A Day in the Life of a Venture Capitalist

P> Editor's Note: This is the second of a three-part series on the state of venture capital in the Greater Washington region. Send comments to technews@technews.com

What do those guys do all day, venture capitalists? Well, follow Frank A. Adams for a day, if you can keep up.

Adams, president and CEO of Grotech Capital Group, Timonium, Md., comes to the office early. Under his arm there's a stack of business plans he read the night before. Some 99 percent of these are forwarded to a secretary for the "thanks, but no thanks" letters. The remaining 1 percent have a chance, though maybe not.

The first few hours he spends in his Baltimore office tackling his phone messages. By 10 a.m. it's usually time to get out of the office and visit the managers of companies Grotech has helped fund.

"We see each company [we invested in] every month, or even once a week," explains Adams. "Our view is that any time you spend on the train or plane is a waste of time. That's why two hours away is about the geographic limit."

Adams calls face time with entrepreneurs vital. "It's axiomatic that to be helpful to these guys you must know the details of their business, because if you don't they'll tune you out. They don't have time to listen to generalities."

Adams said the business world generally misunderstands just how labor-intensive venture capital is. It's far from just reading business plans and then saying yes or no.

"In every week, I spend probably three days out of the office meeting entrepreneurs," said Adams. "One day a week is partners day where [we] talk about what's going on in our various businesses; that's where we get the interplay of other minds on various problems. The remaining day of the week, typically Friday, given that I'm the managing partner, is given up to administrative matters, and I attend to new deals coming in."

Adams says his job is an every-day, all-day devotion. "I read business plans on Saturday, Sunday and evenings. You can't waste time reading in the office. If you were in my office now you'd see a pile of business plans three and a half feet high. And I made a lot of headway on that during the blizzard. We see about 500 business plans a year, and most of those come over the transom."

Those aren't a priority and end up in the pile. Priority is what Adams describes as "meaningful introductions" -- opportunities referred to him by business associates, other entrepreneurs and "lawyers we trust." These under-the-transom business plans get read soon after they come in.

Some get entree before Adams even sees a business plan. "Somebody will call and say, 'Frank, I know this guy, knew him in business school. This really looks interesting.' I give him about 20 seconds on it," said Adams. "If I'm still interested I tell him to tell the guy to call me. Then I'll give that guy 10 or 15 minutes on the phone. Then I'll ask for the business plan, and if I still like that, then I'll have him come in. But at that point the business plan isn't that important. This is an instinct type of business. The metaphor in our business is, 'Can you smell the deal?'"

A lending banker checks a balance sheet; a venture capitalist checks his gut. "They'll call, and it smells right," said Adams. "You read the business plan, and it's terrible. You still bring him in. Because at the end of the day we invest in people, and if an individual convinces us that he can make the unbelievable happen, he just might get an investment from us.

"We're not anything like bankers. We're partners -- in every sense of the word," says Adams on the venture capitalist's relationship to the entrepreneur. "This is the little speech I give to entrepreneurs before we actually consummate a deal: 'We are going to be partners. We will cry together. We will laugh together. We will get rich together, or we'll lose all our money together.'"

He adds: "There's nothing wrong with big egos. You've got to be arrogant to suggest that you're going to do something different than the way people have done it in the last 50 years and then ask people to give you money to do it. Entrepreneurs must be convinced of their own prowess. They cannot have any doubt. The logical conclusion of all of that is that venture capitalists are the same way. You've got to be a little crazy to look at a crazy entrepreneur and say, 'Yeah, let's give him a million dollars.' I don't know who's crazier."

Eisenhower and Patton: Two Winners and Two Entrepreneurs

Both won the war, but by divergent tactics. Gen. Dwight D. Eisenhower carefully prepared the D-Day invasion for months. After getting removed from command in Africa, Gen. George S. Patton went to Great Britain, just barely got a command, and ended up spearheading the allied invasion of Germany. His aggressive tactics ended the war perhaps earlier than it would have ended if a more cautious general had been leading the Third Army through France.

But what does this have to do with entrepreneurs of the 1990s? Nothing, except to show how contrasting styles produce companies that battle in different modes with different reflexes. Some entrepreneurs are like Patton: They aim to get into markets early, fight hard. They like to get into the middle of the battle and are reluctant to share decision-making or delegate. Once they're in the battle, they adapt to circumstances. They don't mind firing people or re-engineering the company over the weekend.

Other entrepreneurs are like Eisenhower: They insist on careful preparation. They're comfortable delegating. They spread the credit around. They'd rather work to enhance employee performance than write pink slips. They don't start a venture until they've got everything ready.

Patton-like entrepreneurs would rather be in motion than plan to be in motion. They have little patience for things such as business plans and the social aspects of entrepreneurship. Entrepreneurs like Eisenhower want to get people behind their ideas through colleagueship and gentle persuasion. Entrepreneurs in the Patton mold might growl at you if you're too stupid to realize their idea is brilliant and their company is bound for a public offering.

Which is the right mode? Who's to say. It's a matter of style, temperament, even genetic code. But if you're new to the world of entrepreneurship and want to be around for the long haul, you may want to read up a little on Eisenhower. Maybe in your second successful venture you'll want to follow the full-speed-ahead footsteps of Old Blood and Guts. Some entrepreneurs, like Patton, are just born to charge ahead. But this can be a liability: Patton's career was nearly destroyed when he slapped a soldier in a military hospital.

Both Eisenhower and Patton had their weaknesses, of course. But, being on the same team, they complemented each other. Eisenhower's too-cautious strategy of invading Germany gave the Nazis time to dig in and lash out in the Battle of the Bulge. Patton was instrumental in quashing that last major German offensive.

Entrepreneurs, whatever their strengths, all have weaknesses. What you want is people on your team who shore up your weaknesses.

One last thing about Eisenhower and Patton. At the end of the war Patton wanted to settle the question of world order once and for all: He wanted to march to Moscow and give those Bolsheviks their last historical lesson. It frustrated Patton that the commander-in-chief in Washington wouldn't let him charge ahead. Eisenhower, meanwhile, became supreme commander of NATO, an organization dedicated to containing and waiting out the Soviet menace. Tragically, Patton died in 1945 driving fast on a German autobahn. Eisenhower became president of the United States. He lived until he was 79.