Sunday, November 6, 2011

The Great Venture Adventure by Jager, CEO of New England Wireless

Here's my experience with a Venture Capital Group:

You have some money to accomplish your dream but not enough or you may only have the dream. You can't get any conventional lending, because you don't have the required capital to get in the game using traditional bank financing. So you turn to venture capitalists for money.

In 1998, I had an opportunity to buy a construction permit for a 50,000 watt AM radio station, the station as it stood was 10,000 watts days and 1,000 watts nights. The station was in a healthy top ten market. A market I knew well from having operated radio stations there for close to 30 years. The price in those heady days of escalating values was what seemed at the time a bargain, 14 million dollars. In addition to the purchase price, there were construction, legal and operating costs, I figured I needed 19 million dollars, a lot of money, but considering a similar station had just sold for 72 million in the same market, this deal had real upside, but I had no money.

Through a consultant, I was contacted by a former Microsoft executive who expressed interest in the deal, we met, I laid it out for him and he set up a meeting with a venture group in New York.

Our initial meeting was with the principal of the group and a young MBA who was designated as our “guy”. I laid out my plan, they listened and then we went to dinner at a really expensive restaurant. When I went to my hotel after dinner, buzzed on 300 dollar wine, I realized I had no idea what they thought of the plan or which way they were leaning on a deal. Neither did my “partner”. When I got off the plane the next day, I had a phone message from our “guy”, he wanted to know if I could be back in New York the following week for a meeting with the principles. I called him back and told him I'd be there. I asked what I needed to bring and he said, “just yourself”.

The next meeting was in the big conference room at the group's offices in Rockefeller Center. In the room with my partner and I were 11 members of the firm, for three hours they peppered us with detailed questions and I felt we weren't getting anywhere. Finally out of frustration, I stood up and said “Imagine if down the street from this building there was a big vacant lot, the only good piece of land available in Manhattan without a building on it, the location is great, its surrounded by prime real estate and all that has to be done is to decide what to build on it! That is exactly what we are dealing with the license of this station!” I sat down and noticed the atmosphere had changed for the better. We then went out and had a big group dinner at the same high end restaurant, the wine was even more expensive than the last time and we had brandy and cigars after dinner. Once again I went back to my hotel with out a clue of where we were at with the financing.

Three days later I was driving to a meeting, my cell phone rang, it was my guy at the venture group, he said “We want the deal, we'll do it for 22 million total and we'll give you 5.5% of it, there is a caveat however, get rid of your partner, if you don't, we don't have a deal”. I was pretty excited, so I told him, I was driving and I needed to find a place to pull over, I put the phone in the counsel and bought myself a minute. I picked up the phone and told him, “that's great news, but if I'm going to get rid of my partner and do this all myself I need the 11% of the deal we laid out when we first talked 2 weeks ago.” He laughed and said, “no problem, if you hadn't asked for it, I would have figured you were too slow for us to work with!” Then he said, “give me your checking account number, so your new company can start paying you.” I gave it to him and asked, “what am I paying myself?” He said, “15k a month work for you?” I told him, “ah, yeah.” He said, “Look, I have to go, so take care of the partner thing today, okay? We'll do a conference call with everyone involved on Saturday morning at 8, have a time line ready by then and congratulations, bye.”

Jesus H. Christ, it was done! Now all I had to do was to get rid of the “partner” which I did in short order. He was stunned, I felt like shit, when he asked me why, I told him to ask the venture guys, when he tried, they didn't return his calls. I had to go to a corporate budget meeting, I walked into that meeting with a whole new attitude. The next day there was 15k in my checking account from my new company. Jan, who at the time was my new girl friend, and I went out and celebrated that night.

Part 2 coming soon.