Phil Bronner (WG ’97) on What Your VC Needs to Know
Wharton Club of DC Alum of the Month: April, 2005
By A. J. Schuler, Psy. D. (W ’88)
April hails the coming of Spring. Spring makes things green. Money is green. This month, we bring you a money man: Phillip Bronner, (WG ’97), Partner in the venture capital firm Novak Biddle Venture Partners.
Want to know what early stage investors are thinking about and looking for in today’s business climate? Read on!
Talking to Phil was like talking to a very sharp, very nice guy who was very used to using his time efficiently. When we met, we got right to the point, spoke quickly, laughed, covered interesting points, discovered common interests and ended as efficiently as we had begun.
There’s a word in Gaelic they use to describe when conversation and the atmosphere in a pub are just alive with electricity, full of life, people and wit. It’s called “craec” (pronounced “crack,” as in, “This place has got the craec tonight!”).
Whatever “craec” is, this interview had it, even if there were only two of us.
AJ: At Wharton, what was your area of concentration?
PHIL: Entrepreneurship and finance. I earned a joint degree, a JD/MBA.
AJ: As a partner, what are your responsibilities?
PHIL: I perform all aspects of the venture capital process; sourcing deals, conducting due diligence, doing the deal and sitting on the board of portfolio companies. I’ve been here for five and a half years.
AJ: How did you get involved in venture capital?
PHIL: Working for the Wharton Small Business Development Center exposed me to venture capital. One of the companies I worked with was selling CD’s on the Internet. A couple of Wharton colleagues and I helped them put together a business plan and raise financing. That company was CDNow, which raised a lot of money and went public. After school I went to McKinsey and became a consultant. Later, I started a company with two McKinsey consultants. The company failed. In 1999, I decided to go into venture capital.
AJ: For any of your classmates, what’s new for you on the personal side since graduation?
PHIL: I married Brooke Fierce five and a half years ago. I was married right before I left New York. Now we have two kids: Dylan, who’s eighteen and a half months, and Sophia, who is four and a half months.
AJ: You’re a busy man: I’m looking for the shadows under your eyes! (laughter from both) In your work, what do you enjoy most?
PHIL: People. What I like most about my job is interfacing with new and interesting people. That’s what I love. I’m always meeting smart people who are trying to change the world, and it’s just fascinating to see. I really love that. I also like dealing with new technology. This is the type of job where you’re always learning.
AJ: Do you have any hobbies or special interests?
PHIL: I like to exercise, specifically biking. . . I enjoy jazz.
AJ: Have there been any defining moments or big lessons learned that helped you forward your career?
PHIL: I always wanted to be an entrepreneur, so I was always looking for some way to start a company. And when I finally started a company, I found I liked it less than I expected because I was focusing on one thing everyday. When I compared that to my experience at McKinsey, I found I missed the variety that consulting offered. That led me to do some soul searching: do I want to be an entrepreneur, or do I want to work on multiple projects? That’s what led me to venture capital.
AJ: Whom do you admire?
PHIL: My father. (smile) Why? Because he has a big heart, and he has an enormous amount of integrity, and he always will try to do what’s right. I aspire to that.
AJ: While we’re talking about things you’ve learned, has there been any great lesson for you in the last year?
PHIL: Often there’s a lot of information that’s thrown at you, which can confuse the picture, but one needs to stay focused on what’s important. For us, that means three things: a big market, a strong management team, and a defensible technology or any defensible competitive advantage (e.g., partnerships) over time. If you stay focused on those three issues, and if a company is strong along those dimensions, it will have a good chance of success. If it’s weak along one of those dimensions, it’s much harder for it to be successful.
AJ: Are you involved in any volunteer organizations, charities or foundations?
PHIL: I’m on the board of a non-profit called In2Books (www.in2books.org). They give kids in inner city school districts five books, and partner each student with a pen pal who will exchange letters back and forth about the book. We call it “low touch mentoring.” They currently operate in DC, and work with 5,000 kids. The efficacy of the program is astounding. It dramatically improves reading and writing for those kids. The goal is to get these kids excited about reading.
AJ: Can you give us a quick overview of Novak Biddle?
PHIL: We’re the leading early stage venture fund in the mid-Atlantic region. Last year we had four exits, 2 IPOs and 2 acquisitions; each acquisition was over $200 million. We’re currently on our fourth fund. Our first three funds were all top quartile. We’re a classic early stage fund. We look for the big markets, strong technologies and a strong team, focused exclusively on IT. We tend to invest between $500,000 and $5 million in the first institutional round and $8 to 12 million over the life of the deal.
AJ: Since the downturn, has anything about your model or the way you review deals changed?
PHIL: Changed? No. . . we’ve always stuck to our knitting. During the boom we didn’t chase deals with crazy evaluations, and during the down cycle, we still looked for high quality deals. As a result, we’ve been pretty consistent.
AJ: I’m sure you get a lot of people knocking on your door for deals. If there’s one thing a company needs to know before they come knocking on your door, one thing they need to have prepared, what would it be?
PHIL: First, you want to be referred. Next, start with an executive summary, and then follow up with a plan so you don’t inundate with information. Then, really have those three characteristics we discussed earlier nailed down. Finally, be prepared to answer this question well: why you guys? What will be your competitive advantage over time?
AJ: Do you often find that people are not as good as they think they are at assembling the right leadership team?
PHIL: Yes, that’s true. What’s interesting to me is having very, very bright people who really know business and who intuitively know the three core issues they should address, and yet they have slides on issues that aren’t essential, and they don’t have the three core areas firmed up. It happens all the time.
A perfect example from a Wharton perspective is when the management team of an early stage investment comes to us with 20 pages of financials. But the reality is no one has any idea what their revenue will be next year. In the early stage, you may not know what the business model for the company will be.
AJ: People project too much detail when they just don’t know.
PHIL: They just don’t know. Here’s another example; let’s take an extreme example. Let’s say that you’re creating a wireless content play. Relationships in the industry will be key, as will marketing, etc. And let’s say you come to us seeking funding with ten pages on the underlying technology. Great. . . but is that a differentiator in your business? Does that represent an underlying defensible market position that makes your business special?
I’ve seen two similar companies that required competencies across both engineering and consumer marketing. One was founded by an engineer and the other was founded by an experienced business developer. I attended their board meetings, and the meetings were as different as night and day.
In one, we’d get a presentation about the technical details of the product, while the consumer marketing strategy was not addressed. At the other board meeting, we’d get reams and reams of information about partnerships, but nothing about the underlying technology. People focus on what they know best, and many companies are just not as smart about rounding out their management teams as they should be. As a member of the board, we try to help them balance and broaden their perspectives, but sometimes it’s much harder to do than you’d expect.
AJ: This is all great perspective, Phil. Thanks for taking the time to share it all with the alumni.
PHIL: My pleasure, thanks for giving me the opportunity.
A. J. Schuler, Psy. D.
A. J. Schuler, Psy. D. is an organizational development consultant and executive coach. He is the author of the forthcoming book, "Revolution: How to Transform Your Company from Within."