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Gene Riechers: Valhalla Partners | Business

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Gene Riechers: Valhalla Partners
Business, People
Gene Riechers:  Valhalla Partners

With over 25 years of experience in venture capital, Gene Riechers has a wealth of knowledge for entrepreneurs to draw on. Gene was one of the founders of the Valhalla Partners, where he remains as a Senior Advisor. Prior to co-founding Valhalla Partners, Gene was co-founder and managing director at FBR Technology Partners, where he helped to foster a culture of success, overseeing the initial public offering of webMethods, the most successful IPO in history. Gene has spent years working in a variety of senior operating roles at technology companies and is the co-founder of the MindShare program, an invitation only development program for CEOs in the greater Washington D.C. region. We were fortunate to speak to Gene and ask him a few questions about venture capital and entrepreneurship.

Tell us a bit about your background and how you became a venture capitalist.
I was fortunate to be a part of some of the leading high growth technology companies in the D.C. area. Over the course of my corporate career, I joined four start-ups, and they all went public. In the 90s, I knew the region had great potential but not enough local capital, so I joined forces with Friedman Billings Ramsey to start a venture fund aimed at building technology companies. We provided early funding for seven more IPO’s, plus a number of other successful companies. In 2002, I was a co-founder of Valhalla Partners, a leading venture fund in the region.

When is it most wise to seek venture capital? Should early-stage companies seek other avenues for funding?
I always tell entrepreneurs to focus on raising capital that is congruent with their business and, most importantly, their personal style and goals. It’s difficult to build a successful, high-growth technology business under any circumstances. Don’t make it even harder by working with investors that don’t correspond with your style.

VENTURE CAPITAL FIRMS CAN HELP YOU BUILD A GREAT BUSINESS, BUT THEY ARE NOT THE ONLY ROUTE TO DOING SO

More specifically, if you raise capital from VC’s, they are going to be engaged in your business and looking for a significant exit. Venture capital firms can help you build a great business, but they are not the only route to doing so. Th e angel investor market is growing rapidly, and they can be great partners for entrepreneurs. Again, it depends on what you are looking for, your goals and your approach. It’s fine if you don’t want an active VC investor partner in your business and/or you want to pursue a more modest exit. Just don’t raise money from a venture capital firm then, or you will find yourself at odds with your investor partner, and life will be hell. The wrong answer is to do something inconsistent with your values and goals.

Lastly, recognize that some businesses need a great deal of capital to succeed, such as data storage. And, some businesses can be built to scale on little capital, such as government contracting. Don’t start a capital intensive business with an attitude that your capital sources aren’t going to have an influence on your business.

What are the top things you look at when looking at a business plan?
Most venture capital investors are very focused on the team. In the early stages, that can mean just one or two people.

Do they have relevant experience? Do they know how to adjust to changes in their market, or are they set in their ways? Do they know that they don’t know everything? Are their plans and goals in line with the venture fund’s goals?
The idea matters a lot, too. For some investors, they want to see great new groundbreaking technology. For others, it’s to see a large potential market. I was generally focused on the potential market size and dynamics, even if it was a nascent market at the time of investment. Something is going to go awry, and a big market gives you room to maneuver when faced with unexpected challenges.

When a company has a brilliant idea behind it, but has a poor management team, what can the venture group do about it?
Venture funds are generally good at helping companies build management teams if an entrepreneur has a big idea and knows they need help in building a team that can work out well. Th e mistake I see, on rare occasions, is that an entrepreneur has listened to too many VCs emphasizing teams, teams, teams. So they go off and build the wrong team before meeting with VCs. When a VC meets a good idea and a large, weak team, the VC is likely to just move onto the next opportunity instead of trying to fix that one. Most VCs feel that may be too hard to fix and is a poor use of their time.

When should an entrepreneur seek an out-of-town venture firm?
I think it’s often wise to have local and out of- town VCs as investors. Each can provide complementary skills. As one example, maybe the local one will help you build a management team, and the out-of-town firm might have a different set of contacts in the market.

What piece of advice do you have for the entrepreneur who is seeking an early exit?
First, I think all companies should be built towards being sustainable in the long run as an independent business. Aiming narrowly for a specific exit (“I plan to sell in 24 months or to this particular acquirer”) usually doesn’t work out. Having said that, it is reasonable for an entrepreneur to view an earlier, smaller exit as a big win for them personally. Just don’t bring in an investor partner who has a very different view. Life’s too short to be out of sync with your investor.

We all like a sure thing, and venture capitalists are no different. How much risk were you comfortable with?
It’s good that venture investors differ a lot on risk and risk/reward tradeoffs. They gravitate to the stage and industries that are best for them, which creates choices for entrepreneurs. If you look to raise venture capital, understand each firm’s areas of focus and risk management. If you are looking for early-stage capital, talking to a later-stage firm is a waste of time. You aren’t going to change them.

You have had over 25 years of experience in venture capital and in the technology sector. What, so far, has been the biggest challenge of your career?
The biggest challenge is to help leaders and companies through times of adversity. The oral histories of successful companies usually don’t include the near-death experiences they suffered regularly in their early days. I was an executive in one company where in the early days I felt like I learned two reasons each day why we would fail and two reasons each day why we would succeed. It was an intense roller coaster experience, but you couldn’t let the emotions of the moment overwhelm you in either direction. (We ended up with 60% market share, so it worked out fine.)

What are some of the big mistakes that inexperienced entrepreneurs commit most often?
A common mistake is to expect market growth or market adoption rates that are too aggressive. This leads to spending too much on marketing and sales early. Another mistake is to focus on getting the first product “perfect” versus getting something useable in the market so that you get feedback. Some entrepreneurs are trying to build release 2.0 at first, even though in their mind it is the 1.0 release. The one they should build and launch is effectively release 0.7.

Do you have any big regrets? Are there any companies that slipped through your fingers?
Every venture investor has missed in both directions. There are the deals you did that you should not have, and the deals you didn’t do that you should have. In the latter category for me is Blackboard. Michael Chasen and his team have done well and taught me there is budget money in education if you know where to look.

What have been the most valuable lessons you have learned being a venture capitalist?
The most important lesson is that in building a company, management will face challenges that could not have been predicted. Do they have the resiliency and trust in each other to work together through the challenging times in order to adapt to those changes?

What do you like most and least about the venture capital industry?

It’s two sides of the same coin – VC’s get to meet with many wonderful entrepreneurs who are dedicated to changing the world for the better. These are bright, energetic, dedicated people. The flip side is that the experience isn’t as intense as it is in a company. As a VC investor, you may be involved with the company, but you aren’t there in the offices sweating the details with a team to launch a product or to get that first key order. I’ve had the very good fortune to be in both places in my career and I really value all of those experiences.

What’s next for Gene Riechers?
About a year ago, I reduced my role with Valhalla Partners following a health scare. I have been fully healthy for some time now and enjoying working with great companies as a board member, advisor and consultant. I’ve worn a few different hats over the years, but it has all been about helping technology entrepreneurs build their dreams. I’m more than a bit addicted to it.

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