a year and employs 600, mostly in Europe and the Caribbean, he says.
Rahim Amidi, meanwhile, focused on real estate, which has since become the largest part of the family business. It was real estate that launched the family into funding start-ups.
The brothers, together with another Iranian immigrant, Pejman Nozad, created a separate arm, called Amidzad, for their VC activity.
It started in the mid-1990s, when they bought a tiny office at 165 University Ave. in Palo Alto.
It was great timing. As the technology market picked up in the late 1990s, the real estate market tightened, and companies became desperate to move into the popular Palo Alto area.
Internet boom
At the time, the brothers were wondering how they could participate in the Internet gold rush. So when PayPal, an online payments company, said it wanted to lease a space at 165 University, Saeed Amidi recalls, he demanded the family be allowed to invest.
PayPal agreed. And when the company went public in 2002 and then was sold to eBay, Amidi made a tidy 30-fold-plus return on investment, he says.
Looked at one way, that's money PayPal could have kept for itself, had it decided not to move into Amidi's property. But Peter Thiel, then PayPal's chief executive, says it was worth it. ``It was kind of a lucky office,'' he says, mentioning Google had the office previously. Thiel's company was able to hang its banner out of the window, and everyone on University Avenue got to see the company brand, he recalls. ``I still think Palo Alto may be the single best location for a start-up.''
The Amidzad trio began to make more investments. They invested $400,000 early on in Palo Alto mobile device and software maker Danger. The deal germinated when co-founder Andy Rubin bought a $5,000 rug from Amidi's store. Danger also moved into 165 University.
Amidzad has since teamed up with numerous other VCs to make investments. One is Barr Dolan of Charter Venture Capital, and another is Doug Leone of Sequoia Capital, both of whom have bought rugs from the store.
Amidi won't say how much his firm has made off the VC deals, but he is anxious to pick up the pace. He expects to make investments in 10 start-ups this year.
Networking through tea and cocktail events at the rug store is one way: They invite a dozen or so people per gathering.
``Jazz, wine and hors d'oeuvres,'' recalls Vipin Jain, an entrepreneur who met Amidi during one of these events last year. A red Ferrari Modena was parked on one of the store's poshest carpets, he recalls.
Jain has since moved his Internet company into Amidi's new incubator in Sunnyvale.
The connections became quite complex at times. At one point, an angel investor named Ron Conway invested in eRugs
.com, an online rug company the Amidis had launched. In return, the Amidis invested money into Conway's VC fund, which in turn invested in a small search engine called Google.
The new Plug & Play incubator in Sunnyvale will be another source of deals.
Amidi lets people pay for rent and office services according to how many workers they have -- between $400 and $450 per person per month. No pesky yearlong leases.
Some 20 start-ups have already moved in to the building, and Amidi has even invested in two of them -- Gabbly, which offers live chat on any Web site, and Melody, a secretive online music site in which some Google executives have also invested.
Valley observers say there is nothing else quite like Amidi's business incubator, where so many start-ups can share services like a cafeteria and, soon, even legal, accounting and human resources help. There are even Friday happy hours with beer and Beanie Bag toys lining a conference room wall.
`Right ambience'
Shridhar Mukund, president of Arithmosys, is building a semiconductor start-up and moved in to the Plug & Play space in January. Mukund says being close to other start-ups has helped with hiring new employees. ``Whether you have one, or two, or three people you feel like you have the right ambience and color,'' he says.
Jain, the Internet entrepreneur, began looking for office space last year but then saw the incubator advertised on craigslist. He moved in because it offered Internet, phone and kitchen services all as part of the package.
And, of course, Amidi asked Jain if he could make an investment in his start-up. But Jain had finished raising his most recent round of venture capital, so politely turned him down. Still, Amidi pleaded, leading Jain to promise he would consider letting him invest later this year. ``He was forceful,'' said Jain."