Charlie O'Donnell asked me last week about lessons I learned on my first venture capital investment. I'm not entirely sure what my first investment was but I know what my first board seat was. It was a company called Upgrade Corporation of America (UCA), founded by Jordan Levy and Ron Schreiber and located in Buffalo, NY.
UCA was in the business of providing outsourced sales, fulfillment and tech support services to the desktop software business. Ron and Jordy had previously built the largest software distribution business and had sold it to Ingram. They saw their former customers like Lotus and Microsoft starting to offer upgrades to new versions of their software programs directly via telesales. And since those upgrade campaigns happened once a year, it was ideal to outsource the upgrade sales and fulfillment to a third party. That third party was UCA. It became a large business and was eventually sold to SOFTBANK Corporation of Japan. It was a very good investment.
I was in my early 30s at the time and the classic "wet behind the ears" VC. Ron and Jordy were concerned that I was going to give them all kinds of worthless advice because I didn't really understand the business like they did. I told this story a long time ago on this blog, so I'll just cut and paste the rest of it from the original post.
I went to the first board meeting. It was in Buffalo, NY and the two entrepreneurs were Ron Schreiber and Jordan Levy, both of whom have become good friends and great VCs.
After the meeting, Jordan took me aside and said "Freddy (he still calls me that), if you want us to listen to anything you say in these meetings, you are going to have to spend some serious time getting to know our business".
I guess Jordan and Ron didn't like the idea of some wet behind the ear VC trying to tell them how to run their business.
I quickly recognized that I had to earn the right to tell them what I thought they should do.
So a couple weeks later, I cleared my calendar for 2-3 days and flew to Buffalo.
Jordan had arranged for me to spend time in every part of the business, from help desk to finance to sales and everything else.
I rolled up my sleeves and got my hands dirty.
I met almost every employee and learned what each job entailed. I even did some of the jobs.
By the end of my stay in Buffalo that week, I had a much better idea of what the business was all about.
And it made me a much better Board member.
I have Jordan Levy to thank for that lesson. He forced me to really understand the business. And I've taken that lesson to heart in my career. I don't like to invest in businesses unless I really understand them. And when I invest in a business that I do understand, I like to "roll up my sleeves and get my hands dirty." I like to engage with the management team and help them build the business.
There is a fine line between "getting your hands dirty" and meddling. You have to let the entrepreneurs and management team operate the business and make all the key decisions. But that doesn't mean you can't help them. And to help them you need to understand the business. So roll up your sleeves and get your hands dirty and you'll be a better investor.