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Venture Profile: Jo Tango, Highland Capital Partners
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Angel Mehta: How did you end up moving from management consulting to venture investing?
Jo Tango: By accident. I decided to leave Bain and wanted to be in a high-growth business. I didn’t pursue anything in venture capital because I had spent a summer at Bain Capital and didn’t think I was the ‘investor-type.’ So, I was networking around town with other VCs to get introductions to portfolio companies. I spent a lot of time previously in Singapore and Hong Kong, which is where I got the growth bug. One of my most difficult projects was helping a client create a business from zero to $150 million in 18 months, half via acquisition, half through organic growth in five countries in Asia. That’s when I started to think that helping to build companies was really fun. At least that was my impression and that’s what attracted me to the start-up arena.
One of the companies I looked at was this little company in Seattle, Washington, called “Amazon.com”. I was being recruited to report to the CEO. I was thinking, “Books-for-sale online…yeah right.”
Anyway, I would always turn down the venture capital opportunities… but when I met the Highland folks it was different… we just clicked. They wanted me to join them and the intention was to just start a business for them, not become a venture capitalist. But that was eight years ago… [Laughing]
Angel Mehta: Was it an easy transition from consulting to venture? What were some of the adjustments you had to make?
Jo Tango: No, it is absolutely not easy. There were a couple of big adjustments for me. (1) This business is all about reading people in situations. Previous career experiences may be helpful but usually not. It usually takes a couple of years to get good in this business because you’re screening for opportunities and people. You compare it against the mental map that you have and until you have the correct mental map you don’t have a lot to calibrate these opportunities to. For example, some people say operating experience is required to be a good venture investor. That’s not necessarily true because you take on roles in a serial manner. Our business is about comparing opportunities all at once and navigating companies through challenges that we’ve seen before. It’s a process that’s parallel. It really is an art versus a science. (2) It was a big adjustment not having a ‘client’ that you bill regularly. Sometimes in consulting, you’re trying to extend the project… incentives are not always aligned with your customers. Here, the incentives are aligned between the general partners and limited partners, between the entrepreneurs and the general partners.
Angel Mehta: Why did venture investing appeal to you at Highland, but not at any of the other firms you had offers from? What was so different about the culture at Highland?
Jo Tango: Highland plays the venture game the way you play baseball; a lot of other firms play the game as you would golf or tennis. We firmly believe that to succeed in venture a firm has to play as a team. That means sharing contacts, customers, and rolodexes. If I source an opportunity but another partner is better suited to do the evaluating and adding value, then I hand off the deal. At Highland we get a lot of points for handing off deals. At other firms, it was always presented to me as an ‘eat-what-you-kill’ environment. In some firms, partners compete against each other for deals. There’s nothing wrong with that system, it’s just different. We firmly believe if you’ve got a team where one person is trying to be the pitcher, the catcher, and the first baseman all at the same time…you’re not best positioning yourself for success. The team, as a whole, will be better off when people have areas of focus and expertise.
Angel Mehta: Have you ever done a deal just because of the pedigree of the other firms involved?
Jo Tango: No. We just don’t do that here. I can think of many examples where we weren’t given the opportunity to do our homework and we just moved on…
Angel Mehta: What does your version of homework involve? What kind of diligence can an entrepreneur or management team expect if they approach Jo Tango or Highland in general?
Jo Tango: It’s pretty simple. Put it this way: according to the studies, there’s no correlation between someone’s future job success and how well they interviewed for that job. So for me, future behavior is based on past behavior and it is only a phone call away. Blind reference checks are critical. There is always someone we know who either worked with the person or knows someone who did, so we usually get the inside skinny pretty fast.
Angel Mehta: Would you back an entrepreneur who did not have a track record?
Jo Tango: Oh absolutely, we love that. We like people who are hungry.
Angel Mehta: Does that mean is it a strike against someone if they’ve already had a huge liquidity event?
Jo Tango: No. It depends on the person and that’s why we must get to know them. For example, we’ve backed a company called “StreamBase Systems”. The founder is Mike Stonebraker… this guy has had two homeruns, Ingres in particular, which competed with Oracle head on in the early days. The point is, Mike is on his fourth company so he just doesn’t stop. Some others hit their numbers and they’re done – they want to sit on the beach for the rest of their lives… but it’s not about the money for Mike. He’s just an amazing individual.