Character of the founder: I need to trust the person leading the charge, and see that her teammates do too. Character includes anchoring in morality. It also involves the humility needed to be willing to pivot when needed. It also goes into how likely they are to be able to stick it through in tough times. One fellow investor goes so far as to say that their main driver of picking investments is the personality profile of the founder (Myers-Briggs Type Indicator). People matter.
As part of our series about “5 Things I Need To See Before Making A VC Investment”, I had the pleasure of interviewing Grant Van Cleve, Managing Partner at Hangar 75 Ventures. Grant is a global entrepreneur, angel investor, and business accelerator. He is regularly listed among the 50 most influential people in Orange County, CA. He has also served as CEO and Executive Chairman of Buy It Installed. Grant is involved in 85 start-ups, serving as a board member in a quarter of those. He is an active leader in the Tech Coast Angels — America’s most active angel investing group. He was President of their Orange County chapter and then Chairman of the whole network.
Thank you so much for joining us in this interview series! Before we dig in, our readers would like to get to know you a bit. Can you please share with us the “backstory” behind what brought you to this specific career path?
Despite being well-groomed for business leadership, I found my value system change dramatically through involvement with a student ministry called Cru while at Wharton Business School. I had career plans to take over the world one real estate project at a time but instead found myself doing aid and development and church work in post-Communist Eastern Europe after biz school graduation.
Over time I ended up finding out that the best way I could personally help the places I was serving was to fan the embers of my entrepreneurial skills. I formed an industry-leading real estate development company in Albania and helped a number of locals get their own business ideas incubated. When we returned to the US for kids’ college, I found my strange combination of for-profit and nonprofit startups, tolerance for risk, and networking gifts provided a great launching pad for a deep dive into the venture.
Even if “late” to the game, this odd mix created a solid foundation that led to real industry leadership in my Southern California turf. As a super angle, I have stakes in 85 companies. I am a director or formal advisor in a dozen of those. And I speak regularly at industry events. And now this combination of being both an investor and an entrepreneur has led to the blossoming of the Hangar 75 venture factory with Ian Wilding.
Is there a particular book that made a significant impact on you? Can you share a story or explain why it resonated with you so much?
One that really sticks out in this story is Leading Without Power: Finding Hope in Serving Community by Max DePree. DePree, the CEO of Herman Miller was known for bestsellers like Leadership Jazz, and Leadership is an Art. But this later work was focused on how to guide people in a not-for-profit setting. I found, though, that the parallels to early-stage entrepreneurship are fascinating. Gathering teammates to join in building a company requires casting vision and culture, especially when one doesn’t typically have the power that comes from having cash for market salaries. This is worth diving into for startup founders.
Do you have a favorite “Life Lesson Quote”? Do you have a story about how that was relevant in your life or your work?
The first one that comes to mind is T.S. Eliot’s “Only those who will risk going too far can possibly find out how far one can go.” We can’t create world-changing initiatives if we aren’t comfortable with risk. And that includes the potential to step off the reservation — or failing en route.
This reminds me of another, longer, quote by Teddy Roosevelt:
“It is not the critic who counts; not the man who points out how the strong man stumbles; or where the doer of deeds could have done better. The credit belongs to the man in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again; who knows the great enthusiasm, the great devotions; who spends himself in a worthy cause; who at the best knows, in the end, the triumph of high achievement, and tho at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who have never known neither victory nor defeat.”
This was given to me by a peer after a project I initiated didn’t work out. He was doing more than just encouraging me. He was saying that he was of the timid sorts who might have predictable results, but would never do world-changing things. He helped me understand that I was in the right lane by doing the high-risk stuff for which I was wired. Even if it didn’t work on a given trial.
How do you define “Leadership”? Can you explain what you mean or give an example?
I think the simplest definition of a leader is: one who is followed. Leaders show the way forward in complicated times. They transmit courage to do challenging tasks. And these things are identified through people committing their time and trust into an uncertain future they feel inspired to be a part of.
How have you used your success to bring goodness to the world?
As noted in my story earlier, I jumped off the standard idea of success pretty early. We are more than just flesh and blood. We need to get right with God and then find real life in serving others for higher causes. But over time I’ve evolved in my understanding of what success on that front looks like for me. I have gifts, and I need to fan those into flame. And it turns out that my gifts thrive in the arena of business. I can be a part of “doing good while going well.” Serving the world by helping entrepreneurs develop transformative products and services that win through market mechanisms that affirm their quality.
Ok, thank you for that. The United States is currently facing a very important self-reckoning about race, diversity, equality, and inclusion. This is of course a huge topic. But briefly, can you share a few things that need to be done on a broader societal level to expand VC opportunities for women, minorities, and people of color?
I do think the biggest way we see broad change is through an individual commitment to action. And I’ve had the honor of playing a pivotal role in some ventures that really change the playing field, and broaden the entrepreneurial base.
One example would be the global involvement in parts of the world that are even further behind than the struggling segments of the US population. Think of fintech platforms like Mosabi providing business skills and desperately needed financial inclusion in Africa. Or using Eastern Europe-based resources for much of our work at Hangar 75.
But I also love the chance to help great entrepreneurs like Lori Torres here in the U.S. She is a female and minority founder who created the successful Parcel Pending. Our entrepreneurial ecosystem work alongside her by coaching her as she dared to step out of her corporate job. And we, as Tech Coast Angels, provided a substantial first round of funding. It was far from a handout, though. She was a first-class founder. And it was an honor for me to have been the deal lead who unearthed all the potential there. What a joy it was to cash a large check when the company sold and to have, in the process, affirmed a woman and minority-owned business.
Apart from my personal examples, our entrepreneurial ecosystem in Orange County is attempting to do more to address access issues. Our UCI Beall Applied Innovation center is hosting an event directed to empowering women and minorities. And the venture community is helping teach, be panelist, coach.
Can you share a story with us about your most successful Angel or VC investment? What was its lesson?
Another great exit — even more than the 19X return from Parcel Pending — was in LeaseLock, an insurtech startup. It was especially encouraging for me because at times it felt like I was alone in backing the founder, Reichen. I saw things in him that outweighed a simple adding-up of the ingredients of the company. I liked the space and knew something about it due to earlier work in the multifamily real estate world.
It was still a pretty “out there” idea that he was trying to crack, but Reichen had shown his stripes in other ways in past roles that made me write that first check. And then the open interaction with him after that kept me writing checks. He is now well backed by top-tier VCs and en-route to unicorn status. An off-market opportunity to sell some shares provided a nice financial hedge, but I’ve ended up keeping most of my stake in there expecting even larger things from this quickly growing business.
Can you share a story of an Angel or VC funding failure of yours? What was its lesson?
Instead of a single story, I think it’s more useful for me to share on why failures are a standard part of the game — not something that happens as an exception.
Pre-seed stage angel investing involves a high tolerance for risk. Even if you are good at it, you should expect more than half to die on the vine. But you can’t let that hold you back from investing broadly enough to get returns associated with such diversification. Relatedly, you have to know the right amount of time to go into diligence for each investment. Enough to catch the red flags. But not so much that you get crippled by ‘what ifs.’ I do some level of post-mortem when they crash, but I don’t dwell on them.
Can you share a story with us about a problem that one of your portfolio companies encountered and how you helped to correct the problem? We’d love to hear the details and what its lesson was.
Rather than highlight a particular case study, it might be valuable to share the role of coaching as investors. It is a bit of a tricky balance. The founder has a vision and has a team hired to execute it. And that’s what we invested in, so we need to be careful to not disrupt that by intervening too much. But in many cases, an investor does have something significant to offer, so I challenge founders to make use of their investor base. Find out what they are good at and then reach out to ask for a tip on a concrete issue you need help with. Keep it focused, as time is short for both of you.
With that in mind, it gives me great joy that around 25 of my founders tap into me regularly. They may call for help on things I’m especially good at, for which I can solve for them quickly. I also have a measure of wisdom and experience they may lack so they seek insights based on variables they are encountering. Most weeks I can look back to a number of such conversations where I was able to really unlock something for these founders.
Is there a company that you turned down, but now regret? Can you share the story? What lesson did you learn from that story?
I am grateful to have gotten in on a high percentage of the winners that came through our turf of late. Even some I backed, which our Tech Coast Angels groups passed on. So, it wouldn’t be right to dwell on something I missed. I will say, though, that I probably should have written a check into Bonti, as it was bought relatively quickly by Allergan. I focus on that one because I met and liked the founder — I really trusted the guy, Len Brandt, who recommended them to me. And I even helped create some relationships that helped them along. I guess I expected to invest eventually, but when the time to do so came, I hesitated at the larger than usual valuation.
Super. Here is the main question of this interview. What are your “5 things I need to see before making a VC investment” and why. Please share a story or example for each.
- A great idea I can catch in the first couple of minutes: I need to get the problem, love the solution, and be able to explain it in a nutshell to others. I, like most venture investors, make the general decision quickly. It’s a quick no if we don’t get it, and don’t like it. Or we’re intrigued by it, and then diligence validates what we first sensed. Rarely do we later get talked into something based on what is unearthed.
- A depth of understanding of the underlying variables when questioned: I don’t need to become an expert on the subject for each investment. But I know enough about enough things to ask good questions. And I need to know that the founder and his team have thought this through well, and will have a decent chance of knowing when to pivot, based on what factors emerge along the way.
- Character of the founder: I need to trust the person leading the charge, and see that her teammates do too. Character includes anchoring in morality. It also involves the humility needed to be willing to pivot when needed. It also goes into how likely they are to be able to stick it through in tough times. One fellow investor goes so far as to say that their main driver of picking investments is the personality profile of the founder (Myers-Briggs Type Indicator). People matter.
- How close are they to a reliable ‘playbook’: This is intimately related to ‘product-market fit.’ Are there proof points out there validating the premise? And have they dialed those in to the point that they can credibly describe what it will take to tap that market in a reliable method? “A dime on this will consistently get us a quarter in return. So invest a bunch of dimes.”
- The price is right!: How close they are to the last point is a key driver in determining the valuation. I’m OK with there being a road to travel still, but I will expect valuation to match. And remember, unlike VCs, we as angels don’t need to deploy our money. If it doesn’t feel like a fair deal we just skip it. We aren’t just deal-making — there has to be a match between risk and reward before we part with our money.
You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
I mentioned earlier that one can “do good while doing well.” I think many of us fall to one side or the other on that. We mindlessly go about the business of our business without recognizing all the stakeholders linked to it. Nor do we consider that there might be a better way to do what we do and make even more impact (and through that likely more money too).
On the other end, we’re trying to have our “give back” be exclusively through channels outside of business. Being a parking attendant at church, or serving food at a soup kitchen are nice. And it does some level of good for our souls to get outside our usual rhythms. But is doing something nice that doesn’t tap into our core skills and passions really the best way to impact? We spent the vast majority of our lives at work. Why not find a way that matches our skills with needs such that we have an exponential impact? On the world. Through the market. And on ourselves as we thrive, not just survive.
We are very blessed that 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 might see this. 🙂
I don’t think a lot about the “bigness” of names I’d like to meet, but the person who currently interests me the most is Eric Metaxas. He is a polymath with great insights into a variety of topics — and a keen sense of humor. But I’m most intrigued at the way he is bringing out lessons from the past to help us navigate our divisive political and social climate today. As the premier biographer of people like Bonhoeffer and Wilberforce, he is bringing out parallels from their lives that impact us all, regardless of political persuasion. I can’t get him off my mind for his courageous conviction and clear communication. I’d love to meet the guy.
This was really meaningful! Thank you so much for your time.