By Richard Silberman, Writer/Researcher, IBM Communications
When venture capitalist Bill Reichert talks about his criteria for choosing tech start-ups to invest in, you may be surprised to find that ROI (return on investment) is but a small part of the conversation.
Instead, Reichert — who is managing director of Garage Technology Ventures, a leading early-stage venture capital firm in Palo Alto, California — points to other qualities that he considers essential to a start-up’s success.
By focusing more on an entrepreneur’s passion, vision and desire to do good in the world than on hard numbers and spreadsheets, Reichert and his peers represent a new paradigm for responsible investing.
“Perhaps the top indicator of success for an entrepreneurial team is that it’s motivated by some higher goal, beyond ROI,” Reichert said.
“ROI is key in every business plan, but what we look for from entrepreneurs is something that gives them a bigger goal than just being a little bit cheaper, a little bit faster, a little bit more economic for their potential customers,” he said.
That bigger purpose can be just about anything: helping people, building a sustainable business, cleaning the environment…you name it. “But whatever that motivation is, we know that’s what’s going to make for a successful company,” Reichert said.
In search of “enchantment”
When a start-up is driven by a higher goal, its appeal can be contagious. And that’s crucial to success.
“One of the big mistakes that entrepreneurs make in selling to customers or investors is believing that they make their decisions based on their brains, when in fact they make decisions based on their hearts,” Reichert said.
Reichert uses the term “enchantment” to describe a company’s ability to capture hearts and make investors and customers fall in love with it.
“Enchantment is that special quality that enables an entrepreneur to change not just minds, but also change hearts and ultimately change behavior,” Reichert said. “And ultimately that’s what you’ve got to do — change behavior to cause an investor to invest or cause a buyer to buy.”
Global from the get-go
While intangibles like passion and enchantment are crucial to Reichert, so are practical concerns that point to a company’s ability to compete and thrive. In today’s world, a tech start-up must be innately global in how it thinks and possess a keen awareness of the entire ecosystem in which it operates, Reichert explained.
“We’re not interested in start-ups that have a global strategy somewhere down the line,” Reichert said. “We look for entrepreneurial teams that can tap right into the opportunity that global connectivity gives us today.”
These entrepreneurs must be able to capitalize on the talent, knowledge and markets available to them in every corner of the planet; skillfully collaborate across a global value chain; and exploit end-to-end systems across the full spectrum of platforms, networks, technologies and devices.
“For today’s high-tech entrepreneur, success is not so much about being a better inventor. It’s about innovating across the value chain of any given business,” Reichert said. “Success means being connected and being aware of opportunities to partner with others or to integrate other technologies up and down the value chain and then across geographies.”
Bill Reichert, managing director of the Silicon Valley venture capital firm Garage Technology Ventures, talks about what it takes to be a successful entrepreneur, innovator and leader in today’s global economy.
A great time for tech start-ups
Reichert has been in the venture capital world for nearly 15 years — through the dot.com boom and bust, through flush times, up to the present. While capital is tougher to come by now, given the global economic downturn, it’s nonetheless a great time for tech start-ups.
“There is an infinite number of opportunities for innovation out there where entrepreneurs can come up with solutions that will make the world a better place and that will enable them to build highly successful companies,” Reichert said.
“If you’re an entrepreneur who possesses the necessary ambition and boldness, there’s never been a better time to start a business to address some of those opportunities and attack some of the world’s problems,” he said.