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Thursday, March 04, 2010

VC partner to start-up CEO-Gamekeeper turned poacher

Gamekeeper turned poacher

I read this article on a recruitment website I frequent...more so of late as redundancy looms...it caught my eye because I know the guy who had written it Mike Zimmerman, he was a contact I had developed in Australia as part of my "find a job in OZ" campaine, I did have a few interviews even offered a job ( www.digislide.com.au), but that is another story. I digress, Mike was a partner for technology venture partners (www.TVP.com.au) who are an austrailian VC that invests in ICM start ups (gamekeeper) who has started (poacher) his own company BuildingIQ (www.buildingIQ.COM).

In the article he reflects on the change andMike has some salient points to make on being a CEO of a start-up.

From VC partner to start-up CEO - a different view

By Mike Zimmerman

Ex TVP Partner Mike Zimmerman contemplates the view from the other side post his latest transition to CEO of start-up BuildingIQ.

How life has changed.

Late in 2008, I left my position as a partner at Technology Venture Partners, one of a very few technology venture capital firms in Australia. My time at TVP had been both enjoyable and challenging, as I spent almost 8 years investing in Australian start ups trying to make it big overseas. I learned a great deal from my partners, and even more from the experiences of sitting on boards and working closely with a number of entrepreneurs as they went through the ups and downs of their early stage companies.

I’m now on the “other” side. In October 2009, I started a software company called BuildingIQ which helps reduce energy consumption in commercial buildings. I’m the CEO and have a small but very capable team of 4 people working in operations and engineering. The foundation of our technology is based on work done by scientists at CSIRO’s energy research centre, who still actively collaborate with us. To get the company off the ground, I worked closely with Exto Partners, a small investment firm with a lot of experience in early stage commercialisation. I’ve raised a small amount of capital and we’ve been fortunate to be generating revenue almost since the day we launched.

As I reflect on what it’s been like to have moved across the table from investor to entrepreneur, the obvious things to flag are the differences. It’s very different, to be sure, but how specifically? Here are some of the bigger things:

1. Details matter: as an investor, I tended to focus on the big picture – was the investee company going after the right market opportunity, did they have the right people on the team, would they hit their numbers? As an entrepreneur, these things still matter, but they only happen if you can deliver on the details that make it so. “Going after the right market opportunity” requires you to spend lots of time with customers and others in the market, read and learn everything you can about your competitors, and deliver the right product with the right pricing and distribution strategy at the right time. Much easier said than done. “The right people” means writing a good job spec, talking to everyone you know for references, and interviewing then reference checking furiously. “Hitting your numbers” means generating and following up leads, making pitches, negotiating and closing contracts, installing product and then launching with customers without overspending. Lots of little steps to get to the big ones.

2. Going deep: Before I left TVP, my portfolio companies were in sectors as wide ranging as optical networking, mobile social media, internet fraud and voIP software. By definition Australia as an investment market is very wide and not very deep, so I was never focused very narrowly or going become an expert in any single field. Now as an entrepreneur, I need to be an evangelist for our sector as well as our specific company’s offering. I also am selling to people with 20-30 years experience in a sector, and trying to be convincing about why our stuff is as great as sliced bread and can’t be gotten anywhere else. In short, I have to be an expert in my field to be successful.

3. Ability to make it happen: Early in my career I had a great few years consulting with Bain & Company. Ultimately I left the sector because I couldn’t handle working up the strategy and recommendations but not being responsible for delivering results. I then got a taste of execution in a start up in Silicon Valley for 4-5 years during the web 1.0 days. As a VC you’re closer to the grindstone than in consulting, but it’s still not the same. You can be involved in strategy decisions, in hiring and in funding, but there’s a lot you’re not involved in, and you’re certainly not on the line for delivering. As the CEO, the buck stops with you, and that means you have to do anything that needs to be done, from ordering the business cards to closing sales to keep the door open.

So there are lots of differences, but I still find myself very thankful for my time as a venture capitalist. It’s helped to remind me of a few things I think are critical in a company at early stages. These include:

1. People, people, people: Being an investor and board member, I saw time and time again how important it was to have the right people involved in a company, and how costly it was when someone wasn’t a good fit, especially if they stayed around too long. So I’m trying now to be very thoughtful and picky about people, and encouraging my execs to do the same. So far I feel we’ve done a great job and I can already see the benefits even though it is early days.

2. Have a board and leverage it: Even though we’re still a very young company, we have an active board of 3 directors, with formal meetings and papers. As an investor, I always felt that there was benefit -- even for an early stage company -- to stepping back from the day to day and reflecting on progress, raising big issues and making strategic decisions on a regular basis. Moreover, I’ve formed an advisory board with people who can be very helpful on specific things but are not possible or practical to have working with us full time.

3. Alignment with investors: As a VC, I don’t think I spent enough time with my CEOs understanding what their motivations and goals were, and then being honest about whether those goals fit with what we as investors needed. Poor alignment between founders and management can really screw up a company and usually becomes most evident at the critical junctures in the company’s life: fundraisings and exit. One thing Exto and I did – and this was Exto’s idea – was draft up a letter agreeing how the company would be run, our initial thoughts on strategy, fundraising and exit and what would happen if we ran into conflict. It forced us to get everything out upfront, and ensure there was alignment from day one. I would recommend this approach to anyone starting a company with co-founder or taking on investors.

So life has changed, definitely. I’m having a great time as an entrepreneur and my world is very different. But having spent a number of years working as an investor has been invaluable and will serve me well in my start up. Next up: retirement!

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