Venture Capitalist Strives to ‘Do the Right Thing’

Ethical behavior stands at the top of venture capitalist Gerald Gallagher’s list of helpful habits for future entrepreneurs.

“What is most important is that I can look at myself in the mirror and know that I tried to do the right thing,” Gallagher, ’69, general partner of Oak Investment Partners, said at the Entrepreneurial Edge Conference hosted by the Polsky Center for Entrepreneurship November 18 at Gleacher Center. “My reputation is intact. Perhaps that is the reason I sleep so well.”

At times, that has meant sacrificing an opportunity that looked potentially valuable.

Gallagher attended Chicago GSB when George Shultz was dean and was later offered a key position dealing with businesses for the Nixon White House in the early 1970s. After spending the day there, Gallagher turned down the job.

“I did not respect how they made decisions,” he said. “They did not ask what was right. Everything seemed to be decided on what I call ‘situational ethics.’”

When the Watergate scandal broke a few years later, Gallagher said, “I realized that not only did I follow my conscience, but I had also unknowingly made the better decision for my career.”

Gallagher looks at ethics when evaluating management teams. When examining a CEO, he said he will check at least ten references, going beyond the list given to him.

He once refused to make an investment after an executive’s reference hesitated answering a question about ethics. Gallagher probed for two weeks, and about five phone calls later, he said, “I found out this guy was basically dishonest.”

Other venture capitalists had already invested in the firm, but “the company failed because of him, despite a great strategy,” Gallagher said.

—Mary Sue Penn