I had the pleasure of interviewing Tom Weithman, President and Chief Investment Officer for MACH37 and the Managing Director of the CIT GAP Funds. Since 2004, Tom has established and grown CIT GAP Funds, a family of seed-stage venture funds focused on making equity investments in the Commonwealth of Virginia’s most promising tech, life science and clean tech companies. Through CIT GAP Funds, Weithman’s team has placed more than 200 seed-stage equity investments and attracted more than $600M of private equity investment to the balance sheets of CIT GAP Funds portfolio companies.
Jean: Thank you so much for joining us! Can you share your story about how you got into the VC space?
I spent much of my early career in corporate America, first for IBM and then for an IT services business under the then Hughes/General Motors umbrella, so I had always worked around technology and the development of technology toward new product and service launch. After 10 years of working for large companies, and an MBA and public policy degree later, I started examining how I could apply my strong operating experience with interests in tech transfer, finance and economic development. At the suggestion of Carl Grant, then at the Fairfax County Economic Development Authority, I connected with the Center for Innovative Technology (CIT) who was at that time trying to start a venture fund. After spending a couple of years at CIT consulting with area start-ups, we launched CIT GAP Funds in 2004. Fifteen years and 200+ investments later, our program has expanded to include multiple funds focused on technology as well as an accelerator seed fund.
Jean: What kinds of startups do you typically work with?
There are a few different ways that I can invest: through CIT GAP Funds (our flagship investment program), our MACH37 Cyber Accelerator, and our recently announced Virginia Founder’s Fund.
- As CIT GAP Funds has been capitalized largely by the Commonwealth of Virginia, we invest in Virginia-headquartered tech, life science and cleantech companies, seeking to be the first, or among the first, money in at seed or pre-series A financing.
- Based on the strong performance of our cybersecurity portfolio, we launched the MACH37 Accelerator Seed Fund in 2013. This fund gives us the latitude to look at companies exclusively in the cybersecurity space from around the world.
- This past spring, we took some of the returns we have earned from CIT GAP Funds and launched the Virginia founders Fund, a special vehicle crafted to invest in traditionally underserved geographies and communities.
Going forward, cybersecurity will continue to be an important investment theme, building on the 70+ investments in that space that we have done through CIT GAP Funds and MACH37. Overall, we have had great success with startups in what I have come to think of as our “D-3” investment cluster — shorthand for “Cyber Defense, Data Analytics and Deep Tech” — and also see a lot of opportunity in big data and data sciences, autonomy, IoT and space.
Jean: What do you look for in the management team of your investment companies?
As an early stage investor, we are generally investing in the original founding team, and being some of the earliest capital into these startups, we can’t afford to have the wrong team.
Without question, our greatest success has come when we have invested in what we call “balanced teams.” By this I mean a team that couples strong technical expertise with the business chops required to get the business up and running. Domain experience is also foundational to the team. We want to see the team populated by one or more individuals who have an intimate knowledge of the market problem they are trying to solve borne of their first-hand experience with the problem as a practitioner, consultant, vendor or solution provider to a practitioner. We also like to work with people who have a high level of self-awareness — people who know and accept their relative strengths and weaknesses — and who we believe will actively seek to remediate team shortfalls by bringing on the right partners, investors employees and advisors to maximize enterprise value even if at the expense of diluting their own equity holdings. With self-awareness comes the additional attribute of coach-ability, the willingness to seek out new information and assimilate the viewpoints of multiple enterprise stakeholders in charting the company’s path to growth and success.
Jean: Can you share a story of a successful Angel or VC investment? What were some of the highlights?
After 200 investments and some great successes along the way, there’s a lot to choose from. One of my favorite stories, however, is a current MACH37 and CIT GAP Funds portfolio company, RunSafe Security. RunSafe is a Northern Virginia cybersecurity company with technology that cyber-hardens embedded systems and devices, so there’s direct application to industrial IoT, automotive, energy and military sectors. We first met RunSafe through our relationship with their CTO, Doug Britton, who is a former CEO we had invested in through GAP Tech Fund II. RunSafe’s CEO, Joe Saunders, was also involved in a local pre-accelerator program run by Jason Chen, who heads up MACH37. We brought RunSafe through MACH37, placing an initial small seed investment and then another investment through CIT GAP Funds. The company has made great progress, and has gone on to close a significant A round from Alsop Louie. This is a company that has attracted a blue chip investor, an outstanding advisory team, including another MACH37 CEO, Michael Wellman of Virgil Security, and gotten great customer traction. While it is still early for RunSafe, we think this company is on its way to being a big success, and case study for the best of what we do at CIT — leveraging our ever-expanding network to help identify and build great companies.
Jean: What is one piece of advice you would give a startup?
Build a team with a team approach. What I mean by this is that individuals don’t build companies, teams do. Early stage investors are going to want to see a company pitch that reflects a balanced team with amicable relations and both technical and business acumen.
Jean: Do you have a favorite book that made a deep impact on your life? Can you share a story?
I usually feel like an outlier on this question because I think people expect me to pick to book about business or venture capital. But I am going to go with Doris Kearns Goodwin’s “Team of Rivals” about the Lincoln Presidency. Lincoln’s political genius lay in his ability to bring together diverse opinion from the most unexpected sources — in his case, cabinet members that coveted the Presidency — to create successful outcomes for our country under the most dire circumstances imaginable. Fortunately, most of our challenges today pale by comparison, but I greatly admire the fundamental idea of bringing together the strongest set of people possible and listening to a diversity of opinion, even at the risk of your own personal interest, as you chart the course forward. For me, this takes the idea of “coach-ability” to an entirely new level and represents an ideal I have tried to let guide my thinking and one that I think entrepreneurs should strive for as we evolve our investment programs.
Jean: What are your “5 Things I Wish Founders Knew Before They Pitched To Me” and why. Please share a story or example for each.
I wish that everyone that pitched us exhibited the following 5 things:
- Understanding of Who Is in the Room — We get excited when companies know our fund and portfolio and share how they can fit in to enhance value of the program. This is the product of research and forethought and is reflected in a pitch tailored to our experience, understanding of their market and understanding of our investment thesis.
- Stage-Appropriate Market Traction — What we view as adequate market traction varies by developmental stage of the company. We want to see revenue streams or even paid betas at early stage, but that is not a prerequisite for our seed work. At a minimum, we expect that the company’s offering has been developed as the product of significant and iterative customer interaction and validation.
- Team Approach to Building the Company — Company building is a team approach. We want to see a team that fully capable of delivering against milestones anticipated by the use of our proceeds. We want the pitch to showcase a clear delineation of responsibilities among the team, amicable working relationships among the key players and a clear understanding of what holes need to be filled.
- Understanding of Life Cycle Capital Requirements — We always like to see that companies understand the amount of capital it will require to hit near-term milestones and have a realistic estimate of the aggregate amount of capital it will take to get to a liquidity event. Nothing inspires us more than realism. Gross underestimation of capital requirements suggests naivete and a misunderstanding of the market.
- Importance of Investor Q&A — We have seen some pretty shaky presentations that were ultimately salvaged by the entrepreneur’s response to our Q&A. It’s the Q&A section of the pitch that gives entrepreneurs the opportunity to showcase their knowledge, flexibility, ability to think on their feet, and their preparation. It’s OK to say I don’t know, it’s always better to do that than to provide misinformation, but we love to see people who have anticipated the questions that investors are most likely to ask.
Jean: Some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US, whom you would love to have a private breakfast or lunch with, and why? He or she just might see this!
I don’t think that I can limit this to just one person, so I will give a you three: Ted Weschler from Berkshire Hathaway. Ted has a very different investment thesis, but I would love to hear how he looks at the world and hear the story of how he met Warren Buffet. I’d also like to meet André Pienaar, founder of C5. We share investment interests in cybersecurity, cloud and data analytics and socially responsible investing. Finally, I would like to add in Chris Douvos, Managing Director at Venture Investment Associates whom I once heard described as “Venture Capital’s Super LP.” I think venture is looking for new models and it would be great to get Chris’s views on that.
Please share your social media accounts you would like readers to follow.
- Connect on LinkedIn: linkedin.com/in/tomweithman/
- Connect on Twitter: @CITorg
- Connect on Twitter: @MACH37Cyber
- Connect on Twitter: @tomweithman
Originally published at medium.com