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Operational experience in a successful start-up company opens up opportunities for top managers to enter the high-stakes world of venture capital, according to two Chicago-area venture capitalists in a panel discussion at Gleacher Center on November 15. The event was sponsored by the Private Equity, Entrepreneurial Ventures, and Venture Capital Club (PEVC), which is run by students in the Evening MBA and Weekend MBA programs.
“If you look at the partners at venture capital firms who have operational experience, where it’s really valued is with fairly senior executives from companies that were huge successes in the market,” said Tasha Seitz, a partner with JK&B Capital, a Chicago-based venture capital firm focused in the software, IT, and communications markets with over $1.1 billion of capital under management.
“They’re the ones who get the name-brand value of saying, ‘I was the guy who ran products at Facebook from the dorm room through to the $15 billion valuation firm.’ Those are the kind of people who will go directly into venture capital. There’s clearly value to having that kind of managerial experience — particularly at small companies. Your highest percentage shot is to go in as part of an executive team at a venture-backed start-up company,” said Seitz, who manages 10-year funds raised from limited partners.
In addition to raising venture capital, she identifies and invests in start-up companies and within 10 years tries to sell the developed firms at a huge profit. She has invested in such companies such Reactivity, which was acquired by Cisco Systems.
W. Rockwell (Rocky) Daehler, Jr., ’93, an investment manager of Motorola Ventures, based in Schaumburg, Illinois, also advised that gaining operational experience in a successful start-up can lead to a career as a venture capitalist.
“I suggest you identify some start-up companies in the geographical area you want to work and start to network. As companies succeed and grow, they’re going to need more people. That affords you the opportunity to get on one of their teams. If you can get on one of the management teams that regularly presents to the investor base, that’s the way you get your name out there and build relationships with folks.”
Daehler looks for start-up companies offering cutting-edge technology that benefits Motorola. Investment deals are presented to a management board, where they are assessed and reviewed. Once the deal is approved, Daehler’s team jumps into managing the investment. Daehler has managed investments in Bitfone, Bluefire Security, Airplay Networks, Dexterra, SkyBitz, Tekion, and VidSys, among others.
“We do a lot of our own grunt work,” said Daehler. “We do our own research and are as resourceful as possible in getting market data.”
Daehler said that start-up companies seeking investor capital from Motorola Ventures oftentimes present incomprehensive business plans to him.
“I need to know what is it that you’re making or selling. I go through tons of business plans and at the end of them, I don’t know if they’re selling a box or a service. There needs to be clarity in what you’re selling. Let me know what makes your product or service unique, special and interesting, and why it’s better than the competition.”
Mary Paleologos