IVCA Profile Q&A: Robert Finkel, Managing Partner of Prism Capital and Author of the New Book, The Masters of Private Equity and Venture Capital

IVCA Profile Q&A: Robert Finkel, Managing Partner of Prism Capital and Author of the New Book, The Masters of Private Equity and Venture Capital

October 19, 2009

CHICAGO - “ Inspired by history and a desire to get the VC/PE successes and ""lessons learned"" on-the-record, Prism Capital's Robert Finkel wrote the new book, The Masters of Private Equity and Venture Capital: Management Lessons from the Pioneers of Private Investing.  The publication is available now for pre-sale at Amazon.com.
 
Robert Finkel is the Founder and Managing Partner of Prism Capital and, as a founding member of IVCA, has been instrumental in the Association's growth and successes over the years. As IVCA's Event Chairman in 2002, Robert introduced the series ""VC Confidential""; as conversations with local leaders in investing to discuss their greatest successes, failures and lessons learned.
 
The series ""VC Confidential"" series resulted in amazingly insightful conversations with key members of our industry. So insightful, in fact, that Robert wanted to share them with a much broader audience in the form of a book. While many of us would have been committed to the idea alone, Robert actually followed through and enlisted well known business writer David Greising's help to share the stories of the most notable U.S. VC/PE investors. Robert has generously offered his share of the book's proceeds to support the IVCA Scholar Program. In this way, his book will educate us and provide minority students direct access to VC/PE firms through summer internships.
 
IVCA: What inspired you to write The Masters of Private Equity and Venture Capital?
 
Robert Finkel: About 5 years ago, I created a mentoring panel ('VC Confidential') for IVCA, with Carl Thoma and several others, talking very candidly about lessons learned over their investing careers. I regret that there is no recording of the series, and it struck me that, in our mentor/apprentice business, the oral history of what the most successful investors know would be lost to the ages if not written down.
 
We don't write it down for our internal development or best practices. Those 'craftsmen' of our industry, who got into it before it became a money machine, have been consistently successful over a long period of time. They are typically press shy. Who better to out their stories and lessons together than one of their own?
 
IVCA: How long from conception to completion did the book take?
 
RF: The first publisher and agent I spoke with wanted to do it, so it was an outlier relative to the usual process. It took some 8 months to find the right writer...and I could not have picked better. It was about 2 years from idea to actual publishing due date (mid-December).
 
IVCA: What lessons from the book are most applicable to today's environment?
 
RF: At the end of each of their chapters, there is a list of 5 lessons...too many for this interview. (I hate to be overly commercial, but you gotta buy the book!) I am donating any and all profits to charity, so it will go to a good cause. There are very few 'new' lessons...but what they choose to highlight is interesting. Combining these lessons into one book does allow the reader to pick up patterns to success.
 
IVCA: What basic characteristics did you see over and over when comparing your interview subjects?
 
RF: Energy, hard working, strong intuition about great people and surrounding themselves with such, and knew when to act when presented with opportunities.
 
IVCA: What are the key differences between the Private Equity and the Venture Capital masters?
 
RF: Great question. There is a more intense energy with the VC's. They appear more comfortable using ""gut feel"". They can make decisions more quickly. The PE guys are more measured, and may be calculating more variables in their decision making. They have less room to be wrong, so must weigh many scenarios to fulfill their fiduciaries. The VC's still want to go for at least a 10x, so they need to be directionally right, but don't need to triangulate quite as precisely.
 
IVCA: Which type of firm, VC or PE, do you think has the most effect on the economy by their approaches and why?
 
RF: In many cases, VC's clearly promote more technologies and create high skilled jobs when none existed. Yet, we are all professional allocaters of capital. PE firms back the companies with the brightest futures, and support the dissemination of technology etc. That works. You could say that VC's disrupt and kill off vulnerable segments, yet they are doing exactly what they should do...reforestation.
 
PE folks get a bad wrap in my view, as they operate in more visible ways because their companies typically have more employees. They are part of the accountable chain...backing best of breed companies and managers with long-term capital. If PE firms back the college sophomores, VC's back infants through 3rd grade. It is easier to say kids are cuter when they are younger, but guiding and supporting them at any age is important to be done thoughtfully and well at any age.
 
IVCA: In the research for the book, what revelations or bit of information surprised you the most?
 
RF: It was less the pre-game that was surprising than things I learned about firms and people. Here are a couple tidbits:
  • Carl Thoma, IVCA's founding Chairman was raised on a ranch, where anticipating and proactively taking action in advance of potentially bad weather was the difference between success & failure.
  • Warren Hellman is an extreme runner and a serious musician.
  • John Canning's role on his college baseball team was catcher - because he could see the whole field.
  • Pat Cloherty's first investment in Russia left the U.S. by courier with a suitcase full of cash but never arrived.
 
IVCA: Are you inspired to write any more books? What are the possible subjects?
 
RF: Akin to giving birth, the last thing on my mind is writing another book. I did find it cathartic to get my thoughts out on paper, and I learned that I have more than I had anticipated - ˜to say'.
 
IVCA: So what did come out of that anticipation?
 
RF: I will say that I believe there is no voice currently talking about the - ˜health' of the investor ecosystem in a constructive way. For instance, it is important that we, as professional allocaters, do so in as aligned and economically efficient way as possible. To the extent we pick the wrong technology, waste capital on suboptimal ideas, back the wrong managers or fund managers, less is contributed to the economy, taxes, jobs and culture. If our incentives are not as thoughtful as possible, it affects everyone.
 
It is important that the LP community properly compensate the folks who invest trillions in our economy. The culture of investing between GP's and LP's is much more of an - ˜us and them' than is productive. The dysfunction all along the investor chain hurts firemen, teachers, and everyone. This concern is knocking around in my head, and if this elephant in the room isn't called out pretty soon, I may have to put pen to paper.
 
Click Here to order The Masters of Private Equity and Venture Capital: Management Lessons from the Pioneers of Private Investing by Robert Finkel with David Greising.