Your background is with Apple Computers. How does your experience at a big corporation aid in development of early stage companies?
Apple was a large corporation divided into several little divisions. Each separate division acted as its own little company. My badge number at Apple was 5041, so I was there fairly early, but not employee number 3 by any means.
How long were you with Apple?
I stayed there 7 years, concentrating mostly on software and new product launches.
On your book Art of the Start - where did the ideas come from?
It took about a year to write the book. A lot of the information was comprised of presentations from events that I have made with our Bootcamp series from Garage. Of course this brought on more in depth discussions of certain topics and allowed me to illustrate examples for each point.
How is the acceptance of the book?
In Search of Excellence had an initial order of only 5,000 companies and went on to greatness. I am not looking for that, but the other day we had climbed to the 13th spot on the bestseller list of Amazon. I'm pleased with that so far (as Guy says this, he takes a bite of his breakfast and glances at his watch, knowing he has a promotional event he must get to in San Francisco).
I have heard you speak a few times at various events and seminars. One of the things I find interesting is your equation for evaluation of an early stage company. Can you explain that to me?
Well, there are a few things I look at. One of the first things is a simple direct correlation. MBA does not equal Entrepreneur. So when an early stage company comes seeking funding my equation is simple.
Company Valuation = $500,000 x every full time engineer - $250,000 x every MBA
Garage is a fairly small firm in terms of total capital under management.
We closed a $20 million fund two years ago. We are an early stage firm generally investing $500,000 to $1.5M in the onset of a company. We stick to our knowledge, experience and evaluation to make us successful.
You also do something rather different in hosting the Bootcamp series. I don't see any other venture firms out there trying to educate entrepreneurs in a workshop setting.
Bill (co-founder Bill Reichert) and I have been doing the Bootcamp series for quite a few years. Actually, a lot of the material in my book is tested material from those workshops. In the years we have been holding the workshops close to 10,000 people have participated.
Is there an industry you see as lucrative in the next few years?
I think ecommerce is coming back. A lot of those companies touched the tip of the iceberg, but consumer behavior was not quite prepared for rapid adaptation.
How do you position Garage to be advantageous of market trends?
Predicting can get you into trouble. We try to react well to changes rather than predict.
Once a company becomes a member of the Garage portfolio what is the continuing connection?
We take a seat on the board and try to be very hands-on. Our companies are generally earlier in their life cycle than other venture firms so there is at times more work to be done on a day-to-day basis.
Is there a common characteristic of a business plan you see from entrepreneurs entering your board room?
The optimism about sales. Generally entrepreneurs are too optimistic about the sales.
Isn't it difficult though to forecast low and keep an investor interested?
There is a fine line, I guess. Another common thing is for me to add one year to whatever timeline an entrepreneur presents and divide the amount of sales by one half. That is usually the reality of what will happen. We like to see a critical mass of $1M to $2M in sales that can be reached rather quickly.
The venture arena is becoming somewhat competitive again. Are there deals you look at that have already been seen by a number of venture firms?
We ask the entrepreneurs if anyone else is looking at them and usually get three answers. Two of them are the same. First answer is no. We then wonder what is wrong. The second answer is yes and we wonder why no one has bit. And the third answer is yes and this yes may show there is a lot of interest from other investors.
About this time Guy is distracted by the time knowing his car and scoot, but the speed limit still applies on the 280. He finishes his breakfast, checks his shirt to make sure he didn't spill anything and subtly lets me know he needs to run. I come to the conclusion that yes, this businessman's personality can be compared with the car he drives. His quiet demeanor belies the fierce intensity he brings to the venture capital arena.
By Tim O'Malley
