Private Venture Capitalist
During our interview, Mark Tousey, Private Venture Capitalist, shared how important it is for business people and leaders to express humility, which he learned the hard way. He tells the story. He also emphasizes the value of integrity, explains what he looks for in entrepreneurs he's going to back financially, explains why he left big banks for VC work, and more.
What do you love most about your work?
I love helping people who have ideas for businesses. It's fun to see the germ of a new idea expand, take form, and actually become a business -- to decide whether something's viable, to have total confidence in your abilities, to jump in with both feet and make it happen. I've started two companies myself, and I know how exciting it is to grow them. Now I'm in a position where I can help others do that. Fundamentally, I just love doing deals.
What two companies did you start?
When I left the world of big banks, I started a venture capital business in 1993, called Blenheim Capital, which is the name of the palace where Winston Churchill grew up. We chose it because we wanted something that sounded well-established. Then I started a restaurant group in 1997.
Why did you leave "big banks"?
I advised various management teams when I was a corporate finance advisor, often working with incumbent business teams wanting to buy a business or division from their parent company who wanted to sell it, or working with outside management teams looking to buy. I realized that that was where the action was. I didn't want to advise; I wanted to be doing things myself. So I left in '93 and started Blenheim with two other colleagues, bought them out in '97, and then carried on the business for my own account.
How do you decide what companies to back?
From a business perspective, I don't care what products entrepreneurs want to develop. It doesn't matter what they make or how they make it. What's important to me is my confidence in their ability to deliver. That confidence arises from my view of whether they have vision, whether they have thought out all the challenges of selling that service or product -- if they've thought through the competitive pressures, if there's a big enough market, and so on. If they have the vision, discipline, and the drive, then that warrants my consideration of their proposal.
Now in the end, the terms I may offer them may not be acceptable for them, and there are no hard feelings. But if they like the terms I've proposed, then we have a basis on which to work, to hammer out the details of my investing in the business. But it's really a partnership. Once you invest in a private company, it can be quite tricky to sell the stock prior to selling the whole of the business. So you need to be very careful with whom you go into business because you're going to be in there with them for good days and bad days, usually at least between three and five years. The good thing about my involvement is that it's my own money. I don't have to return the money to any other investors, and that gives me an edge over most VC firms who have a finite period that they can have their money invested in a particular company.
What's challenging about the venture capital business?
The challenge is to be of support to management teams when the tough days roll around. They may go through times when they wonder, "Should I have done this? Do I have what it takes? Is there a market for this?" But they nearly always come out of those dark days confident that they can do what it takes. You have to have vision even when the winds blow in the wrong direction. The doubts that come along about doing something new would regularly undermine your confidence.
How do you maintain confidence and vision?
For me, there's no question that my reliance on God is fundamental. If you don't have something rock solid, you can lose your confidence and give up. I've worked with people who have very good ideas and a tremendous amount of drive and motivation, but they have nothing to guide them when things get rough; they're looking to their own intellect. They swing from one extreme to another. They have no sense of vision, no staying power. The constant change of direction causes havoc with a business. It's difficult when people don't have a standard against which to judge their own actions.
It doesn't matter to me what church or concept of Supreme Being or God someone has, but it's really important to have the recognition that there is some power above that's not human intellect because, in my view, intellect will never carry you through. You need something more permanent and fundamental because it's not unusual to make mistakes in our daily lives. The important thing is to have the humility to recognize that you don't have all the answers.
For me, the only place to find the answers is through divine intelligence. Whenever I've failed, it's because I thought I was the creator or the source of intelligence, and when I've succeeded, it's always been because I've relied on God for my guidance.
Are there any Bible stories that have given you inspiration?
If you look at the story of Moses, you'll find an individual who lacked confidence from the start and said, "I can't do this." God made it very clear that He was guiding Moses. That was a long journey, and there were lots of dark days. But in the end, it was a complete success because Moses was humble enough to recognize that there was a power beyond him helping him.
You've mentioned humility a couple times. Why is it so important?
Humility is a very difficult thing for business and financial people, as their work is all about confidence and self-confidence. You have to make sure you're setting the foundation for the necessary confidence in divine authority rather than in personal intellect. It's easier to have humility when you don't know anything. It's harder when you do know something. That's the danger of intellect. You start relying on your education (and I've had a lot of business education) and experience. I'm not discounting them, but you may find yourself in a situation that seems identical to a previous one and think you know what to do. That's why you've got to have humility and go to God. What you did before may not work; you may need something different with the new company. If you don't do the right thing, you're not going to succeed.
When you get into investment banking, you're ready to take over the world, and you need that confidence. People will tolerate arrogance if you're good at what you do, but arrogance should never be a substitute for leadership. A real leader brings his colleagues with him and doesn't force them to march behind. The difficulty with many entrepreneurs is that they think they know everything and won't take advice. Now I've had situations where it hasn't been this way, but I've had to deal with ignorance and arrogance, too. And, it's a lesson I learned myself early on in my career.
How did you learn humility?
When you feel like you know everything, it usually means you'll end up failing and learning humility the hard way -- losing a transaction or client, or in my case, losing a lot of money. In my early days after graduate school, I set up and ran a division for a bank. I wrote the rule book -- the standard procedures and practices, the control system that should be followed. Once I started running this new division, everything that I said was "me" and" I." I would announce in our weekly business meetings what "I" had done and what "I" was planning on doing. About four weeks in, I transacted a trade, disregarding and breaking the rules I had written and the bank had approved. As a result, I lost $900,000 for the bank in a single transaction. It was a humiliating event for me -- having put together a division in an area of expertise that I had studied in grad school and then falling flat on my face.
Why did you break the rules?
Because I was so excited about having achieved something on my own. The fallacy was that I had achieved it all on my own from a human perspective. I was going on this ego trip and not giving any credit to others or to God. I got so wrapped up in the "I" trip that I ignored the rules I had written and set up, reasonable rules of protection. That was the whole stupid thing about it.
What rule was it?
The rule was to do a credit check on the client. I started off as a banker; I knew this rule. In effect, I decided that I was superior to the rule. I sold a large amount of securities to a third party I had never met. I didn't ask for any money up front before I bought the securities. Once I bought them, the price fell; the client walked away; and I had to sell the securities to someone else on the market for a huge loss. If I had done the credit check, I would've asked for the money from the third party up front, which would've protected the bank and would've flushed out whether or not they actually wanted to buy.
So what happened?
I had a very understanding boss who called me into his office. I was convinced I was going to get the sack. He gave me a lecture in which he basically said, "We all make mistakes, and the people who ultimately succeed, learn their lessons. But the most important lesson you need to learn is that you have a team around you, and you are not doing this single-handedly. I've been sitting listening to you in the Monday morning meetings, and you keep saying 'I' and 'me.' You never give any recognition to any of the back office team or the support staff. And as a friend, I have to tell you that you deserve this downfall. But if you're as good as I think you are, you're going to come out of this better than before and never make a stupid mistake again." My entire attitude changed, and I stopped using the word "I." I've been very careful in the succeeding 20 years never to make a report to a board or to colleagues using "I"; it's always "we," even when it's been me doing the work by myself.
Obviously, you bounced back very successfully.
In that situation, I made back the $900,000 and more in the succeeding two months. I continued to succeed in the bank, although my name was quite well known in the higher echelons, not for reasons I would've liked! But the important thing was that they knew I had the courage to hang in there and fix the problem. And through the whole thing, I did enjoy a reputation of having a high sense of integrity. And when I set up the VC business, there were two transactions that we made that brought us success, both financially and in reputation. At the end of the day, all you have is your integrity -- and you take that from business to business.
Did you run into any situations where your integrity was challenged?
There were many instances where clients would try to undermine my integrity by offering me bribes or asking me to cut corners which were not ethical. When I was at the bank in NY, and I was trading in overseas securities, I was working in a jurisdiction, in a region of the world, where bribery was normal. But I knew from my own position that accepting bribes was untenable, as well as wholly unacceptable to my bank. So when I refused to accept their "inducement payment," which would enhance my own personal finances, they weren't prepared to work with me. They called me back again the next day to try to persuade me. So, maintaining my integrity meant that I lost business, but I was very prepared to pay that price. We just did business with people who were prepared to deal ethically. In the end, we were successful.
I'd say integrity would be at the core of the successes I've had.
About Mark Tousey
I have been very fortunate to have had such a wide array of experience in several facets of finance -- commercial banking, investment banking, emerging markets sales and trading, corporate advisory, and most recently in venture capital. This wide experience is invaluable to me as I help others build their businesses.
I studied business and French at Washington University in St Louis, where I was able to follow my interest in international finance. I spent my junior year studying finance and music at the University of Strasbourg, France. While working on my MBA at Wharton, I became very interested in the fledgling emerging markets debt trading business. Soon after graduation, I was given the opportunity to build that business at one of the world's largest banks at the age of 27.
I moved to London in 1988 to expand my experience in international finance, first in setting up an emerging markets trading business and then helping to set up a corporate finance division at another major international bank. In 1993, I established a venture capital business -- working first with colleagues and then spinning off and working for my own account a few years later.
In addition to finance projects, I now spend time as a director on the boards of a number of charities and philanthropic organizations in the UK and the US, with a particular focus on classical music and opera.