"We don't take equity positions that would make me a million dollars," he tells Byte and Switch. "Sometimes I take a little stock and I hope. But it rarely pans out." [Ed. note: Aside from Duplessie, no current or former ESG employees provided any information for this article.]
Duplessie readily acknowledges that ESG has received shares in certain companies. While he would not name all 12, he says that ESG had owned small amounts of common stock in Astrum Software (bought earlier this year by EMC), Pirus Networks (acquired by Sun Microsystems Inc.), and Nishan Systems (which McData Corp. recently purchased).
However, he says, every single client of ESG must pay $25,000 a year in cash -- no exceptions -- to receive the baseline service, which includes 12 hours of analyst time. Additional services cost extra; for example, ESG charges between $10,000 and $15,000 a day for speaking engagements. It is only for these extra services that ESG will take shares instead of cash, according to Duplessie.
Furthermore, Duplessie claims that ESG takes shares only in situations where startups simply do not have the cash on hand to pay for those additional services. "We always take cash when we can. If we feel there's legitimate opportunity to add legitimate value, we will consider accepting equity. Unfortunately, not every startup has the money. Sometimes we try to be nice guys."
He also notes that the shares ESG takes often end up being worthless. One of the few successful exits that yielded a return for ESG was Sun's acquisition of Pirus for approximately $160 million last year (see Sun Beams on Pirus). Duplessie would not reveal how much ESG received from that deal; an ex-Pirus employee, though, says ESG's piece of the pie was "not astronomical." By contrast, Duplessie says, when McData bought Nishan for $83 million, the $10,000 in Nishan common stock ESG held wasn't worth anything.
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