Wearing my VC hat, I am constantly exposed to highly disruptive start-ups, and it keeps me laser focused about ways every industry can change overnight. At GMM, we employ over 50 R&D scientists, and if we don’t constantly innovate we’re dead. Some of my large competitors rest on their laurels after launching a new technology, which in my opinion is asking to be selected for extinction. Start-ups keep you paranoid, which is a good recipe for survival in the jungle of capitalism.
Once a successful start-up enters a hyper-growth phase, they might be growing 30 percent to 50 percent per month. This necessitates scaling and hiring much faster than companies like GMM that are in mature industries. It’s eye opening and valuable to be a part of this process, because hiring A+ people is the most important part of building a dominant company. Start-up culture has also honed my skills in identifying and elevating people even faster internally at GMM, a crucial skill that prevents loss of star employees.
This “millennial generation” gets a bad rap in my view about being soft, entitled, pretentious (the list of pejoratives is endless). However, the young people who work in the start-ups I am invested in are some of the hardest working, smartest people I have ever met. It’s important to not be biased against youth (as others are), because these kids are truly the future. Nostalgia bias is insidious, and usually a mirage. Intelligence is intelligence, and drive is drive at any age.
Being on the board of start-ups is a phenomenal way to learn best practices on many governance and management issues. Even though I have hundreds of employees, I only have seven direct reports and I am always trying to drive a consistent culture across our various facilities. A company with 20 people will be very different than a 1,000-person organization, and venture investing has helped me drive a powerful top-down culture that ensures my staff is always learning and growing.
At GMM, we launch two or three new products every year, and it’s easy to be lulled into the delusion that clients magically want what we’re offering just because we spend millions of dollars each year on R&D. Being around start-ups mainlines the idea that solving problems is the only thing that keeps you in business over the long run.
Start-up CEOs are selling all the time — to potential investors, to potential employees, and to potential clients. Even though I have a large sales team at GMM, I constantly interact with key clients and use the experience gained having sat through hundreds (if not thousands) of pitches. Here’s what works: simplicity, focus and hyper-competence. Charisma is great, but you don’t need it. In fact, when someone is “too slick,” or seemingly has all the answers, that’s a red flag to me.
I didn’t raise outside capital when I started GMM, so I didn’t have investors breathing down my neck to sell the company. However, good VCs know it’s important to build a company that a buyer would want to acquire, whether you have interest or not. This strategy paid off when GMM was acquired earlier this year by SDK, a $7 billion conglomerate. This was the largest buyout in the history of our industry, and I am still the CEO of GMM (and love my job more than anything).
Venture investing makes you realize that people somehow end up where they’re supposed to end up. Darwin figured this out long ago — talent rises, good companies make it, and bad companies with mediocre founders won’t. It’s a brutal world, and starting a business is maddeningly difficult. Some people will grow when the spotlight is on, and other people won’t. But that’s OK — if it were easy, everyone would do it.
One of the greatest pleasures of investing in start-ups is helping companies grow like weeds, and seeing founders transform into real leaders. When you watch a company go from a PowerPoint deck and some sizzle to 130 employees, $150 million in capital, and stratospheric sales growth within a couple years, it reveals a beautiful fact: Anything is possible in America if you work hard and never give up.
— By Ravin Gandhi, CEO of Chicago-based GMM Nonstick Coatings and a member of the CNBC-YPO Chief Executive Network. As a VC investor, Gandhi has stakes in technology companies KeyMe, Ampsy, Tred, Lettrs and Hester Biosciences.
Follow him on Twitter @Ravingandhi1.
CNBC and YPO have formed an exclusive editorial partnership consisting of regional “Chief Executive Networks” in the Americas, EMEA and Asia-Pacific. These Chief Executive Networks are made up of a sample of YPO’s global network of 24,000 top executives from 120 countries who are on the front lines of the economy and run companies that collectively generate $6 trillion in annual revenue.