After listing his Hutt Valley-based microwave telecommunications company MAS Technology on the NASDAQ in 1997 and cashing out with almost $60 million from global giant year later, entrepreneur Neville Jordan now spends his time looking for high-flying science and technology start-ups to invest in.
As co-partner in venture capital company Endeavour Capital, Jordan has direct equity stake in seven such companies and an indirect investment in eight more. The future success of these start-ups will depend on the quality of the management Jordan selects to run them.
A casebook example of how start-up should try to marry management, science, venture capital, and market opportunity is biotechnology company Jordan recently co-founded, called Protemix (see box story). But Jordan can’t run all these companies himself, nor would he try. So how does he find CEOs and what management qualities does he look for?
Like any venture capitalist, Jordan expects high returns from his equity stake. He only invests in science and technology companies with teams of skilled people who have world-beating ideas and an international outlook. “I look for companies with world-class research platforms for products, where there’s clear channel to global markets and plenty of candidate products coming through,” he enthuses.
Taking his cue from MAS Technology’s outstanding track-record, all his start-ups must have high growth potential. And like MAS, he expects them to return 30 percent year-on-year organic growth over 10-year horizon. But MAS Technology is hard act to follow. In 22 years the firm never made loss – and for the past 12 years, it delivered 30 percent both top and bottom-line growth.
“MAS Technology achieved these results through 15 years of continuous reinvestment in people, the community and care developing strong stakeholder relationships. These are things that develop sustainable value growth,” explains Jordan.
As co-partner of Endeavour Capital Jordon grooms and mentors his CEOs. “An international knowledge of markets and services can be readily imparted,” he says, “but it’s usually more difficult for CEOs to assimilate cultures that are different from the western world. This can be taught, but it requires an inherent ability to empathise with people from other backgrounds. This quality is best identified by watching people in action, not everyone has the ability.”
His CEOs must develop feeling for the underlying technology. They must also possess strong strategic sense of how the science translates into commercial product. “I look for someone who can build an effective team and simultaneously develop like-minded individuals. It’s the leader’s job to develop spirit within the company by demonstrating personal commitment to those standards. For example, my role at Protemix is to formulate the character of the overall team,” says Jordan.
Instead of operating by remote-control, through fear or dictate, CEOs need minute-by-minute demonstration of the company’s values. It’s equally important that they stay flexible enough in their thinking to embrace change as constant dynamic of these organisations. “A good CEO has the courage to pursue his convictions, instead of just freezing up. It requires certain amount of naked intuition to make decisions, even when there’s insufficient time to gather all the necessary information. Shielding behind consultants is no no.”
It is, however, permissible to make mistakes. Jordan sees them as part of the process by which company moves forward.
The removal of unbending organisational structures is, according to Jordan, the key to improving New Zealand’s management performance. Modern enterprises are more interested in integral stakeholders than in upholding rigid structures. But according to Jordan there are still too many “family tree-style” management structures. “They’re still around because people are slow learners. Organisations are better defined by their interactions with stakeholders than by the nature of their management structure,” he offers.
Companies that follow social change, plot social trends and understand what people are looking for will survive. “People don’t want to be part of large structure. They want to be split into teams and empowered with opportunity to demonstrate their abilities,” says Jordan.
Talented people often don’t get an opportunity to prove their leadership capabilities. When they are so empowered, most CEOs-in-waiting rise to the challenge. “Once you’ve made good selection, and provided the necessary resources, you have to trust these people to get on with it, without trying to micro-manage them,” says Jordan.
Jordan is encouraged by the number of university programmes that focus on management for science and technology-based companies. And shoulder tapping seems to deliver the best results. Salary being the issue that it is, attracting people from offshore is difficult. “If we started looking for new CEO today, it could take up to year to find the right person,” he says. “Once the right person is found, we can expect to hold onto them for at least five years. One of the hooks is stocks options that provide attractive returns when the value of the firm is finally sold and full value realised.”
But after the searching, how does Jordan know he’s employed the right CEO? For start he places lot of faith in good old-fashioned reference checking. He’s frequently surprised by mid-sized companies that undertake considerable psychometric testing, then fail to check the references of former employers.
Icons create spirit
Jordan prefers to take minority position in the companies he invests in to keep the founder’s interest level high. Founders are usually invaluable to the company’s future, though his or her skills as CEO might be deficient. talk with the founder before buying into business is essential. Everyone needs to be clear about who will run the company.
Founders are often first and foremost clever scientists trying, often unsuccessfully, to run business. “And the icons within an organisation aren’t necessarily part of top management. Yet it’s often these people who embody the spirit of the company – which is why they’re so important,” says Jordan.
What are the ‘must-have’ qualities that Jordan looks for in CEO? Graduate qualifications in any single discipline aren’t necessarily mandatory. But Jordan believes that the ability to graduate accounts for something and is often guide to creative or independent thought.
A record of proven ability is some indication of CEO’s ability to transpose success into other business environments. Previous failure is not necessarily bad thing in Jordan’s books.
“The common denominator is the ability to achieve favourable results, and these needn’t be exclusively financial. They could include dominating particular market or launching new product, both of which could negatively impact the bottom-line over the short-term,” he explains.
New Zealand companies are currently experiencing sea-change in thinking. growing number of them are trying to identify themselves by their interactions with stakeholders. Large companies in particular are starting to recognise that they don’t operate in isolation from the problems now facing the world.
“Being in business just to make money for shareholders is now tempered with issues of social responsibility and principles of fair-dealing. There is nothing inherently wrong with company that’s totally focused on the financial bottom-line. But I’m not sure this model is sustainable. Achieving sustainable value growth comes from continuous reinvestment in research and people and developing relationships with range of stakeholders. Companies that don’t do this are more likely to go through boom and bust cycles,” says Jordan.
The ethical hat
Cowboys still run many local companies. But to thrive and grow, Jordan thinks one of the numerous hats CEO must wear is one