Elizabeth Perry / White Bull:
So, what’s on your mind? What are your concerns?
Nigel Grierson / Doughty Hanson:
There is frustration right now with the public markets. The private equity venture capital system depends on liquidity from successful exits, and exits by IPO remain tough right now. Also, capital availability in the public market is affected by a myriad of macro-economic factors beyond our control and influence. Capital for technology businesses appear to be constrained as it seems there is still a strong lean towards low-risk investments in the current environment. Equally, low risk capital typically does not flow to high-risk investments. … If there were solutions to these problems, it would probably be one of the biggest enablers for the industry right now!
WB:
And on the positive side?
NG:
I’ve seen no decline in the enthusiasm of the entrepreneur. They’re passionate, they’re enthusiastic and they’re innovative. So there’s no lack of aspiration. Although there is generally less money in the market, so it’s tougher to raise capital, there are still some great success stories. … One of our companies, Gomez, which we started at almost a seed stage in the UK, and grew in the US, was recently acquired for $295 million.
WB:
Let’s talk about the Exits. How do you approach this stage with your clients?
NG:
One of the advantages of having a venture capitalist on board is to stay ahead of the curve and make sure the company is appropriately structured to have very high quality corporate governance - almost as if you’re a public company. This is the toughest test of all. Even if you don’t IPO but are acquired, you benefit enormously from this. Good corporate governance will make the acquisition go so much more smoothly. As a venture capitalist, you must take advantage of that knowledge and experience and work hard to make sure the company is in great shape.
WB:
Now let’s talk about middle age for a minute. … Can you still be sexy in middle age? I mean, you read all about the new kids on the block all the time, but what does it take to stay fit as a “middle aged” company?
NG:
Well, there is a lot of skill and experience that comes into play. You need to maximize the quality and the impact of your products and messages. But you also need to develop your company into a market leader … not number four five or six. The market leader always gets the attention and maximum value. They’re the ones setting the agenda and deciding on the direction. They’re the ones with the most to say. So, the trick is, to just be persistent in being a market leader. If you’re number 5 or 6 in mid life … well, it’s tough.
WB:
What will you be looking for when you come to Barcelona for White Bull 2010?
NG:
I’m always interested in meeting high quality people … entrepreneurs with passion and innovation and inspiration for greatness, whether they’re early stage, mid stage or late stage. I think great companies are built on great people, so that’s one of the primary things I search for.
WB:
How do you recognize a passionate entrepreneur aside from the fact that he gives a good elevator pitch?
NG:
For an early stage investor in the internet space, you look at how some of these companies have been successful. Let the user lead you as opposed to trying to lead the user. Build the site, grow the user base, experiment like crazy and quickly focus on monetizing what works. Some Internet business models are nothing like what they started out as. As we often say – there are two types of Internet start-up; the quick and the dead! Having a business plan that remains the same over the next five years just isn’t going to fit on the cutting edge. You have to be able to admit you were wrong sometimes. Let’s not grieve over it, let’s abandon and move on. And it’s not just the young entrepreneur, it’s also the mid stage firm. You have to have all-around good managers that can juggle all of the balls and really maximize the efficiency of the capital and get to profitability as quickly as possible and stay there. Innovate, Energize and Grow! Sometimes I say “You know what you’re looking for but you can’t recognize it until you see it.”
Really what it boils down to is that successful businesses are made of successful people. … And that’s what I will look for at a conference.
WB:
Who do you look up to?
NG:
Well, I study behavioral science. It’s one of my passions. So many of the people I look up to are in that space. I have learnt a lot from William Daniels in the past. Daniels studies people, correlates their behavior with stimuli in the environment. In business, I had the privilege of working directly with Andy Grove at Intel. It was almost career changing just being able to learn from him … how you clear away the distractions and focus on the key issues in your business with incredible discipline and innovation at the same time. Incredibly therapeutic. He’s another one of my heroes.
WB:
What makes Doughty Hanson stand out from the rest of the herd?
NG:
We’re not a broad-based investor. We focus on mobile technologies, internet software, and Clean technologies. …Those are the areas in which we have a lot of first-hand experience … managing successes, managing failures. And secondly, that focus enables us to get a real depth of knowledge - using that, of course, to help the companies that we invest in. This hopefully makes us the preferred investor for entrepreneurs.
WB:
How important is geography?
NG:
We have offices all over Europe and an office in Silicon Valley. This is one reason we have been successful at transitioning companies from Europe to the US for example. We’ve got knowledge, experience, resources and contacts on the ground to help companies make that transition. While we will focus on helping Western European companies, if it makes sense to help them accelerate their growth by helping them transition to the US, we’re well equipped to do that.
WB:
What else do people need to know about the way you do business?
NG:
It’s not magic. But we have focus and passion and determination to share with the entrepreneur. A good VC must be determined and have great aspirations … just like the entrepreneur. You’ve got to be able to share and engage and have passion in order to get and help with what the entrepreneur is trying to achieve. And, you have to be a born optimist. You have to believe that you can help companies be wildly successful. That’s what we believe and probably one of the main reasons we’ve been so successful.
WB:
I like that: Wildly. Thanks, Nigel. It’s a pleasure to have you on board!