By guest authors Irina Patterson and Candice Arnold
Irina: At what stage of a business’s development do you prefer to invest?
Dick: Really, anywhere from what I would call pre-seed to developmental. We’ve even invested in one expansion-stage company.
Irina: How about if somebody comes with an idea on paper?
Dick: No. But we have other partners here, like the business incubator, that will work with them. We’ll, in some cases, show them how to find some friends, family, and fools money.
We want to see a proof-of-principal prototype. That’s the minimum threshold for us to seriously consider investing. You know, there are lots of places to find friends, family, and fools money. Some of our members will provide that outside the group sometimes. But as a group, we don’t try to invest in just the idea stage.
Irina: Do you think in terms of total available market (TAM)? How large does the market have to be for you to get interested?
Dick: The dollar size of the market isn’t as much of a factor as is the growth of that market. It needs to be a rapidly growing market. It’s very hard to generate a scalable company in a market that’s mature.
That’s why the information technology business has been so attractive. It’s always growing pretty rapidly, and [it’s a big] productivity improver. The biotech industry is in that stage today. Web retailing is in that stage today, even though retailing – conventional retailing – is pretty stagnant. Web retailing continues to grow 20% to 25% even in bad times.
Irina: Have you invested in Web retailing?
Dick: We have, yes. We have a retailer of extreme sports gear in our portfolio. We consider them high technology because they manage 25,000 Google AdWords as a part of their business model.
Irina: What about the teams? Do they have to have any previous business experience?
Dick: Not necessarily. We invest in teams, and we want to see an entrepreneur who may be a technical person. If he or she is a technical person without business experience, we want to see that person teamed with a business person.
We will often be the facilitators of that teaming, one of our members will help, for example. We do a lot of matchmaking. You asked earlier what do we do with entrepreneurs who show up with just ideas. We do send them off to the business incubator.
In all cases, we try to make certain that someone who approaches us leaves us in better condition than when he or she arrived and moves along their path in some fashion or other. We have companies we’ve been working with for two years that aren’t yet to the point where we’ll seriously consider investing in them, but we’ll keep paying attention to them because we like their potential and we think that they can reach the right point where they have good potential for us.
Irina: What would it take for them to reach the right point?
Dick: Well, it can be finding that business partner, it can be getting over a technological hurdle, it can be doing market surveys to really define the market for us, how much it’s growing and where it is, and how much they spend on average, and things like that. It can be getting to the point at which in their personal lives they’re able to launch a business.
Irina: These entrepreneurs you’re talking about have been developing their company for two years now, right?
Dick: Yes, that’s right, for almost three years. A lot of their hold-ups have been personal situations.
Irina: Are there any character traits of a founder that you find critical?
Dick: There’s not just one. We look for risk takers. We have sent people away whom we decided were not risk takers. We look for people who are good listeners. If there was one trait at the top of the list, it would be the ability to listen to others.
We get calls from all sorts of people who know they have the right answer, and they usually don’t get very far in the conversation with us. We’re experienced enough to know that no one knows all the answers. Lots of other points of view and opinions and experiences are needed in order to find your way to the right answer.
Irina: How many investments do you make in a year out of the 10 to 12 pitches you receive per month?
Dick: About four or five.