By guest authors Irina Patterson and Candice Arnold
Randy: I think we’re very interactive, a very gracious community, and we care deeply about the entrepreneurial community and we want to give them as much information as possible for future success. And it’s not easy making the forum and if you do the math, if only four or five companies are making it out of 50, it’s still tough to get to Keiretsu Forum. Especially in Northern California, where, obviously, we’re the oldest chapters throughout the three continents and where there is a lot of capital. In fact, I would say that we’ve probably done at least over $100 million in just the past seven years here in Northern California, in capital.
The reason why that figure’s high, by the way, is because we not only invest in early-stage, great technology companies, but we also look at other sectors, which we call brick-and-mortar sectors. We invest in consumer products, we invest in real estate and so 30% of our portfolio – of our 265 fundings – are real estate related.
That’s one of our differentiators at Keiretsu Forum. We like to look at everything. Any company that we feel that we can help grow and, conversely, help with capital, but not necessarily all technology companies – even though we happen to be at the epicenter of technology investing here in Silicon Valley – we will try to help; we like to look at everything.
Irina: What factors play the most significant role when you decide whether or not to fund a company?
Randy: That’s a great question, and we could go in depth for hours on that one. Let me just say what resonates with our members is management is obviously key. Number two is a past track record we can point to. And that track record can be failure.
We’ve invested in companies in which in the past the CEO failed, but perhaps he or she failed for a myriad of reasons but is now self-effacing, honest, has learned from mistakes, and is coming back with a different concept . . . and one thing that great about America, and other parts of the world, but specifically in Silicon Valley, is that it’s okay to fail.
You just have to come back, and if you learn from your mistakes and you can truly make it, again, we will give you that chance. So the first thing is management. The second is we’d like to see a deep track record, especially in relationship to the vertical they’re pitching to us.
Also, when the CEO is coming to us with a great idea, it’s very important that he or she and the team have great relationships with customers and great relationships with the sectors in which they want to grow. One of the questions I may ask an entrepreneur who’s pitching to us is: “If you need and introduction to the CTO at Google” . . . and they say, “Absolutely, I think we’re already there, I’d say, “Well, tell us who that person is. Tell us what kind of relationship you really have because we would really like funding companies where people really do have the relationships.”
And the best way to approach us, in regards to the use of funds or capital, is we can help scale the company. Where we can lose money is if we’re just underwriting a consulting company or a company that’s not going to grow. Where we make our money, and, again, this is not OPM – other people’s money – this is our money, our members’ money and my money.
We care deeply about the use of funds where we can scale the company, because the only way the company’s going to make money for them and us – and, again, it has to be a win-win for both parties – is first that the valuation has to be right, and second the use of funds has to scale. And the only way that the multiples and the indexes truly work is if the team can scale the company toward exit.