Editor’s note: This is second of a three-part interview.
RESEARCH TRIANGLE PARK — Dennis Dougherty is not what anyone would call a stuff shirt. He runs counter to the public image of venture capitalists as flaming egos dressed in suits.
He likes to tell jokes about VCs.
You told some funny stories during your speech at the Council for Entrepreneurial Development’s banquet earlier this year. What’s your favorite VC joke or story? You know, how many VCs does it take to install a lightbulb —
Three VCs and three entrepreneurs are taking the train from Boston to New York. When the conductor starts down the aisle collecting tickets, the three cost-conscious entrepreneurs all go into the toilet. The conductor knocks on the door and says “Ticket please.” The entrepreneurs crack open the door and hand out one ticket. The VCs observe this enterprising burn-rate reducing technique and on the return trip they jump into the toilet first. One of entrepreneurs walks up to the toilet door, knocks, and says “Ticket please.”
After 20 years of involvement in Venture Capital events in RTP, do you just feel older or has the VC industry matured as well? Please explain.
I feel like I crammed 40 years into the last 20; but, working with the next generation at Intersouth and the region’s entrepreneurs is exciting and makes me feel younger. The venture industry here has matured beautifully. In 1986, our $6.4 million was all the VC money resident in the Triangle. Today there is close to a billion dollars under management by the area’s venture capitalists. The entrepreneurs and their advisors here are sophisticated and can match up with those anywhere.
Monica Doss (who runs the CED) told me it’s not how many VCs you have – it’s the quality. Do you share her belief that RTP has in fact developed a strong cadre of VCs? How so?
Monica is right. It is also not how many entrepreneurs, it’s the quality. For a long time, the region was “dinged” by outsiders for having neither experienced (read quality) VCs or entrepreneurs. We have VCs (and entrepreneurs) that are experienced and good investors. The venture community here is really special. I know that it is hard for local conference planners to grasp the concept that funds already located here are just as competent as those from outside of the 30-mile “radius of credibility”. Unfortunately, because many of the funds here have similar business models, i.e. early stage, life science, technology, etc., we have to compete with each other for investor dollars from time to time. But when it comes to doing deals, the funds are compatible, with partners who really like each other, and are respectful and supportive of the entrepreneurs. I know a lot of VCs and the “knucklehead quotient” here is very low.
Your first event drew 100 people or so. The most recent drew more than 800. Could the RTP tech industry have evolved to the point it has reached without VC?
No. And the VC community could not have evolved without the tech industry. I gave a speech about 10 years ago about what comes first — the VC or the deals, the chicken or the egg. I concluded that a successful community is chicken and egg soup. It takes risk dollars, good ideas, managers willing to take risks, good accountants and attorneys who know what to do, supportive university tech transfer, institutional investors, etc. Until you have all the ingredients, it’s just various stages of hot water. Today the “soup’s on.”
How have VCs helped other than by raising and investing money?
I know that at Intersouth we have been on a 20-year missionary sale of the Research Triangle and the Southeast. This has helped focus the attention of other investors, managers, and scientists on this region as a good place to invest, take a job or start a company. We bring outside investors into our deals and that gets them in town 4 times a year, so they begin looking at other deals. In terms of helping companies that we invest in, VCs have to be careful. Because we have the checkbook, we can often occupy the “bully pulpit” for our opinions.
Different management teams need different things. CEOs are resentful of VCs who advise them about things that they already know better than the investors. Some things VCs universally know better than managers, or should know. The biggest one is what does it take to raise money, now or next time. Because we spend every single hour of every single day visiting with companies that need money or trying to help companies get other VCs money, we really have good instincts here. Beyond that, help should be customized to fit the needs of the company. Often CEOs just need someone who doesn’t work for them to listen. Good VCs have big ears and little mouths.
A number of newer VCs started as entrepreneurs themselves. Your own Kip Frey among them. Does this evolution bode well for the future – more entrepreneurs doing well and looking for ways of giving back as well as capitalizing further on their success?
Successful entrepreneurs are a good source of talent in the VC community. They are especially credible with CEOs who prefer to take advice from someone who has “been there, done that.” Good VCs back or recruit good CEOs to their companies and our job is to be the coach, not the player. The best background for a successful VC has been the topic of energetic debate since I entered the industry 20 years ago. I think that the conclusion has been that the specific background is less important than good people skills, discipline, risk tolerance, and willingness to make big money decisions in ambiguous situations.
Wednesday: Criteria for making a deal.
Part one: www.localtechwire.com/article.cfm?u=5735