Venture Capital Companies / Venture Capital Firms Series Overview
Our VC interview focus on interviewing top GPs from the top Venture Capital Companies / 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.
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Russell is an experienced Managing Director with a demonstrated history of working in the capital markets industry. Skilled in Negotiation, Securities, Asset Management, Investment Advisory, and Management.
Covarrubia & Co. is focused on acquiring construction, real estate, and engineering company’s in the lower middle market. We’re currently looking for ground-up development projects in major cities. Please submit to email@example.com
Portfolio ventures 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 acquire family owned businesses so all our ventures need some tuning up. We’re a “Value Add” investor we absolutely have to know how to extract value before buying. We feel this allows us to ensure the multiple is accurate and that we’re delegating enough resources to ensure that business runs as anticipated, when things start unraveling we know before hand with our required reporting standards. If our money is in it we have to ensure it gets 100% effort.
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 a network of business development professionals that refer us to acquisition targets and projects. If they’re an interest we start the standard process I personally work on as I want to know the management before spending a lot of resources on. I usually work through the due diligence phase as well to ensure that nothing is missed from the technical stand point but also to create the “ Value Add” plan which I believe is critical prior to putting capital in.
Most businesses we purchase have a succession CEO in place who’s a professional CEO but has a tremendous amount of loyalty to the business and we typically require the exiting parties to stay in 10% to 25% so that loyalty is carried over and that if anything goes south we have the ability to pull back part of our capital. I trust my team they’re efficient and they know my expectations and they always exceed them if they need help we all chip in to ensure whether it’s an acquisition, growth plan, or an exit that it’s successful.
Many GPs of venture capital companies / 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 only look at buyouts from a value add view point. If you’re just buying to buy that okay but the likelihood of having a truly successful portfolio isn’t very high. We buy with a purpose and strategy. While in due diligence we lay down the ground work and create the strategy of how we grow, when are we likely to exit, and how directly with the whole team including the CEO and the existing founders. Transparency is very key with our companies. I believe in the whole “ No BS” mindset and my teams do as well.
Nowadays, mental health is more present than ever, 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?
I have a military background (Marine Corps) so burning out is apart of high intense work whether that be combat or investments. I don’t like comparing the two often but the mental strain is very similar and the mindsets are also similar in my experience. I believe having open communication as a team in these issues is very important also ensuring a performance coach is available for the team.
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?
As the head of the firm I personally approach the CEO first in a kind manner, I’m a firm believer in “Talk Softly, but carry a big stick”. And I use that often, we’ve unfortunately have had to remove a CEO in the past not a pleasant experience but it turned out to be exactly what was needed for the company. We as a board made the choice and once my initial conversation happens I report to the team what’s going on and we plan a strategy on how to help and fix the situation first.
When raising money from LPs, what is the thing you emphasize the most when “selling” the fund for venture capital companies / venture capital firms? Past returns? Team expertise (domain and/or entrepreneurial expertise)? Unique angle?
Well our firm is a family office at the moment, but with our new Fund Caretaker Capital will be a No Fee 40 ACT fund we want to emphasize on that because as a SFO we only do direct but we’re getting transactions so large we simply can’t do it all ourselves and bringing in LPs that share our vision is important.
We also like transparency hence the 40 ACT reporting which we will do with LPs immediately until we get to the public markets for their liquidity needs. Locking up investors money long term just can’t happen anymore, we need more liquid funds and we believe Caretaker will do that long term.
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