When I met my wife Pam in the early 90s, I wasn’t necessarily the most enlightened guy on the planet. As a matter of fact, it would be fair to say that I was more concerned with what was happening in my own little world than in the lives of others. I grew up in the east coast’s dog-eat-dog culture and while I like to think that I was generally a nice guy, if I’m intellectually honest with myself I know that putting other people’s interests and well being ahead of my own agenda wasn’t particularly high on my priority list in those days.
Pam is exactly the opposite. From the moment I met her, I was drawn to her intense belief in Karma, that everything you do in life comes back to you. I vividly remember grocery shopping with her in Boston’s South End early in our courtship. We got back to her place and she realized that they didn’t charge her for one of the items in her bag. She made us walk back to the store so she could pay because of “Karma.” At that point in my life, the only time I thought about Karma was when I heard Boy George singing about it on the radio. Today, it’s the single biggest building block of our parenting.
Okay Mark, now you’re going to tell me how this relates to start-ups or venture capital, right? Well, what I’m about to share with you is one of the all-time great business Karma stories.
Last month Telemetric (one of our portfolio companies) was acquired by Sensus. This was great news on a number of levels. Telemetric (maker of smart grid products) was the first company that Highway 12 Ventures ever invested in. It’s also a Boise-based company and Sensus is keeping all of the employees and will likely significantly grow the operation here in Idaho. Co-founder Joe Bowen is one of the most earnest, hardworking guys I’ve ever met and this was great validation for him in many ways. It was also a nice outcome for all of the investors.
Like most startups, things weren’t always so rosy for Telemetric. As a matter of fact, I remember one chilly day about five years ago when things were at their bleakest. My co-investor Tom Loutzenheiser (who was running a small venture firm) and I were meeting with the CEO to discuss his desire to leave the company to pursue what he believed to be more compelling interests. While the company was experiencing modest growth, they were still burning cash after four years and Tom and I didn’t have much in the way of capital reserves to keep the company going.
Here’s where Karma comes into play. Tom’s firm had a significant amount of their fund invested in Telemetric, considerably larger than our stake. Tom shared with me that he really believed in the company, its people and the products they were making. Being near the end of their fund and probably not raising another one (and also being an engineer and former successful entrepreneur), Tom believed that he could salvage Telemetric and offered to take over as interim CEO for six to twelve months. We agreed to put a little more money into the company to see what Tom could do. That was over FOUR years ago.
He never asked for equity (though the board eventually awarded him that), took an extremely modest salary, and proceeded to work incredibly hard for over four years to help make Telemetric the success it is today. I’m sure that Tom had many other compelling opportunities along the way. He put aside personal ambitions and passed on all of them because he believed that making Telemetric successful was important for all of the investors, the employees of the company, and for Boise.
The moral of the story is that it would have been easy for Tom to simply agree to shut the company down a long time ago. It’s easy for all of us to imagine that we’d do the noble thing and make a significant sacrifice like Tom did and put so many other people’s interests ahead of our own. However, during my career as a venture capitalist, I’ve seen a lot of people take the easy way out in personally challenging situations and I’ve seen how greed and self interest can cloud people’s judgment.
For example, I recently watched two co-founders who raised millions of dollars from angels and VCs take very large severance checks from a company that is now selling off their IP at a considerable loss for all of the investors because they were contractually entitled to it (and I thought I’d seen everything!). In my mind, to put it politely, they showed complete disregard to the investors who gave them a chance to pursue their dream. I’ll admit that I’ve amused myself imagining the lives they’ll be coming back to in a world based on Karma…
My message is simple: If you live in our world of start-ups and venture capital, you will eventually and most certainly find yourself in a situation that has parallels to the two scenarios I described above. Situations like these will offer you various options. The choices you make in these situations will be the defining moments of your career. Unfortunately, more often than not the option that seems the most difficult may be the one that serves you best in the long run. In Tom’s case, he will now have more quality options and people ready to back him than he could have ever imagined. Those two founders? Well, I’m betting that Karma will be knocking at their door before long.
For the rest of my career, Tom Loutzenheiser will serve as an example to me of what doing the right thing is really all about. I hope that when Tom reads this, he’ll accept this blog post as a very small portion of my gratitude for being the honorable man that he is and setting the bar so very high for the rest of us…