To many, Sand Hill Road is the sacrosanct symbol for the early collegial days of venture capital. But Reid Dennis' investments predate even these pastoral office complexes where the Who's who of the industry reside.
In fact, when he first started investing in local high-tech companies, they didn't use the terms "venture capital" or "Silicon Valley."
It was 49 years ago this fall.
The current founder and partner of Institutional Venture Partners -- who still wears a bow-tie when many on Sand Hill Road wear no tie at all -- was an analyst with financial company Fireman's Fund in San Francisco. A Stanford University graduate, Mr. Dennis, 75, and other young analysts working in San Francisco's 1950s financial community formed a casual circle that would invest in and mentor young tech companies.
"We called ourselves `the group'," he says. "We'd hear of a small electronics company and invite them to lunch. They'd explain their business, then we'd make them go stand on the street corner for about five minutes while we talked about it. Then we'd invest -- or not."
It's fitting that Mr. Dennis' hobby was setting companies in motion -- it's a word that sums up much of his personal and professional life since.
Over 10 years, "The Group" invested in some 10 small companies, at about $75,000 to $300,000 a pop. Mr. Dennis was hooked.
He soon headed up the Fireman's Fund corporate venturing arm, and later, when it was acquired by American Express, introduced that global financial giant to venture investing.
In the early 1970s he looked around at his life. He was a president for American Express' West Coast office and if "he kept his nose clean," his ultimate reward with the company would be a promotion and move to New York.
The San Francisco native would have none of that. Instead, he decided to focus on what'd been his favorite part of his career -- helping create small tech companies.
Mr. Dennis and partners Burgess Jamieson and Burt McMurtrey opened the offices of Institutional Venture Associates, later renamed Institutional Venture Partners, at 3000 Sand Hill Road when the complex was new, and a small firm, Kleiner Perkins Caufield & Byers, was at the other end of the building.
An outsider peering into Mr. Dennis' office today may think he's just moved in, as dozens of boxes are scattered across the floor and the furniture. His face lights up, explaining they contain a rare collection of old Japanese model trains -- many one of kind. They were going to be split up and auctioned off separately. Instead, Mr. Dennis bought the whole collection and is planning to donate it to a locomotive museum.
"It seemed a shame to split it up," he says.
Model planes and photos of planes also dot his office. In fact, he just returned from an ambitious vacation. Mr. Dennis loaded up his wife, grandkids, and several friends -- 14 people in all -- into one of his amphibious planes for a month-long cruise up through Canada and Alaska.
"It's totally absorbing to me," he says of flying. "Like taking a damp rag and wiping all the business worries off a blackboard."
That's the kind of focus that's made him a successful investor for almost 50 years, says Norm Fogelsong, fellow partner at IVP.
"When he engages in a particular project he's totally focused on it," he says. "One of his other great skills is his ability to engage on something. He calls things like he sees them and he's generally right on."
But this industry's ups and downs have taken a toll on many. In fact, much of the motion going on today in venture capital disturbs Mr. Dennis. The industry has grown in dollar amount from $2.9 billion in 1980 to $171.9 billion raised in 2000, with several dozen companies now sitting on $1 billion funds.
Many of Mr. Dennis' generation of investors are retiring.
"It's not as fun as it used to be," he says. "I don't blame them, but I think the easy way out is to retire."
Now that the markets have changed and the industry is back to its roots, Mr. Dennis has valuable expertise to offer.
"I thought I was old and out-of-date," he says of the last five years' tech bubble. "I didn't understand what was going on. Now I understand -- it didn't make any sense to anyone."
"Life isn't that easy. Every time it gets that easy, watch out because you're about to get hit in the back of the head with a heavy weight."
The last few years have changed things. In past decades, people went into venture capital to help build something. Today, many young partners see venture capital as a fast track to wealth, he says.
And, in IVP's early days, the firm made its profits when the LPs did. But if a venture capital firm has a $1 billion fund, the management fees alone are enough to support a firm and its partners.
"The emphasis on making money is nauseating to me; that's the wrong reason to be in this business," Mr. Dennis says. "It's become more dog-eat-dog."
He quotes a phrase coined by fellow industry veteran Don Vallentine, of Sequoia Ventures: "Sure, I hate to lose money but (if a company goes under) I hope to leave my heel marks on the edge of the cliff."
That sentiment has largely been replaced by "triage," a new catch-phrase of the industry, referring to VCs picking and choosing who can make it out of their now-bloated portfolios.
"They're picking out one-third of their portfolio that won't make it and saying, `I can't help him, let's not waste any time on him,'" Mr. Dennis says. "That's the first time in this business I've seen so many professional investors who feel they can't help their companies any longer."
"We used to roll up our sleeves and do everything we could. We're the ones that got them into that position."
Despite these ruminations, Mr. Dennis' investment activity continues. He thrives on the excitement from hearing a new idea and providing the resources for that idea to become a product.
His partners are doubtful he'll retire soon.
"I've worked with him 12 years now," says Mr. Fogelsong. "I know he loves this business. I think he'll stay active as long as he cares to."
-SARAH LACY covers banking, finance, venture capital and the arts for the Business Journal.
Reprinted with permission by ©2001 American City Business Journal Inc, all rights reserved.