I live in Texas, where during the tech bubble folks were walking around saying that it was nothing compared to the real estate crisis of the late 80s. So now seemed like a good time to chat with Austin Ventures, which has been investing in the state since 1979 and announced two funds worth a total of $900 million in September, a few days after the markets started to collapse.

I spoke with general partner Chris Pacitti, who told me that once the firm, which has a reputation for being financially-oriented rather than operationally-oriented, saw the crunch coming it kicked its fundraising machine into high gear. Now Austin Ventures has $300 million for early-stage deals and $600 million for growth equity.

When it comes to recession or depression fears, Pacitti talked about the fine line entrepreneurs will have to walk between cutting spending to a point where they can last through a protracted downturn and shrinking to the point that they can’t compete once the dollars start flowing again. But he also said that this time around, many of the startups are well positioned to withstand a downturn, especially those with recurring revenue streams.

“We’ve seen this movie before, but this will be different than the last downturn,” Pacitti said. “The economy will be worse, but this is not a tech-led recession that we experienced before with lots of overfunded sectors and business models that didn’t work.”

In his mind, most of today’s startups (especially those at Austin Ventures, which didn’t make a lot of Web 2.0 and cleantech bets) have the type of subscription-based revenue streams that could see them through a protracted downturn. He also sees Texas faring a bit better than the California tech scene.

“There aren’t a lot of cleantech investments here that need a lot of capital, so that will be a net positive,” Pacitti said. “Basically those are large, capital-intensive science experiments that need a lot of project finance. That is very difficult sector to be in right now. We have a different mix here, and are focused on software and media plays.”

For those wondering how to achieve the fiscal discipline to hang on through the downturn, Pacitti put it simply, “This means the CFO is back in control.” For a venture firm that prides itself on financial acumen and strategies, that’s music to Austin Venture’s ears.

pFiled under: a href="http://www.autoblog.com/category/ford/" rel="tag"Ford/a/pimg vspace="4" hspace="4" border="1" src="http://www.blogcdn.com/www.autoblog.com/media/2008/10/leclairleaving_opt.jpg" alt="" /br /br /Ford Chief Financial Officer Don Leclair has decided to hang up his spreadsheets after an illustrious career at the Blue Oval. Leclair worked at Ford for 32 years and has held the top financial post there since 2003. Succeeding Leclair will be Ford of Europe President Lewis Booth. Booth has helped lead Ford's positive transformation in Europe and grow Mazda's success around the world, which are probably Ford's two largest successes of the past decade. Excruciatingly tough times in North America await Booth upon his arrival Stateside, and team Ford needs some of that same magic he had in Europe to pull the 105-year-old automaker out of its current situation. Leclair and Booth will be working together over the next few weeks to ensure that no balls drop during the transfer of power.br /br /We're sure Mr. Leclair would have loved to leave the Blue Oval during happier times, and we hope his retirement is a long and enjoyable one. If a href="http://www.autoblog.com/2008/10/09/gm-and-ford-beaten-up-on-wall-st-today/"stocks/a are part of his exit package, though, it may be some time before he has a chance to relax.br /br /[Source: Ford, Photo by William Thomas Cain/Getty]pa href="http://www.autoblog.com/2008/10/10/ford-cfo-don-leclair-retiring-ford-europes-booth-will-replace/" rel="bookmark"Continue reading emFord CFO Don Leclair retiring, Ford Europe's Booth will replace him/em/a/ph6 style="clear: both; padding: 8px 0 0 0; height: 2px; font-size: 1px; border: 0; margin: 0; padding: 0;"/h6a href="http://www.autoblog.com/2008/10/10/ford-cfo-don-leclair-retiring-ford-europes-booth-will-replace/" rel="bookmark" title="Permanent link to this entry"Permalink/anbsp;|nbsp;a href="http://www.autoblog.com/forward/1338886/" title="Send this entry to a friend via email"Email this/anbsp;|nbsp;a href="http://www.autoblog.com/2008/10/10/ford-cfo-don-leclair-retiring-ford-europes-booth-will-replace/#comments" title="View reader comments on this entry"Comments/a pa href="http://feeds.autoblog.com/~a/weblogsinc/autoblog?a=EQoTJH"img src="http://feeds.autoblog.com/~a/weblogsinc/autoblog?i=EQoTJH" border="0"/img/a/pdiv class="feedflare" a href="http://feeds.autoblog.com/~f/weblogsinc/autoblog?a=FAA2m"img src="http://feeds.autoblog.com/~f/weblogsinc/autoblog?i=FAA2m" border="0"/img/a a href="http://feeds.autoblog.com/~f/weblogsinc/autoblog?a=EOp3m"img src="http://feeds.autoblog.com/~f/weblogsinc/autoblog?i=EOp3m" border="0"/img/a /divimg src="http://feeds.autoblog.com/~r/weblogsinc/autoblog/~4/417062634" height="1" width="1"/

Just because you run a private company that does not have to file quarterly financial statements with the SEC does not make it okay to cook your books. The CEO and CFO of Seattle-based CRM firm Entellium found that out the hard way. They were arrested by the FBI earlier this week for inflating their revenues and then lying to their board about it. The company appears to be toast. It fired two thirds of its staff of 60 people in Seattle, and its Website is down. We are putting it in the deadpool.

The CEO, Paul Johnston, and CFO, Parrish Jones, kept two separate set of books. One they showed the board, and the other was the real one. The fake one inflated revenues by $11.7 million over the past three years. For instance, in 2006 they told the board that revenues were $3,950,362, but they were really only $582,079. In 2007, the fake revenue number jumped to $6,291,705, whereas the actual revenues were only $1,446,238. This deception continued until September 26, 2008 when the VP of human resources, Melisah Wojtacha, came across the fake board books while cleaning out the desk of a former sales VP.

The scandal in Seattle is particularly embarrassing for Ignition Partners, the VC fund made up of former Microsoft hotshots who put in $19.7 million of the total $50 million that Entellium had raised. Ignition’s Jonathan Roberts sat on Entellium’s board (as did former Cisco CIO Pete Solvik, now a managing director at Sigma Partners). Did they not have outside auditors verify the accounting?

Ignition can kiss that $20 million goodbye.

Entellium Complaint - Upload a Document to Scribd

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Read full story for latest details. pa href="http://rss.cnn.com/~a/rss/money_latest?a=YQfjgj"img src="http://rss.cnn.com/~a/rss/money_latest?i=YQfjgj" border="0"/img/a/pimg src="http://rss.cnn.com/~r/rss/money_latest/~4/417064235" height="1" width="1"/

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A U.S. District Court complaint alleges that the pair lied about the financial state of their company to attract over $50 million in investment between March 2004 and Sept. 2008.

It always surprises me when I hear about various tech startups that eventually resorted to outright scamming. I can understand the pressures of running a startup as things get tough, but I can't ever imagine resorting to outright making up revenue. Yet, whenever an economic downturn hits, these stories start popping up. You may recall back in 2001 when the hot startup Critical Path was caught a href="http://www.techdirt.com/articles/20010405/1726215.shtml"making up about 10% of its revenue/a. A day later, one of the biggest speech recognition companies of the time, Lernout #038; Hauspie, announced that its Korean division a href="http://www.techdirt.com/articles/20010406/1055246.shtml"had made up almost all of its revenue/a. In that case, it resulted in the end of L#038;H completely, as well as a href="http://www.crm-daily.com/perl/story/10138.html" target="_new"jailtime/a for the CEO. br /br / It looks like we may be getting another such story. Just a few weeks ago, CRM provider Entellium was a href="http://www.marketwatch.com/news/story/entellium-launches-rave-crm-storefront/story.aspx?guid={B1DAFCAC-3405-4478-BDEC-0EAF6DE2B23D}#038;dist=hppr" target="_new"announcing new products/a (which they spammed us with a press release about). On October 1st, we received another email pitch from Entellium, urging us to download its software for a free 30-day trial. That same day, the company's a href="http://seattletimes.nwsource.com/html/businesstechnology/2008221247_webintellium02.html" target="_new" target="_new"CEO and CFO suddenly quit/a. A couple days later, most of the company's employees were a href="http://seattletimes.nwsource.com/html/businesstechnology/2008227093_entellium04.html" target="_new"laid off/a and told that the company was out of money. br /br / The whole thing seemed quite odd, especially considering that the company had raised over $50 million, had just launched this product and everything seemed to have been moving forward. Late Wednesday, however, the details came out. It turned out that the two execs who quit, Paul Johnston and Parrish Jones a href="http://ap.google.com/article/ALeqM5g8gBlkOTAlAvnpngy8_81fpcsknAD93MLV7O0" target="_new"had been flat out lying to its board and its investors concerning revenue/a for years. For example, since 2006, the company made less than $3.8 million, but told the board it brought in $15.5 million. That's not just a slight fudging of the numbers -- that's extreme fraud, which was used to help the company raise that $50 million. br /br / The biggest question, though, is where were the board and the investors on this. It's difficult to see how investors would hand over more than $50 million without ever conducting an audit. They simply believed the two execs. It's also worth noting how the fraud unraveled. Apparently, the VP of HR was cleaning out the desk of the former head of sales, and discovered the bogus set of books that the CEO #038; CFO had been showing the board. She turned them over to the company's comptroller, who gave them to a board member -- which resulted in the board pretty quickly calling the CEO to let him know that they were sending over their own "contract" CFO to "check some things out." That was the point at which the two execs resigned. br /br / You always hope that these stories are simply cases of bad seeds, and that there aren't others doing the same, but it'll be worth watching to see if we start hearing other similar stories. They seem to come in bunches. br /br / a href="http://techdirt.com/articles/20081008/2148102498.shtml"Permalink/a | a href="http://techdirt.com/articles/20081008/2148102498.shtml#comments"Comments/a | a href="http://techdirt.com/article.php?sid=20081008/2148102498op=sharethis"Email This Story/a br / br style="clear: both;"/ a href="http://www.pheedo.com/click.phdo?s=2f1d2858913c1e4722de2fd710f576f0"img alt="" style="border: 0;" border="0" src="http://www.pheedo.com/img.phdo?s=2f1d2858913c1e4722de2fd710f576f0"//a img src="http://www.pheedo.com/feeds/tracker.php?i=2f1d2858913c1e4722de2fd710f576f0" style="display: none;" border="0" height="1" width="1" alt=""/div class="feedflare" a href="http://feeds.techdirt.com/~f/techdirt/feed?a=05m0m"img src="http://feeds.techdirt.com/~f/techdirt/feed?i=05m0m" border="0"/img/a /divimg src="http://feeds.techdirt.com/~r/techdirt/feed/~4/415755492" height="1" width="1"/