By guest authors Irina Patterson and Candice Arnold
Irina: Do you pay attention to the total available market (TAM)?
Corey: Absolutely. That’s a huge factor, the size of the market. And how accurate we think the entrepreneurs are [in calculating it].
Irina: Do you have a benchmark for what size the market should be?
Corey: No. There’s no predetermined benchmark. It’s on an industry-by-industry basis. That number would be radically different in all different spaces.
Irina: What about the quality of the management team?
Corey: Nothing is more important than the quality of the management team.
Irina: What level of experience is required?
Corey: We value experience greatly. Although, again, there are exceptions. For Dexrex, the Web 2.0 company I was telling you about, the CEO who came to us was 24 when we invested in him. So, that is definitely the exception to the rule.
There was a company that came and presented to us – Incentive Targeting – and they had a young management team. They were very smart, but the group wasn’t comfortable investing with that lack of experience in that particular case.
They ended up going out and securing an experienced CEO, a guy with gray hair. And after making the initial progress that we wanted them to make, they came back and presented again, and then we did invest in them.
So, in general, the experience of the management team is very important. But, like I said, occasionally, RVI will make an exception as they did in the case of Dexrex where the founder was only 24. But he was just such a brilliant guy. Dexrex just signed a $30 million or $40 million contract. They have significant revenues, they have over-performed, they have surpassed their benchmarks. They have a double-tier approach and have individual clients who use their services, but I think the significant revenues are coming from their corporate clients.
Irina: Do you have any preferred industry sectors?
Corey: Honestly, it’s such a variety. There’s a company Rentomatic, formerly known as iiProperty that makes software for people who are land owners, property owners, and landlords so that they can track the houses and apartment buildings they rent out.
There’s the company Optical Alchemy that makes cameras that go on unmanned aerial vehicles. We invested in a company that runs a couple of radio stations in Virginia. It is really diverse.
There’s really no one space that I can say that RVI focuses on. They really care more about the quality of the deal, the quality of company, and the quality of the people. If they think they can make money on it and somebody in the group has expertise on it, it really doesn’t matter. They’re agnostic when it comes to space.
Irina: I looked at your website and saw a company for pet death care services, Pet Angel World.
Corey: The entrepreneur behind that company is an RVI member, Glenn Hanson, a founding member and original chairman of RVI; that’s an in-house deal. He’s doing a rollup; he’s trying to create a national brand of pet crematories. He’s a serial entrepreneur. He’s started a bunch of different companies. And, again, just like the group, he’s extremely diverse. He’s in the real estate deal, he’s in the pet crematories deal, he’s in all kinds of deals. He’ll get involved in any space and he’s a wonderful guy, somebody whom I’m personally close to, who has been a mentor to me and taught me an amazing amount about business.
Irina: So sometimes members do their own deals?
Corey: Absolutely. There are definitely companies that the members start and that they bring in. It’s the minority of deals in our portfolio that were started by members, but it does happen from time to time.