When Michael Dell last fall shelled out $2.4 billion for Orange County-based Quest Software, he set off a chain reaction that's now rippling through Silicon Valley.
The acquisition was core to Dell's strategy to reshape his troubled PC maker into an enterprise software contender. Former Quest chairman and CEO Vinny Smith, for his part, is plowing the fortune he reaped from the sale into a new venture firm called Toba Capital.
In the past few months, Toba has invested in more than a dozen enterprise software startups. On Tuesday, San Jose's Quorum -- a maker of data-recovery software -- will become the latest addition to Smith's portfolio, with an $11 million infusion.
Smith, 48, who rarely grants interviews, told this newspaper he expects to put as much as $150 million into venture deals this year. According to figures from the National Venture Capital Association, only half a dozen venture firms invested more in the valley in 2012.
And Smith is spreading the wealth beyond the Bay Area. Though he's recently opened a three-person San Francisco office, his team of software-executives-turned-investors also is deployed in New York, Texas, Minnesota and Southern California.
"The guys who run software companies have 15, 20 years experience, but they're not the ones you see in venture firms," he said. By building his team with such veteran operators, he added, Toba can offer expertise as well as a check.
This is actually Smith's second foray into the venture business: After selling his first startup, Redwood City-based Patrol Software, in 1994, Smith began investing through a Manhattan firm called Insight Capital Partners. Quest, in fact, was the first investment he made, when it was a 25-person company with $4 million in yearly revenue.
Smith became CEO of Quest in 1997, and by the time he sold it to Dell, the company boasted $857 million in annual revenue and 3,850 employees.
In between, Smith became a billionaire following Quest's initial public offering in 1999, sharing space on the Forbes list of America's youngest tycoons with the likes of Yahoo (YHOO) co-founder Jerry Yang. The dot-com bust sliced Smith's wealth by a reported 80 percent, but he doubled down on the business.
In recent years, Quest scooped up a number of smaller companies that complemented its application management software with data protection and other products for corporate IT departments.
"He did a great job of seeing new market opportunities," said Brian Freed, an analyst with Wunderlich Securities who followed Quest's stock. "He's clearly got vision in terms of where technology is going."
The Quest story wasn't without controversy. The company was among hundreds nationwide that were investigated by the Securities and Exchange Commission after the dot-com bust for illegal backdating of employee stock options.
Quest restated earnings and took a $143 million accounting hit to settle the SEC's concerns. No charges were filed.
The Dell merger also featured some intrigue concerning Smith's former investment firm, now known as Insight Venture Partners. Insight approached Smith early last year about taking the software company public, and when Dell got into the bidding, the venture firm became a de facto stalking horse that helped drive up Dell's final price tag.
Smith, who owned a third of Quest's stock, cleaned up. (He recused himself from the board's vote on the Insight bid, even though he'd stopped investing with the firm in 1996.)
Since getting back into the venture business, he's attacked things with gusto. Last month, Toba led a $10 million investment in Palo Alto software maker WSO2; last week, Smith's firm doled out $9 million for Codenvy, a San Francisco startup that helps developers build and test apps via the cloud.
"We talked to a bunch of more traditional VCs," said Quorum CEO Larry Lang. "But what got us excited about working with Toba was that Vinny has a whole bunch of personal connections in the industry."
As for the firm's name? It refers to the Toba Eruption, a volcanic explosion in Indonesia more than 70,000 years ago that some scientists believe led to a global winter that supercharged human evolution.
"If you think about it, the software industry's going through a similar mega-change," said Smith, who chose a stylized volcano for his firm's logo. "With virtualization, then the cloud, this is creating an entirely new software industry."
Contact Peter Delevett at 408-271-3638. Follow him at Twitter.com/mercwiretap.
Title: Founder, Toba Capital
Career: Chairman and/or CEO, Quest Software, 1998-2012; founder, Patrol Software, 1992-94; various sales management roles, Oracle, 1987-92
Education: Bachelor s degree in computer science, University of Delaware, 1986