Interview with Bill Reichert of Garage.com

BizPlanIt recently spoke with Garage.com President Bill Reichert, to gain his insights into business planning, raising capital and launching a successful venture. Garage.com is a venture capital investment bank that provides funding services for high technology and life sciences startups. Headquartered in Silicon Valley, Garage.com also has U.S. offices in Austin, Boston and Seattle, and international offices in Israel and London.

BizPlanIt: Please tell us about how Garage.com got started?

Reichert: Garage was originally founded by Guy Kawasaki (current CEO) and Rich Karlgaard (current publisher of Forbes magazine), but the company was actually the brainchild of Craig Johnson. Craig is now the founder and managing partner of the Venture Law Group. He decided that there was a need for a professional firm whose sole focus was helping start-up companies raise funds from the increasing array of funding sources available to high technology startups. Craig proposed the idea to Guy and Rich and they agreed it was a great platform upon which to build a business.

BizPlanIt: How did you become involved with Garage?

Reichert: I started with Garage in the beginning of 1998. I had known Rich Karlgaard for years, and after he, Craig and Guy pulled the idea together, they were looking for someone to run the company who had been involved in starting up a number of companies. That was my background, having been involved in launching and operating a number of software and hardware companies.

BizPlanIt: Over the past several years, BizPlanIt has been flooded with business plans from companies seeking capital. What has it been like at Garage?

Reichert: Since our launch in October 1998, over 64,000 entrepreneurs have contacted us to help them raise funds for their company.

BizPlanIt: Have you experienced a slow down in requests since the market downturn early in 2000?

Reichert: It’s been very interesting from our perspective. We’re still seeing a steady increase in the number of business plans and funding requests we receive, however they are now mostly centered on hard technology ideas such as semiconductor, telecommunications networking, hardware, enterprise software, biotechnology and even energy. Nearly all the Dot-Com’s have disappeared. What I think is an untold story out there is that the number of solid technology start-ups getting funded has actually been going up.

BizPlanIt: What is the main difference between a good investment and a great investment from your perspective?

Bill Reichert: A good investment is a great idea with a great market opportunity such as a compelling kind of underlying technology or idea going after a big market. Great is that same idea with a great team behind it – that’s the essential difference. We see a lot of really good business ideas, unfortunately a lot of the teams have very limited backgrounds.

BizPlanIt: What are some of the biggest mistakes you encounter in the business plans you review?

Reichert: A business plan needs to get the point quickly since most investors will make a decision within 10-seconds whether to contact the entrepreneur or not. Too many entrepreneurs spend too much time focused on the wrong stuff. So my first major point is that you need to communicate the core of the value proposition extremely quickly and clearly in any communication. Too many entrepreneurs instead spend time setting the stage to communicate their core message. One of the biggest turn offs to an investor is a paragraph that starts with "The Internet is growing at a tremendous rate”. You need to get to the beef of the message and get to it quickly.

BizPlanIt: After one of your companies has obtained funding, what sort of on going operational or strategic planning exercises do you or a venture capitalist expect them to undertake?

Reichert: One of the big failures of most of VC's is that they do not impose adequate discipline upon their portfolio companies. One of the things we do in our process with our portfolio companies is to lay out a framework for business planning, operations planning and corporate management. We focus on setting goals and business metrics, creating tracking tools, evaluating our companies against those metrics and then adjusting the company’s course as needed. We typically use a general framework that we then customize for each company. We often do this even before funding is in place in order to create a useful and practical operating management model that the entrepreneur can carry beyond the investment discussion into operations.

BizPlanIt: Should entrepreneurs craft different messages for an angel investor versus a venture capitalist?

Reichert: I think the short answer is No. You should treat angels the same as you do VC's. They are clearly different but to presume that an angel has a different frame of reference or a different motivation than a VC is risky. The initial presumption should be that an angel has the same motivations and interests and frame of reference as the VC.

Having said that you can expect different things from angels and VC's. Generally, angels are interested in getting early when a company is less developed. They are willing to contribute hands on, rather than simply from the capital perspective that pervades the VC community. It’s harder to find a professional VC who will take the time to help you build the team, build the idea, build the prototype and build all the other things you need to launch a company. Angels might be more fascinated with that situation.

The other thing in terms of expectations is that you should not expect an angel to have deep pockets to fund other rounds. However, that is the VC’s business, so you should expect when you are talking to a VC that they have a commitment to investing in subsequent rounds. That should be a key qualifier of any venture capitalist - What role will they play in the following round? You should expect that the VC will help with the fund raising as well as with the funding itself. With an angel you should expect help with fund raising, but probably not with substantial additional capital.

BizPlanIt: Are the days two people in a garage growing to 200 employees within 12 months gone?

Reichert: No not at all – it’s absolutely still out there. The irony is there were too many companies one year ago that did that. They did it without having a valid business model to justify 200 employees. There are still plenty of companies/ideas out there that could go from 2 to 200 in 12 months, however only the ones with a perfectly valid business model and management team will even have a shot.

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