Final Venture

2

'No.'

Gil Appleby, Revere's Managing Partner, and my boss, folded his arms across his chest, daring me to protest.

No? It couldn't be no. I couldn't let it be no.

While I had worked on many deals in my two years at the firm, this was only the second that had my name on it. My first, a PC home-leasing company, had been a lucky success in a record time. My second, Net Cop, was going to be a failure just as quickly.

I had promised Craig the money only a few days before. When we had initially invested in Net Cop six months previously, we had committed to provide more funds when the company needed them. Craig needed them now. Without our cash, his company would go bust.

I had given my word.

It shouldn't have been an issue. A regular item on the agenda of the Monday morning meeting of the partnership. This was where new investment opportunities were discussed, and any problems in Revere's investment portfolio dealt with. Net Cop wasn't supposed to be a problem. It was supposed to be an opportunity.

The meeting had started in the usual way, with Art Altschule talking about BioOne. Art liked to talk about BioOne whenever he could. It was Revere's most successful investment, and Art's deal, and he didn't want any of us to forget it.

I wasn't listening. My eyes were on a plane lowering itself gingerly through the sky towards an unseen runway at Boston's Logan Airport, two miles behind Art Altschule's closely cropped head. My mind was on what I was going to say about Net Cop.

Eventually, I became aware Art had stopped talking. I was on next.

Gil glanced down at the papers in front of him. 'OK. Net Cop. A three million dollar follow-on. Tell us about it, Simon.'

I cleared my throat. I tried to be concise, low-key, objective.

'As you no doubt remember, Net Cop plans to make the switches that direct the billions of information packets that fly around the Internet every day,' I began. 'They've completed the design of the switch, and they need a further three million dollars from us to go on to the next stage of their development, building something that they can show to potential customers. Frank and I made the initial investment six months ago. At that time we agreed to put in further funds provided Net Cop met various milestones. As you can see from my memo, they've met these milestones. Internet traffic is growing exponentially, and Net Cop has tremendous potential. In my opinion, Craig Docherty has done an excellent job, and we should continue to support him.'

In the six months I had worked with Craig, I had become more and more impressed with his abilities. I had also grown to like him. At thirty-two he was three years older than me, a wise old man in his business. He had vision, drive, energy, and an absolute determination to see Net Cop succeed.

The facts spoke for themselves. And the facts said 'Invest more money.' Or at least I thought they did.

There was a brief pause as I finished. My eyes flicked round the room. Everyone was watching me. The five partners: Gil, Frank, Art, Diane and Ravi Gupta, the firm's biotech expert. And the other two associates, Daniel and John, my friends and colleagues who I knew would support me, but who I also knew didn't have a vote.

No matter how many presentations I made, the board room didn't get any less intimidating. It was where all the important decisions in the life of Revere Partners were taken. Soft lighting reflected off cream walls with abstract sunsets. One set of windows overlooked Boston Harbor to the airport, the other the great canyon that was Franklin Street, with the colossus of the Bank of Boston building guarding one wall. Looking thoughtfully over Gil's shoulder, as if weighing the pros and cons of the discussion round the table, was a bust of Paul Revere himself. Silversmith, patriot, energetic horseman and finally wealthy entrepreneur, he mocked the computer geeks and disgruntled middle-managers who came before him. He didn't seem too impressed by my arguments either.

My eyes rested on Gil. He sat stiffly in his usual place at the middle of the table, leafing through the briefing papers I had prepared. I knew he would have studied them thoroughly over the weekend.

'The original plan called for a follow-on investment to be made after one year. We are only six months into the deal. Why so soon?'

His accent was clipped, almost English, what I had come to recognize as the hallmark of the Boston 'brahmins' who had run the city for three centuries.

He looked up and peered at me through his thick glasses. The lenses made his eyes look unnaturally small and hard. I had seen him use this effect many times before to unsettle hopeful entrepreneurs. It was working with me.

'As I mentioned, the market is hotting up,' I replied. 'There are more competitors springing up all over the place. Craig wants to make sure Net Cop is the first to ship product.' I cursed myself as I said this. I was beginning to sound defensive, always a bad position to find yourself in.

Gil's face, wrinkled and weather-beaten from countless days spent under sail in Massachusetts Bay or out in the North Atlantic, watched me, thinking.

There was silence round the table. No more questions. I began to relax. I was going to make it.

'Frank. You helped Simon with the deal, I believe. What do you think?'

I glanced over to the elegant figure of my father-in-law. Despite his fifty-seven years his hair was still light brown, his body athletic, and his face handsome. He was wearing one of his dozens of suits, this one with a subtle check. But his eyes, which usually twinkled kindly, were agitated, worried.

'I don't know, Gil. I've got some problems with this one.'

What? This was not supposed to happen. Frank was supposed to be on my side.

The silence intensified. Everyone looked from Frank to me.

'Yes?' said Gil.

'Simon has laid out the information here well enough,' Frank said, gesturing to the paper in front of him, 'but I think he's drawn the wrong conclusions. There's much more competition out there now than there was six months ago. Maybe we should think about that.'

'But Craig has thought about it,' I said. 'That's why he's sped up the development process! His team is better than any of the small companies, and the big boys are just too slow.'

Frank shifted in his chair. His deep voice commanded attention. 'I'm not sure about Craig Docherty, either.'

Out of the corner of my eye I saw Gil flinch. Venture capitalists are proud of backing people, not businesses. Once you begin to doubt the person, then it is very hard not to doubt the business.

'You liked him six months ago, Frank,' Art said. 'What's changed?' Art was always quick to spot an opportunity to criticize Frank's judgement. He and Frank jostled in a most subtle way for the position of Gil's right-hand man.

'That's true. We all did.' And indeed Craig had made a presentation to the assembled partnership that had gone very well. His energy, dedication and total grip of his business had come through with great force. 'But from what I've seen of him since then, I think he's unreliable. He believes so much in the success of his company that he loses track of what's going on around him. The original plan was for twelve months to the development of a prototype, and that was tight. You can't do it in six without cutting corners. And you can't cut corners in this business without screwing up the product.'

'But he's been working eighteen-hour days, seven days a week!' I protested. 'The guy barely sleeps. And his staff are all working just as hard.'

'So he's driving them too hard,' said Frank. 'He'll make even more screw-ups.'

'Are you saying we should drop Net Cop?' asked Gil.

Frank paused. He leaned forward and rubbed his chin in the way I had seen him do a hundred times before turning down some hapless entrepreneur who had come into our offices looking for us to finance a dream. My eyes sought his, but he avoided them. 'We took a risk with the first two million. That's what we're supposed to do as venture capitalists. But the market's moving away from us, and the entrepreneur's losing perspective. The deal looks different. It would be a big mistake to drop another three million now'

The bastard! I began to panic. Unless I did something immediately Net Cop would be dead. It was a good deal, I knew it. I just knew it. And more importantly I had given my word. Net Cop was Craig's life, and I had promised to support him. I wasn't prepared to go back on that.

'I disagree,' I said. I felt as much as heard a quick intake of breath from Daniel Hall, the associate sitting next to me. Associates didn't disagree with partners at Revere. 'I'm sorry Frank, but Craig seems to me to have done exactly the right thing. The market thinks that his switches are better than everyone else's. He has easily the most advanced security and encryption features, and that's exactly what the big telcos and ISPs want these days. He's got a winner here.'

Gil listened. When I had finished, he glanced across to Frank.

'He's got a higher spec than the competition,' said Frank. 'But we don't know whether he can deliver it-'

'That's why he needs the money for the prototype!' I interrupted. 'So that he can prove it works!'

Frank was silent. Then, for the first time that morning, he smiled. 'I admire Simon's enthusiasm. I've got to admit this looked like a good deal when we invested. But not any more. Sorry, Simon.'

The deal was dying, dying. 'But we can't back out now!' I protested. 'We told Craig we'd invest the next tranche when he met his technical milestones. He's met them. It was in the investment agreement.'

'There's always a way out of an investment agreement, Simon,' said Frank. 'I can think of a couple of clauses in there that could give us an out.'

I paused. I was floundering badly. I felt a nudge under the table. 'Give up,' whispered Daniel, very quietly out of the corner of his mouth. But I couldn't.

'Frank,' I began. 'We made an agreement. We have to stick to the spirit as well as the letter of it. We both know that Craig thought we were committing the second three million dollars. I thought that too.'

Frank didn't answer. He glanced at Gil.

Gil took a deep breath. 'OK, do we go ahead with the extra three million? Frank, I take it you say no?'

Frank nodded.

'Art?'

'No.'

'Ravi?'

Ravi glanced down at my memo through his half-moon reading spectacles. With curly grey hair, a bow-tie, and a large fleshy brown face, he looked more like a professor than a venture capitalist. He thought for a moment, but he could tell the mood of his partners. He shook his head.

'Diane?'

Diane had been listening closely to the exchange. Now all eyes were turned to her. She sat there with perfect poise, her thick dark hair framing her high cheekbones, her small delicate lips puckered in thought.

'I think we should go with it,' she said at length. 'I take Frank's points, but I remember when we did this deal. We knew then we were in for five million. It's an exciting market, and maybe we have got a winner here.'

I gave her a quick smile. The support was too little too late, but I appreciated it.

Gil listened to her with respect and nodded. 'Thank you, Diane.'

The room was silent as Gil studied the papers in front of him. We let him think. Then he sat back, folded his arms and delivered his verdict.

'No.'

All eyes were on me. It felt like a physical slap in the face. I had lost a deal. Somewhere I had gone wrong, and I had a feeling that it had little to do with Net Cop and more with Revere. I should have taken the time to prepare the political ground more carefully, to square Gil. I shouldn't have allowed myself to be ambushed by Frank.

Gil took some pity on me. 'I'm sorry, Simon. I go with Frank on this one. When a deal turns sour, you should take your losses. We've learned that lesson over the years the hard way. I'd like you to get hold of the lawyers and work out how best to present this to Net Cop. But I don't want to lose our two million if we can avoid it.'

'Without the extra three, Net Cop's finished,' I muttered, pursing my lips.

'Well, salvage what you can,' said Gil.

My first bad deal! That was a blow to my ego, but I could live with it. In fact it was probably an essential part of my education as a venture capitalist. What I couldn't live with was going back on my word.

'I can't do it,' I said.

Gil looked at me sharply. 'I don't think you understand, Simon. You've made your points. We've listened. We've decided to pull out. Now it's your job to do just that.'

'We made a moral commitment to give Net Cop the funds. I made a moral commitment. I can't go back on that.'

Art, who had been quiet throughout this, suddenly burst in. 'Hey, quit playing the English gentleman with us. This is business. We back winners, and when they stop being winners, we drop them. It's tough, but that's how we make money for our investors-'

Gil held up his hand to stop Art. 'OK, Art, OK,' he said calmly. He turned to me. 'I appreciate your sense of integrity, and I think there is a place for it in the way we do business at Revere. And I agree we had a moral commitment to invest more money, provided we were happy with the way the business was being run. But we're not.'

Gil looked to me for a response. I didn't give him one.

'Investment decisions must be based on the commercial realities,' he went on. 'And the reality here is that the partnership doesn't want to invest. It's not your decision, it's ours. All we ask is that you carry it out.'

They were all staring at me. 'I can't,' I said, and picked up my pen and pad and left the room.

I sat at my desk in the empty office I shared with the other two associates, my brain tumbling over what had just happened.

I had been at Revere just over two years, joining straight from business school. From the beginning, I had been determined to succeed, to make the serious money that American venture capitalists can earn, to break out of the traditional constraints of my past: my father's tide that had now become mine, public school, university, the army. In my middle twenties I had realized that my life of tradition and privilege, which since boyhood I had been told was the pinnacle of human civilization, was for me a cold prison cell.

There was something beguiling about being an officer in the Life Guards: the sense of belonging to an elite, a sense of superiority that had been carefully honed by centuries of regimental pomp, ceremony, myth and esprit de corps. But I didn't want to be beguiled. Soldiers were thankfully becoming increasingly irrelevant in the modern world. I didn't want to be irrelevant. I wanted to be in the middle of things. So I had escaped, leaving the army and winning a scholarship to Harvard Business School. America was a land of opportunity for anyone who believed they had ability and who wanted to make a success of themselves, untrammelled by their past lives in the old country.

I was definitely one of those people.

And I had been doing well. PC Homelease had made eight million dollars for Revere in six months out of a half-million initial investment, and had won me recognition in the firm as someone who was either smart or lucky. Gil thought highly of me, and until today, so had Frank. I badly wanted to make partner; that was where the big money in venture capital was made. At a lunch a few months before, Gil had hinted that this was a definite possibility. Was I now going to throw it all away?

But I had given my word. I couldn't go back on it.

Why couldn't I? Was this just another one of those precepts that had been programmed into me at school and in the army, that a gentleman's word was his bond?

No, that wasn't it. I knew plenty of gentleman liars. It was just that in life there were some people you could trust, and some you couldn't, and I thought it was important to be one of those you could.

The other two associates returned from the meeting.

'Have you got a death wish, or something?' asked Daniel, as he threw his legal pad on to his desk by the window. Short, thin, with dark hair and pale skin, he was the most aggressive, and probably the brightest of us. 'Once they say no, they mean no, you know that.'

I shrugged.

'Man, that was rough,' said John, putting a hand on my shoulder. 'They mauled you in there.'

'It certainly felt like it.'

He powered up his computer. 'I think you were right, though. If you say you're gonna do something, you've gotta do it.' He gave me a friendly smile.

'Bullshit!' Daniel said. Art's right. You've always got to do what makes financial sense. That's what the investors in our funds pay us for.'

I ignored him. There was no point in arguing with Daniel on the question of ethics. He was the personification of the concept of 'market forces' as a religious system. If something's price goes up it's good, if the price goes down it's bad. We had both been recruited from Harvard, and despite the compulsory ethics courses we had attended there, we had been given plenty of academic justification for the supremacy of the pricing mechanism as a moral tool. Daniel didn't need any of this, though. He was a natural believer.

John was very different. Tall and athletic, with mousy brown hair and big blue eyes, he looked younger than his thirty years. He had been at Revere the longest of the three of us. His father, John Chalfont Senior, was one of America's richest men. He had built up Chalfont Controls into a multi-billion dollar corporation, and for a couple of decades had made regular appearances in the business magazines, where his views on hard-working Americans, corrupt politicians and unfair foreign competition were stridently broadcast.

But John Junior had little interest in hard work or money, managing to do just enough to scrape into an Ivy League college and business school. His ambition seemed to be to lead an ordinary life, free of hassle, which, given who his father was, was not easy to achieve. Joining Revere had kept his father happy. Daniel said John would never make it at the firm; he didn't have enough interest in money. Daniel was probably right. But John did what he was asked to do competently enough, and it was hard not to like him. He did a lot of work for Frank, who seemed to be happy with him.

'What are you going to do now?' he asked.

I sighed. I had been thinking about that ever since I had walked out of the board room. 'I don't know. I'm thinking of resigning.'

'Don't do it, Simon,' said Daniel. 'Seriously. Shit like this happens. It's going to happen wherever you work. Just because Frank woke up in a pissy mood this morning shouldn't mean you have to give up your career. What's with him anyway? I've never seen him so mean.'

'Neither have I. What do you think, John?'

'I don't know,' he said thoughtfully. 'Something's bugging him.'

Frank would normally have backed me up on something like this. And if he had disagreed with my conclusions, he would have gently guided me to what he believed was the right answer before the meeting, not waited for the moment of maximum humiliation.

It had to be me and Diane. That was the only logical explanation. Frank loved his daughter, and was very protective of her. In this case overprotective.

My phone rang. It was Gil.

'Simon, can I have a word tomorrow morning? Say nine o'clock?' His voice was friendly.

'Gil, I'd like to talk to you now-'

Gil interrupted. 'There's no need for that. Let's talk tomorrow, when you've had time to think about this morning. OK? Nine o'clock tomorrow then.'

His voice brooked no argument, and anyway what he said made sense. 'OK, I'll

be there.'

Daniel glanced across the room at me. 'Gil's going to give you a chance to dig yourself out of this hole. Take it.'

'We'll see.' I picked up the Net Cop papers on my desk and tried to focus on them.

'Do anything over the weekend, Daniel?' John asked.

'Yeah,' said Daniel. 'Went to Foxwoods. Played blackjack all Saturday night, and came out with a thousand bucks more than I went in with. What more could you ask? What about you?'

'Nothing so exciting. I caught the Monet exhibition at the MFA. Pretty good. You should go.'

'Sign me up!' said Daniel.

'Daniel, have you ever been to an art gallery?' I asked.

'Sure. My parents took me to some museum in Paris when I was a kid. I threw up over a sculpture of a man and a woman making out. My mother was convinced my innocent sensibilities were upset by such an obscene composition. I suspect it had more to do with the Pernod I sneaked at lunch. Anyway, it was a real mess. Museums don't agree with me.'

John snorted. 'I'm sure they don't.'

My phone rang again. This time it was an external call. 'Can you take that John?'

He punched a button and picked up the phone. He listened, and glanced up at me, mouthing the word 'Craig'. I shook my head.

'I'm sorry Craig, he's in a meeting… It may last all day… I'm not sure what exactly it's about… I'm sure he'll be back to you when he has some news… OK, goodbye.'

'Thanks,' I said, as he put down the receiver. 'Craig's going to be calling all day. Would you two mind picking up my phone today?'

'Us pick up your phone?' said Daniel. 'We can't do that! We need a babe to pick up your phone. I'll call a temp agency and get one for you. Now what do you need? Redhead? Blonde? Let's get a blonde.'

'You'll do fine, Daniel,' I said.

I glanced down at the Net Cop papers in front of me. I had told Gil I couldn't carry out his decision, but that decision had been taken, and I had to face up to the fact. I couldn't leave it to someone else at Revere, or even worse, some hard-nosed lawyers to tell Craig. I had to do it myself, face-to-face; I owed him at least that much.