Venture Capital Companies / Venture Capital Firms Series Overview
Our VC interview focus on interviewing top GPs from the top Venture Capital Firms, from the heart of SV to Europe and other geographies, with different investment stages, philosophies and value-adding focuses as board members. We discuss topics such as fundraising from LPs, adding value as a board member, level of support to portfolio companies, among other important everyday topics for a GP.
Find all Venture Capital Firm / Company GP interviews here.
Bio (First-Person)
(Find Richard on LinkedIn)
I believe there is too much friction impeding our ability to solve important global problems. We have established a number of ventures which help entrepreneurs succeed. Over the last 30 years I have worked as a CEO, Chairman, and Mentor while serving my shareholders globally through 115 company board directorships in 26 countries. This experience afforded me the insight and confidence to create my own venture fund in 2005. After 13 years Red Ocean has developed active equity positions in 14 companies globally. In 2014, I founded South Bondi to mentor executives between their corporate job and and their contribution to the start-up community. In the same year I co-founded Cataliize (previously Startmesh) to globally commercialise technology companies with tested and validated offerings and in 2015 I co-founded Badalya to globally commercialise innovative food companies.
Interview
Portfolio ventures of venture capital companies that are going great need almost no support, and the ones that are in the bottom aren’t worth helping. Apart from the two extremes, how do you know how much effort, time, persistent to put in the ones that are somewhere in the middle?
We believe that all portfolio ventures need support. We specialise in allocating the right human and financial capital for success. Our venture catalyst model optimises our effort as well because we are rewarded exclusively for success and have done intense due diligence up front.
Our typical engagement lasts between 3 and 5 years and each venture will touch over 100 people in our team during this period as we help them commercialise in many new markets globally. Our decision to optimise the liquidity event gets continuously reviewed through out the engagement.
A major review is conducted in conjunction with the founder after the first 36 months. During this review we agree the optimal next steps to liquidity.
How do you balance your time between (1) sourcing quality prospect ventures (2) doing due diligence for prospective investments and (3) helping current entrepreneurs? Which of these are you comfortable outsourcing to principals/analysts and which do you absolutely have to do yourself?
We have been around over five years now and operate in 38 cities and all continents globally. We receive about 150 applications per month. Only 10% of our time is spent on sourcing quality prospect ventures. We have a clear thesis on what we get involved in and this optimises our pursuit and filtering of prospect ventures.
So 90% of our time is spent on strategy, due diligence, and supporting execution. I personally lead all of our strategy review and development and my co-founder leads our due diligence process. And most importantly, execution is lead by our partners in each city around the world.
Many GPs of venture capital firms are good investors but don’t master one of the core skills – adding value as a board member. What do you think are some tricks to a productive relationship with founders? What should the culture be for the board and CEO for a quality relationship?
We believe that the key to venture success is directly related to an established trusted relationship with the founder(s). Our partners assume the role of the non-executive director for each of our portfolio companies. Each partner can take on a maximum of two ventures at a time. Their role is to mentor and continuously optimise the mix of human and financial capital for success.
We believe the best cultures are ones which empower the founders to be focused and collaborative. We have simplified and productised our management reporting systems which give all stakeholders access to consistent objective data. Our partners success is directly related to the founders and all stakeholders interpretation of the same operating data.
Nowadays, mental health is more present than ever in venture capital companies, with things like burnout, stress, depression, among others. What do you think of external intervenients like executive coaches, both for a founder and for a VC partner? Do they usually add value?
We acknowledge burnout, stress, and depression are heightened during the early stages of all entrepreneurial journeys. We have developed a very robust founder assessment program which all founders receive at the time of the initial venture assessment. We identify the risks of burnout, stress, and depression very early in our engagment.
We also have a number of coaches in our team which work with our own partners, team members, and founders through out the engagement to help human capital operate at its highest levels. We think our process adds significant value.
How do you solve important conflicts with CEOs, such as lack of alignment on exits, strategy, or just the CEO being in denial about things like performance? Does the resolution begin with a private conversation or with involving other board members in a decision?
At Cataliize we try to identify and anticipate the potential conflicts before the engagement commences. This tends to save the time and effort of all stakeholders.
That said, if conflicts do arise, private discussions are always the best way to address these disagreements. These discussions occur regularly informally, every quarter formally, and with a major review during the 36th month of the engagement.
When raising money from LPs, what is the thing you emphasise the most when “selling” the fund? Past returns? Team expertise (domain and/or entrepreneurial expertise)? Unique angle?
We source financial capital for our ventures from many sources; Customers (revenue through our sales teams), Governments (grants), Debt (loans), Impact (purpose), and Investors (venture capital). Our differentiator is the breadth of sources of capital and the de-risking of the stakeholders involvement.
When securing financial capital from a customer we emphasise our clear understanding of the problem and the unique solution the venture offers. When securing financial capital from governments in the form of grants, we emphasise the positive impact the company has on the country by solving an important problem and creating new jobs.
When securing capital from debt providers or investors we emphasise filtering process, track record, and hands on engagement process. We believe our unique process minimises the ownership dilution for the founder and the early angel investors.
