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Robert C. McCormack, '68
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2001 Distinguished Alumni Awards
The IT Man (Continued)
The rapid success of the company, which closed its
first fund with $43 million, its second with $80 million, and
its third with $120 million, is due in large part to Trident's
decision to invest in information technology.
"We picked very specifically in terms of what areas we were
going to look at and what areas we weren't going to look at,"
McCormack said. "We knew a certain amount about business
processing--back-office type stuff. And that's how we got here.
Right place. Right time."
Right place, right time, indeed. As one of the first venture
capital firms to specialize solely in information technology enterprises,
Trident had a jump on its later-arriving competition. "There
weren't a lot of people doing it," remarked McCormack, "and,
of course, the market came our way, too."
Firmly established by the time other venture capital
firms were just taking notice of the IT revolution, Trident has
maintained its position at the top through wise investment choices
and its reliance on dependable partners.
When asked what he looks for in an investment opportunity, McCormack
replied, "The most important ingredient is management. You
need management and...somebody who's got the flexibility and the
insight to change the business plan when it needs to be changed."
Blind adherence to the established plan can ruin a burgeoning
business, said McCormack. "The worst thing in the world is
to develop a business plan and say, 'This is it. I'm sticking
to it. Period.'... Markets don't work that way."
However, sticking with people you know may reduce potential error,
McCormack said. "We've been in business long enough now that
two-thirds of our transactions come through prior relationships.
You know them; they know you."
| "Essentially the government
is business. It's the same people doing the same thing--just
in a different environment." |
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When investing in a company, Trident
looks not only for a flexible and experienced management team, but
also for a large potential market, a product or service that is
quantifiably valuable to consumers, and a reasonable valuation that
will bring high returns.
For Trident, this means finding a partner who also capitalizes
on up-and-coming technologies. "We had one company that developed
a credit card processing system for the Internet," said McCormack.
"It was a product concept that a lot of people were working
on--Microsoft, Citibank, Visa, MasterCard."
Trident had worked with the entrepreneur previously and knew
that he was a successful and reliable software developer. "He
had never failed to deliver what he said he was going to deliver,"
McCormack stressed. "He wanted to do this, but we initially
tried to discourage him." The venture seemed too risky, said
McCormack, particularly in light of the competition and the required
technology.
The entrepreneur insisted, and, trusting
their previous encounters with him, McCormack and his partners at
Trident invested in the enterprise.
The system became a universal
platform for Internet commerce. Having created the software--which
validates credit cards and processes purchases--in just nine months,
the company quickly became a source of tremendous revenues. Trident
eventually merged it into VeriSign, a company that provides e-commerce
infrastructures to Web sites.
CSG Systems, the largest cable-television billing service in
the country, also proved to be a major success for Trident. "Most
cable services do their billing through third parties," explained
McCormack. "Our company now has a dominant market share and
a $2 to $2.5 billion market value. That's a terrific business."
So, too, is Trident Capital, which closed a fourth fund--valued
at more than $350 million--in October 1999 and a fifth fund of
$730 million in March of this year. The company employs approximately
25 people in four cities--Westport, Connecticut; Lake Forest,
Illinois; and Los Angeles and Palo Alto, California--and has more
than $1 billion under management.
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