When people ask Tom Simpson what he does, he usually makes something up.
“If I say I shovel coal for the city, they’ll chuckle, and we’ll move on to other topics.
“But if I say I’m a venture capitalist, their eyes glaze over in five seconds.”
Actually, it’s not that complicated. Venture capitalists help nurture new businesses. In return for funding and guidance, these “angel investors” own a share of the businesses.
Take etailz.com, a Spokane company acquired by a New York-based corporation last fall for $75 million.
Etailz began nine years ago as an elevator pitch Simpson gave during an entrepreneurship class he teaches at Gonzaga University.
One of his students, Josh Neblett, approached Simpson after class and offered to write a business plan.
Six months later Simpson, Neblett and Sarah Wollnick (Neblett’s future wife) formed greencupboards.com, which later morphed into etailz, an online purveyor of eco-friendly products.
Fast-forward to 2016.
Simpson gets a call from an investment banker representing something called Trans World Entertainment Corp.
“He began talking about purchasing etailz, which caught me off guard,” Simpson recalled. “After hearing him out, I said, ‘We aren’t for sale, but thanks anyway.’ ”
Neblett overheard half the conversation and asked Simpson about it.
“When I mentioned who the banker represented, Josh said, ‘What a coincidence. The CEO of Trans World was sitting next to me at a casino in Las Vegas recently, and we really bonded. Let’s meet with them.’ ”
It turned out the two companies’ differences made them a good match.
“They have 300 stores but no online presence, while almost everything we do is online,” Simpson explained. “So it was like one plus one equals four.”
Life is all about luck, says Simpson. “But luck is the intersection of opportunity and hard work.”
Certainly is was luck that Neblett happened to sit next to the Trans World CEO in Vegas. But thanks to years of hard work, etailz was ripe for acquisition.
Simpson insists Spokane, too, is on the verge of taking the next step, but only if the community works hard to leverage its assets.
He discussed that topic – as well as cars, clams and headstands – during a recent interview.
S-R: Where did you grow up?
Simpson: Here in Spokane. I graduated from Lewis and Clark.
S-R: What were your interests back then?
Simpson: Tennis. And I was editor of the high school newspaper.
S-R: What was your first job?
Simpson: I started delivering The Spokesman-Review when I was 14.
S-R: What college did you attend?
Simpson: I earned an undergraduate degree in business administration at the University of Washington. After three years as a CPA in Spokane, I went to the Wharton School at the University of Pennsylvania.
S-R: Why graduate school?
Simpson: I got married when I was 21. About two years later, my wife and I were heading to Sears in our station wagon to buy a washer and dryer when two high-school buddies of mine pulled up next to us in a bright red Corvette, music blaring. And I thought to myself, “Holy cow. I got on this life path a little too quickly.” I wondered what I could do to jazz things up a bit without messing up my résumé, and the only idea that came to mind was business school.
S-R: A Corvette might have been cheaper.
Simpson: Yeah, but going to business school opened up all sorts of opportunities. Until then, I’d never been east of Missoula. I met fascinating people and learned things I otherwise would not have been exposed to.
S-R: What did you do between earning an MBA and returning to Spokane?
Simpson: I was an investment banker in Seattle for nine years. A fabulous individual who had worked for Goldman Sachs took me under his wing and taught me about financing young companies.
S-R: What was his core philosophy?
Simpson: “Put your clients’ interests first.”
S-R: What brought you back to Spokane?
Simpson: Dave Clack (former chairman of Old National Bank) asked me to revitalize a little venture fund he and a local group had started called Spokane Capital Management.
S-R: Wasn’t Seattle a bright red Corvette compared with station wagon Spokane?
Simpson: I didn’t recognize what I was getting myself into back in the summer of ’95. Spokane was in a state of despair. The Davenport Hotel was boarded up. Downtown was falling apart. Yet 1995 to 2000 proved to be phenomenal years for venture capitalists. Almost everything I invested in turned to gold. The following five years, not so much. By 2000, the markets were overvalued. Then we had 9/11, followed by Sarbanes-Oxley (a law intended to protect investors from fraudulent accounting practices). Those were tough years for venture capitalists.
S-R: And after 2005?
Simpson: Much better. I got involved with the Spokane Angel Alliance and started etailz. The seeds I planted post-2005 have sprouted nicely.
S-R: Where are we today?
Simpson: I think Spokane is on the cusp of greatness in terms of economic vitality. But we need to make the most of our assets.
S-R: Such as?
Simpson: Our incredible quality of life. A recent New York Times article talked about how the percentage of children in San Francisco has plummeted. It’s no longer a livable city. Spokane is highly livable – close to lakes and mountains and trails – and we have affordable real estate. Steve Case, co-founder of AOL and author of “The Third Wave,” predicts there’s going to be a ‘rise of the rest.’ Cities like Spokane have an opportunity to be the next Silicon Valley or Austin, Texas.
S-R: Would that be good for Spokane?
Simpson: Yes, because economic vitality pays for all the social services we want to provide.
S-R: What’s the best business advice you ever got?
Simpson: “Culture trumps strategy.” If you have an average product and an average market, but an amazing culture – employees who show up smiling, ready to work together – you’re likely to succeed. Flip it around – say you have a great product and a great market, but there’s infighting – no way are you going to succeed.
S-R: Did any skills you learned delivering newspapers as a teen transfer to your career as a venture capitalist?
Simpson: Being a paper carrier taught me all aspects of business. I was responsible for getting myself out of bed at 4 in the morning. I was accountable if customers complained. I had to learn social skills, because back then carriers had to go door to door collecting money from people who might be grumpy. Those lessons formed the basis of what I have grown into.
S-R: What venture are you most proud of?
Simpson: Hands down, etailz.
S-R: Who provided the initial capital for greencupboards.com?
Simpson: I invested personally, along with some of my close contacts in the community.
S-R: Did you have an exit strategy?
Simpson: No. The three things I preach are be a leader in your market, grow your revenues faster than the competition, and be profitable. If you do all three, at the natural time someone will knock on your door.
S-R: How did your employees fare in the sale?
Simpson: We had an incentive program, and no one lost their job because of the sale. So the employees have and will continue to benefit from this acquisition. And we’re hiring.
S-R: Do you actively search for businesses in which to invest, or do they approach you?
Simpson: Both. People come to me, but I constantly watch for new companies or first-time entrepreneurs. My primary focus is on our region, which I define as everything from Pullman-Moscow to Sandpoint to western Montana.
S-R: What’s the craziest pitch you ever heard?
Simpson: Someone called with an idea for cleaning the fuzz off clam shells. That was a short conversation.
S-R: What do you like most about your vocation?
Simpson: Interacting with an incredible variety of people – particularly aspiring entrepreneurs looking for guidance. I love harnessing that enthusiasm.
S-R: What do you like least?
Simpson: The frustration I feel working with large groups of people who are tied to conventional ways of doing things. Instead of overanalyzing, I prefer to follow my gut. If something works well, do more of it. If it doesn’t quickly produce results, try something else.
S-R: Does Spokane need more venture capital, or more fresh ideas?
Simpson: More ideas. I can find the money.
S-R: What advice would you offer an entrepreneur looking for funding?
Simpson: Research your idea thoroughly, so you can answer almost any question someone might ask trying to poke holes in your business plan. Know how much money you need to get through 18 months, and don’t exaggerate your company’s valuation.
S-R: What are your secret talents?
Simpson: Ping pong and headstands. I do yoga nearly every day, and when I travel, I take pictures of me doing headstands.
S-R: Any guilty pleasure?
Simpson: French fries – preferably with mustard.
S-R: What’s on your bucket list?
Simpson: Traveling to places I’ve never been. My son teaches English in Ho Chi Minh City, and my daughter, who’s getting her Ph.D. in psychology, will present at a conference in Prague in May. So trips to Vietnam and the Czech Republic are on my list.
S-R: By the way, did you ever get a bright red Corvette?
Simpson: No, but I did get a bright red Alfa Romeo. (laugh)
This interview has been condensed. Writer Michael Guilfoil can be contacted at email@example.com
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