Kevin Greene is a Partner at Valhalla Partners. He has over twelve years of operating, banking, and investment experience with both early and late stage enterprise software, healthcare and media companies. Prior to joining Valhalla Partners, Kevin was a principal at Flagship Ventures, a $600 million early-stage venture capital firm in Cambridge, Massachusetts, where he served as a member of the investment team and worked closely with a number of Flagship’s portfolio companies. Before Flagship, Kevin worked for IBM out of its Research Triangle Park, North Carolina campus, where he was responsible for establishing, retaining and growing relationships with IBM business partners across the globe. He also held a variety of product marketing positions at IBM, including managing the WebSphere Application Server product portfolio. Prior to IBM, Kevin worked for several years at Goldman Sachs in its New York and Hong Kong offices, where he executed over $30 billion in equity, equity-linked, and M&A financing transactions for technology, healthcare, media and energy-related clients.
Can you tell us what an average day is like for a Venture Capitalist?
An average day for a Venture Capitalist (if there is such a thing) represents a challenging sprint across three priorities – building companies, investing capital, and developing sector knowledge. Every day is a portfolio company building day. If we serve our entrepreneurs well, our own success will follow. If one of our CEO calls, we drop everything to help. The entrepreneur comes first.
Second, we seek to be the first to indentify and win attractive investment opportunities. We aggressively invest in creating, nurturing, and expanding our relationships and networks in an effort to partner with the very best sources of innovation. New deal flow is the lifeblood of any venture firm.
Lastly, effective company building and investing requires staying abreast of changing markets and sector opportunities. We must constantly strive to anticipate and adapt. It’s a constant balancing act and it requires strict time management, which isn’t always popular.
What is the best way to get a VC’ s attention? Will a simple email work?
Email is tyranny. Venture firms receive thousands of external emails a week. Therefore, most VCs tend to filter projects through people and relationships.
The best way to gain a VC’s attention is through other people. Ask for an introduction from someone connected to the venture capital firm.
Can you briefly explain why it’s best to get a small valuation when getting an investment?
Low valuations relative to other projects in the same sector and at the same stage are generally not a good thing for a company. Valuations represent the price the market is willing to pay to own a piece of a company. A low relative valuation says something about how the market views the company and, depending on the amount of capital raised, could significantly dilute the existing shareholders.
That said, companies that attract high relative valuations face a different challenge. These companies must grow revenue and profits to meet or exceed these valuation expectations. If the company fails to do so, perhaps because past valuation expectations were unreasonable, it could enter a tail spin.
Building a successful company takes a long time. Maintaining alignment of investor, senior management, and employee interests along the way is critical to building great companies and achieving superior returns. Ideally, everyone involved is incented to achieve success. At any given financing event, unreasonably low or high valuation levels can haunt a company down the road. It’s best to think long term.
Do you invest in family teams? Are there any kinds of businesses or management arraignments that you immediately turn away?
Indeed, the best sources of innovation sometimes run in the family. Locally, brothers Scott and John Ferber are two of the most innovative forces in the ad tech industry. “Ferber class” entrepreneurs are hard to find and are always a privilege to work with. All companies run into challenges when decisions are optimized for reasons that are not in the absolute best interests of the company or its shareholders.
Family teams are no different. Building a great company is tough enough. There is simply no room for those who put their personal interests ahead of the interests of the company or its shareholders.
Are there a mentorship programs conducted and organized by VC’s that coach entrepreneurs?
A seed accelerator (or incubator) mentorship industry is rapidly surfacing across the world. Some are national in scope.
Others are regional in scope. Most accelerators receive venture capital funding and/or participation. A recent Kauffman Fellows Program field study highlighted that three incubators (Techstars, Ycombinators, and Seedcamp) accounted for over 50% of the startups generated to-date by the 30 U.S. seed incubators with one out of six participating start-ups achieving qualified financing events. These accelerators typically provide coaching and handson support through an intense multimonth formal program. In exchange for small equity positions, the support often comes with office space, access to venture capital through demo days and a small amount of cash to cover living expenses.
While entrepreneurial mentorship programs are not new, the institutionalization of these programs is a powerful phenomenon that is positively changing the innovation landscape. These programs will foster the creation of more competitive and therefore successful start-up companies. They may also further democratize the venture capital fund raising process, which ultimately, may fuel further consolidation in the venture capital industry as the origination of deal flow lends itself less to regional advantages.
What happens when a company you invested in fails?
My late mentor, Prof. Jeffry Timmons of Babson, liked to differentiate good ideas from real market opportunities. Successful entrepreneurs and investors know good ideas do not always represent sustainable, real, or, most importantly, timely market opportunities. However, sometimes we assess the market opportunity wrong, or worse, fail to capture a real and attractive market opportunity.
If a company we invest in fails, we generally hope it fails fast–in a capital efficient manner and for the right reasons. If we’re lucky, we learn something early in the company building process that enables the company to pivot to success. In some cases, management succeeds in finding a new home for the company’s employees and technology, while returning as much shareholder capital as possible. And in other cases, the company is shut down and we are left holding a multi-million coffee cup with a cool company logo. Failure is a key part of the innovation business. If you fear failure, you do not belong in this business. We must be free to fail in order to take the calculated risks required to pursue great opportunities.
What are some practical words of advice you can give to the entrepreneur about to be interviewed by a VC?
Clearly articulate the customer problem and market opportunity. Know and tell your story. If you’ve attracted “glow in the dark” talent to your team, talk about them. Do not spin.
Non-fiction is preferred. “I don’t know” is a perfectly acceptable answer. Tolerate interruptions. VCs are notoriously impatient. All the VC likely wants is simple acknowledgement that they have been heard. You may learn something new, but then again, you may not. Keep your head up. Maintain that quiet confidence that enabled you to quit your job, take the risk, and pursue the American dream. You are an entrepreneur and you deserve our respect.
Do good entrepreneurs make good venture capitalists?
Changing the world and building a new company, from invention to innovation, is replete with challenges. Successful entrepreneurs require a unique mix of optimism, paranoia and courage. It also helps if entrepreneurs’ venture capital Board members are great coaches. Some great coaches are former star athletes. Some terrible coaches are former star athletes. Entrepreneurship and venture capital are no different from the ball field.