ON THE FRONT LINE
feer.com
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By Dan Biers/LOS ANGELES and Bruce Gilley/HONG KONG
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Gary Rieschel has his hands full running Masayoshi Son's U.S. venture-capital operation, perhaps the most important piece in the Softbank global puzzle. Rieschel's job as executive managing director of Softbank Venture Capital is doubly important because besides investing in fledgling companies, he's supposed to act as a scout for companies for Softbank's long-term stable.
Son tapped Rieschel, who had worked for computer giant Cisco Systems after receiving a Harvard MBA, to set up Softbank's venture arm in 1995. Rieschel started off with a bang, making 55 investments in nine months in 1996. All of the Softbank U.S. venture funds launched before 1999 have achieved returns exceeding 100% a year. But the recent bearish market will push that figure down in subsequent years.
Rieschel's latest fund, Softbank Technology Ventures VI, raised $1.5 billion in June--half from Softbank itself--and by late September about one-quarter of that money had been invested. All told, his portfolio is nearing 200 companies, with several billion dollars invested.
"There might be eight or 10 of us that really haggle and argue and fight over what the strategy should be, and then I go and implement it for private equity in the U.S.," Rieschel says.
He tracks companies using a colour-coding system to indicate varying degrees of cash need--red implies money is needed within 60 days; yellow and green, less pressing needs. "Some of the best companies we have are red," he says.
Softbank got in early on Internet portal Yahoo!, whose value subsequently soared and still accounts for most of Softbank's own market value. But Rieschel also acknowledges some spectacularly bad investments, including about $30 million lost in firms that tried to create on-line communities. "Complete disaster. Absolute wipe-out," he laughs.
Rieschel scotches any idea that his rapid-fire investment approach leaves little time for consideration or to help nurture companies. "It's not a shotgun approach at all. That's one of the great misconceptions. I'm not a shotgun person. If you look at my background, I'm a biology major. I'm a very strategic person, I'm a very big planner." He believes John Chambers at Cisco is the best organizer and Larry Ellison at Oracle has the best grasp of technology, but Softbank's Son, he says, "has the biggest ambition." |
