Last week, the Center for Innovative Technology (CIT) announced that its CIT GAP Funds‘ portfolio reached 100 companies, an achievement that they celebrated with a party in Charlotsville. No, stop, anyways. Since then, they have already invested in other three companies (Private Practice, Urgent.ly and Riogin).
Tom Weithman, VP, CIT Entrepreneur and Managing Director of the CIT GAP Funds, answered our questions and shared his interesting vision with us (I want to thank Hap Connors, VP, CIT Government and Public Affairs).
FinSMEs: What’s CIT GAP Funds?
Tom: CIT GAP Funds is a “double bottom-line” venture fund within the Center for Innovative Technology – a 501c3 non-profit. We consider ourselves a “double bottom-line” fund in that we (a) invest to realize extraordinary financial returns for entrepreneurs and co-investors while replenishing the supply of investment capital within our fund; and (b) seek to realize extraordinary economic outcomes for the Commonwealth of Virginia by way of new companies formed and contribution to the state economy.
CIT GAP Funds is a family of seed and early stage funds underwritten by the Commonwealth of Virginia. Since its inception in 2005, the Funds have invested $13 million in public funds in just over 100 startups, which then attracted more than $200 million in private equity – a 15-1 leverage.
The CIT GAP Funds Investment Team is an extraordinary collection of individuals – with backgrounds as angel and venture investors, consultants and operators – dedicated to developing the next generation of high growth start-up companies in tech, clean tech and the life sciences. This team is augmented by an Investment Advisory Board comprised of leading venture capitalists, angel investors and industry representatives who help guide our fund’s decision process.
FinSMEs: What’s your focus and investment strategy?
Tom: CIT GAP Funds focuses on the next generation of tech, clean tech and life sciences start-up companies dedicated to achieving exceptional growth in the Commonwealth of Virginia. As an active investor, we take a hands-on approach toward nurturing and growing companies seeking to create significant value in start-up companies at their earliest developmental stages. We seek out capital efficient opportunities and encourage our portfolio companies to pursue capital efficient strategies at these very early stages and bring to bear our expertise – in the areas of strategic guidance, business development and capital formation – from both private and non-dilutive grant sources — during this critical formative period.
FinSMEs: What’s the main achievement you have brought to Virginia (in terms of jobs, growth of companies, exits)?
Tom: We are extremely proud of our record of new company formation and development as well as the 10 exits that we have achieved and the great value locked up in our early stage portfolio. What we most like to talk about, however, is the amount of private money that we have helped bring to the table for our portfolio companies. An important part of our model is leveraging private capital against Virginia investment. We have achieved this by offering a superior due diligence product that inspires confidence of the investment community – both institutionally backed venture capital funds and angels. As a result, if you look across our portfolio, we have brought more than $15 of private investment into portfolio companies for every $1 of public money deployed.
FinSMEs: Personally, what do you like to see in startup founders? What don’t you like to see in them?
Tom: We like to see start-up founders who are passionate about what they are doing, dedicated to understanding what the market needs, are coachable and have a high level of self awareness – that is to say they know what they know and know what they don’t know. Founders with these characteristics are invariably the ones that bring the best teams together – cofounders, employees, advisors and investors – to build companies. By contrast, we are reluctant to invest in founders who believe that the knowledge base required to build their company is self-contained, who are not good listeners and are threatened by outside advice and counsel.
FinSMEs: Today, a new wave of thematic funds is raising (fintech, creative, quantum, etc.). In your opinion, can it result in a real advantage for the industry and for backed companies?
Tom: I am a believer in thematic investing, presuming of course that the investor is bringing real domain expertise to bear and not just chasing “the flavor of the day.” Investors create the greatest value when they invest in what they know. In this way they can bring to bear the depth of their own industry experience as well as that of their extended networks – other investors, customer contacts, would be management team members and other portfolio companies – to help grow their targeted investments. In creating value for portfolio companies, they advance and create value for company’s industry. By creating value in their portfolio companies, they create great returns, which benefit the venture industry.
FinSMEs: Speak about some trends…fintech, IoT and wearable tech, virtual reality, etc. Which one do you bet on?
Tom: I believe that there are three inexorable and interrelated trends – mobility, “the internet of things” and information security. We have placed a number of investments in the mobility space and are highly intrigued by the “internet of things” and are uncertain exactly how this plays out in terms of investment opportunities. CIT’s recent launch of the MACH37 Cyber Accelerator, a sister organization of CIT GAP Funds solely dedicated to the formation, seed funding and development of early stage cyber security companies, speaks to our commitment in that space.
FinSMEs: Finally, some people to say thanks for this achievement?
Tom: Wow, really far too many to thank. I would have to single out the following – our great CIT GAP Funds Investment Team who works hard every day to find, groom and coach the best of the best here in the Commonwealth, CIT CEO Pete Jobse for his support and insight during both fund formation and our ongoing operations, CIT’s Board for their unflagging support of our fund, the Northern Virginia Technology Council and other supporters for their tireless advocacy for continued state sponsorship of CIT GAP Funds and last of all Virginia’s entrepreneurial community – the key driver of next generation innovation in the Commonwealth.
— CIT GAP Funds (@CITGAPFunds) April 11, 2014