Patricia Cloherty is chairman and CEO of Delta Private Equity Partners, LLC, and manager of The U.S. Russia Investment Fund and Delta Russia Fund, L.P., two venture capital funds with over $500 million invested in 54 Russian companies. On March 17th, 2008, President of the Russian Federation Vladimir Putin signed a decree awarding Patricia the Order of Friendship for her major contribution to the development of Russian business and for strengthening friendship and cooperation between the Russian Federation and the United States.
w2wlink is delighted to have Patricia Cloherty as a guest on the C-Link Suite Interview series. Among many other awards, successes and accomplishments, Ms. Cloherty is truly a model of a self-starting woman. She grew up with a "huge international curiosity" in a small town near Lake Tahoe. Her mother was from Canada and her father an Irish immigrant. They originally worked on the Southern Pacific Railroad, ultimately became entrepreneur owners of a dry cleaning shop, and wanted more than anything for her to have a good education. She studied Spanish literature and classical Greek to earn her B.A. from the San Francisco College for Women. In between college and joining the Peace Corps, she worked for the Von Trapp family and Maria Von Trapp became a good friend and mentor. She approaches networking the same way as she approached acquiring mentors -- by building natural friendships.
Patricia later earned an M.A., M.I.A. and Ph.D. from Columbia University. She served in the Peace Corps in Brazil from 1963 through 1965. In the Peace Corps, since she was assigned an experimental task of teaching farming and animal husbandry to children with the men. That unique assignment is a step that she considers to have been a valuable differentiator in her background that aided her success. She learned a lot about science during that experience. Several of her successful investments have been in the areas of science and intellectual property.
Ms. Cloherty is former co-chairman, president and general partner of Apax Partners, Inc. (formerly Patricof & Co. Ventures, Inc.), a multi-billion-dollar private equity company. She is a past president and chairman of the National Venture Capital Association of the United States. In 1991, President George H.W. Bush appointed her chairman of the Investment Advisory Council to revamp the Small Business Investment Company program of the U.S. Small Business Administration. From 1977 to 1978, Ms. Cloherty was deputy administrator, U.S. Small Business Administration, appointed by President Carter. She was appointed to the board of the U.S. Russia Investment Fund in 1995 by President Clinton, became chairman in 1998, and chief executive officer from 2003 to 2006. In 1981, Ms. Cloherty also was the founding president of the Committee of 200, a prestigious organization of the country’s leading women entrepreneurs and corporate executives.
She is also a trustee of Columbia University, a trustee for Life of International House, and a trustee emeritus of Columbia University’s Teachers College. She is a member of The Rockefeller University Council and the Council on Foreign Relations. Patricia is a board member of the American Chamber of Commerce in Russia and a member of the advisory boards of two business schools in Russia -- one in Skolkovo and the other in Saint Petersburg.
w2wlink.com: Pat, how does a woman entrepreneur get funding from a VC firm like yours? What are the main requirements?
Patricia Cloherty: We need to see that the idea has been reduced to practice or that it is clearly predictable scientific principle that works and is viable. That means it is bringing in increasing monthly cash flow in a consistent, reliable way. Scientists like to explore the unknown. One scientist who worked with me exclaimed, "You mean you want me to work on what we’ve already figured out?"
The key is showing that the business is sufficiently ambitious and growth oriented, because it needs to beat the return on investment of any other investment. We usually like to see that family and friends have invested in the initial startup of the venture as a statement of confidence. If the entrepreneur, her family and friends won’t invest, why should we?
In fact many women have done it ... Lillian Vernon, Estee Lauder and Judith Estrin, co-founder of Bridge Communications, are just a few.
w2wlink: What about a business plan? How important is that?
Patricia Cloherty: What is important is that the idea works clearly and shows that there is a return on investment to be made. We represent people’s savings and have a responsibility to our investors. It is more important that the plan or presented documents show and communicate that the idea is working in an increasingly profitable way.
w2wlink: So the written presentation is to introduce you to a working idea. You are in Moscow. Do plans vary from the United States and Moscow in terms of how many you receive and the format?
Patricia Cloherty: In America we receive about three to four thousand business plans a year for our investment consideration. In Russia, we receive about 150 proposals a year. It’s also a matter of how developed the country is and how many contacts are made with us to some degree.
w2wlink: What is the entry size a business should to be for your firm to consider funding?
Patricia Cloherty: $1-100M in returns and willing to give a 25-45 percent equity position in exchange for the investment.
w2wlink.com: Does the entrepreneur generally have to come from a certain background of experience or education to get your attention as being credible?
Patricia Cloherty: No. If someone has a working idea that is bringing in increasing monthly cash flow on a reliable basis and can show it -- that is the main criterion. You don’t have to be a graduate of an Ivy League school, have any school or have worked at a big name company. Like the woman I just saw – excellent idea, working wonderfully – she invested in it herself and brought it to us after she could show the ROI, and she doesn’t have any of that kind of background!
w2wlink.com: Must an entrepreneur have received angel funding before approaching you?
Patricia Cloherty: No.
w2wlink.com: We’ve talked about the win for the entrepreneur and the investor. How about the employees? How have you helped set up ventures so that the employees win from the fast growth they are a part of?
Patricia Cloherty: I have given incentive performance-based stock options and year-end bonuses. Depending on their level in the company, they might get other bonuses, as well, and special distributions.
w2wlink.com: Do you notice a difference between men and women entrepreneurs?
Patricia Cloherty: No. Women mainly just lack the confidence because they are less accustomed to competing for capital in quantitative terms, which means they need to get a partner. One of the biggest mistakes is under-pricing products because they are afraid that no one will buy the product if it were to sell for a profitable price. When I started a company that sold a completely unique scientific product, because we patented it, I set the price at an 85 percent margin with one-third down payment with each order.
w2wlink: You mentioned that you think networking is the natural outcome of making friends and being around people of common interest. C200 is one of the most powerful networking groups of women in the country, if not the world. How did it come about?
Patricia Cloherty: Susan Davis from Chicago was consulting NAWBO, which was a lobbying and business support group, and was attempting to raise $200,000. She asked for a thousand dollars per member until the total amount was raised. The 200 members who contributed decided to form C200, a networking group that is not a lobbying group. Now it’s almost 700 members and a similar support group for business risk takers for personal development has started in Russia called the Committee of 20.
Groups that Patricia Cloherty is directly affiliated with include: Delta Private Equity Partners, LLC, and C200, among many others.
