Don Rainey

Photography By Michael Vonal

DON RAINEY, THE VENTURE MAN

When Don Rainey isn’t discovering the latest and greatest early stage tech firms, he keeps busy by serving on the boards of ARPU, Clarabrisge, LivingSocial and Zenoss. Don Rainey is also a technology consultant to the Chief Information Officer of the US Department of Defense through the DeVenCi Program, seeking out firms that can help the Department of Defense overcome some of its more pressing technology needs. Don Rainey is also an Organizing Board member of the Mindshare forum, which seeks to help CEOs in the Metro DC area to build strong and lasting companies. Despite all that is on his plate, Don found the time to share with us some of his thoughts.

What does Grotech Ventures do?
Grotech Ventures is an early stage, venture capital firm. We strive to be the first investors in high potential technology companies. Our team is committed to finding and backing the best local talent pursuing the biggest ideas. The firm is 27 years old, and since most of us had our businesses prior to doing this, we have the experience to positively influence the outcome.

When an entrepreneur comes to you for funding, what are the top three things that you look for in a company? What are some overrated things that entrepreneurs pitch to you?
The top 3 things we look for in a company are management talent, visible traction with customers or in markets and a plan that can succeed in multiple ways. The most overrated things that entrepreneurs pitch us are “me-too” ideas that copy currently successful companies or ideas that chase smaller markets.

You are on the boards of numerous associations, and companies, how do you choose who you affiliate yourself with?
I like to be involved with lively people that are committed to improving the world. They are out there.

What are the risks of backing early stage tech firms, what are some of the benefits?
The risks of backing early stage companies are many and varied but typically focus on the market, the product and the team. Sometimes, the market isn’t there and sometimes it is there but the market doesn’t want the product. Or, sometimes, it doesn’t matter because management is incapable of producing a product or reaching the market. The benefits of backing early-stage companies are profound and rewarding to investors and management. I like the creative side of being part of creating something from nothing. It is thrilling and I will never stop doing it.

What does DeVenCI Program do and what is your role there?
DeVenCI is a Department of Defense program to fast track the adoption of innovative technologies where a dozen venture capitalists volunteer their time to help the DOD find these new technologies. We meet around the country with DOD personnel who tell us about their unmet technology needs. The DOD personnel aren’t usually aware of the state of the art in technology. We, as VC’s are given our investment focus on emerging technologies. So, we go out on a big scavenger hunt every few months to find whatever they ask for and we have been very successful. I am on my 3rd 2 year term with DeVenCI now. All that being said, I do not have any government security clearances, so when I ask for specifics about the usage of previous products recommendations, I get an answer that sounds like this – “We love it, it is working well in the field, and how is the weather at your house?”

What are some of the trends you see in D.C. and how does it compare to what’s going on in Silicon Valley. What are some of the benefits of being in D.C.?
Silicon Valley will always be better at the creation of technology tool businesses than any other region. They are advantaged in skills, disposition and capital to do this. The rest of the world will take these tools and use them to create their own new businesses. New York is doing this well with advertising related companies. D.C.’s startups are well positioned for the progression of social media. D.C. is better situated and skilled for the coming convergence of social media and public policy. Silicon Valley and New York “don’t get” public policy.

What have been your biggest disappointments and your biggest surprises?
My biggest disappointments were also surprises. I had one CEO who turned out to be world class at ignoring good advice regardless of source. And another one with a tenuous and unfamiliar relationship with the truth.

Some of the very successful and innovative tech firms out there have been started and led by entrepreneurs under the age of 30, such as Google, Facebook Zynga, Pandora, Amazon, and Ebay, among many others. Have tech firms become a young man’s game?
They are for the young or the young-atheart. Tech firms are created from the application of new tools to old problems. Younger people tend to be more conversant in the newer tools and less accepting of the old problems. None of that precludes older folks. But given the tendency of younger people to command the power of new tools, startups can be a younger person’s domain.

How much of what you do is based on metrics, and how much is based on intuition?
I think it is more art than science, so I say both-with a heavy mixture of intuition. In the industry, we prefer the term “pattern recognition” to either metrics or intuition. Pattern recognition is the process of matching what one has seen work in many different contexts to the proposal at hand. With startups, everybody is typically trying to do something that hasn’t been done previously. So we look for analogous experiences–start up successes and failures –and attempt to find matches. That is pattern recognition. Prior successes and future ones tend to look alike.

What are your sources of motivation? Who do you find inspiring?
I am an advocate for entrepreneurial endeavors. I often tell MBA students that in starting a business, there is only one sure thing. You may succeed or you may fail, but the act of starting as a business will absolutely change you as a person. That progression of people, or being part of that progression, is my life’s work. I love it. And, I find it inspiring every day.

What’s next for Don Rainey?
I just joined the Board of Visitors at James Madison University, my alma mater, and I am very excited about the opportunity to serve the greater community around the school.