The dollar amount is staggering.
Yet the $375 million Rich Langdale has raised for his family of companies in less than two years isn’t what’s gotten the business community talking about him. It’s the prominent slate of investors he’s attracted to underwrite his ventures that started heads turning in Columbus. That and the fact that he’s raised so much venture capital so quietly.
Only the $75 million deal Langdale closed in December 1999 for his then-start-up venture SubmitOrder.com and the additional $40 million he secured this past May for the same company — which has since dropped its dot-com suffix — have grabbed headlines. The other $260 million he raised with very little fanfare.
Langdale says he prefers it that way.
“I never had any interest at all in being famous,” says the golf-shirt-clad entrepreneur who will turn 37 at the end of this month. “A certain level of anonymity is a good thing.”
That’s not to say Langdale is bashful. Not by any means.
“I’m probably more cocky than I should be,” offers the refreshingly candid founder of SubmitOrder, NCT Ventures, Digital Storage Inc. and a handful of other companies based here and abroad.
All the same, Langdale — who also owns Retail Planning Associates and holds a minority interest in EnergyGateway.com — seems clearly uncomfortable with the notion of having the spotlight turned directly on him rather than on his companies or associates.
“This is very much a group effort,” he repeatedly emphasizes. “There are over 2,000 people worldwide that work very hard and deserve credit for the success of the companies of NCT.”
Yes, but how many of those people have inked deals worth enough money to collectively buy 250 thoroughbred horses, 360 Lear jets, 24 Lamborghini Diablos and the naming rights to seven Major League Baseball stadiums?
That’s the magnitude of the cash Langdale has raised. And that’s precisely why he’s become the poster boy — if reluctantly — for securing large volumes of venture capital.
“Pure venture capital of this magnitude is unusual,” says Mike Endres, a principal with Stonehenge Financial Holdings Inc. in Columbus and business adviser to Langdale.
It may even be unheard of in Central Ohio, suggests Larry Hilsheimer, Ohio Valley managing partner for Deloitte & Touche, who says he knows of no one else locally who has raised as much venture capital as Langdale.
“At this point, Rich has as much ability to raise venture capital for a particular idea as anybody in this community because of the relationships he’s developed over the past couple years and the relationships he’s strengthened with the people involved in those deals,” says Hilsheimer, who also advises Langdale on business matters. “That access and those relationships provide him with the ability to make contacts most of us in this community can’t make. So if the next great idea comes along, it’s going to be a lot easier for him to develop it than somebody else.”
Langdale, sitting in a meticulously clean, glass-fronted conference room in the Smith Bros. Hardware Building, says he doesn’t fancy himself an expert in raising capital.
“Part of it is being in the right place at the right time with the right concept for a company,” he says.
Yet a survey released earlier this year by the Columbus Venture Network shows the $260 million Langdale quietly raised in 2000 for his fledgling online-order fulfillment center was more than half of all the venture capital secured by Central Ohio-based companies last year — and more than a third of the total venture capital raised by businesses throughout the state.
Apparently Langdale has been in the right place at the right time more often than most.
He cut his first big venture deal in the waning months of 1999, shortly before everything dot-com fell out of vogue with investors.
“With the benefit of 20/20 hindsight, you have to appreciate his timing of the market,” Endres says, “because the ability to raise money in that market became very, very difficult very quickly (after that). He had a business plan that was very attractive to people. So attractive that he got the attention of some of the biggest (investors) in the country.”
“It’s almost surreal how it all happened,” Langdale says, taking a quick gulp of decaf.
Just a month earlier, his cup would’ve been filled with thick, dark, caffeinated java. Just a month earlier, however, Langdale was burning through energy faster than a blowtorch would a dinner candle — a phenomenon his doctor blamed on excessive caffeine consumption.
But who could blame Langdale? It takes a lot of hustle to attract venture capital — especially in the amounts he has — and that first, highly publicized $75 million investment was cut in an extremely chaotic, high-pressure atmosphere.
“The financing was going on at the same time as our first e-Christmas. So there was some mixed emotion going on there. We knew we’d have to keep our heads down and do a good job with Christmas,” he says, but he also knew the company couldn’t wait until after the holiday rush to seek financing.
SubmitOrder was running out of cash.
Targeting the big boys
Langdale knew if his fund-raising efforts were going to be successful, they would have to focus not on explaining SubmitOrder’s services, but on the financial return the company could bring potential investors.
“When a venture capitalist gives you $1, he’s looking for a clear route to make $10,” Langdale says. “So many people get caught up talking about how cool their product is, but at the end of the day, what matters to the investor is, ‘What kind of return am I going to get?‘”
With that in mind, he began identifying a select group of investors who seemed like a good match for SubmitOrder, based on the type of return they would expect, the timeframe in which they would expect that return and the types of companies they’d run or financed in the past.
One investor who fit the bill was former Netscape Communications Corp. CEO Jim Barksdale.
“Jim Barksdale — with his background at FedEx, which is a logistics company, and Netscape, which was a high-growth technology company — he understood what we were about. We were a high-growth logistics company with technology,” Langdale says. “We were absolutely certain this was the right fit for him.”
Getting that message to Barksdale was not as simple as sending SubmitOrder’s business plan to The Barksdale Group, which was Langdale’s first — and admittedly naive — approach. He got a generic rejection letter in return. He got similar rejections from others on his list, including Kleiner Perkins Caufield & Byers, the California-based venture firm known for investing early in revolutionary Internet business concepts such as Amazon.com and Netscape.
The negative response didn’t dissuade Langdale.
“He’s persistent,” Endres says. “When he is satisfied that he’s got the right plan, he’s very dedicated to that.”
Langdale gathered his business advisers — a group that includes marketing expert Roger Blackwell and logistics guru Bud LaLonde, both of The Ohio State University, and Roger Lautzenhiser of Vorys, Sater, Seymour and Pease — to help him find a better approach. They began fishing for a personal connection: a friend or business associate of Barksdale’s who might be easier to reach and who could encourage him to take another look at the strength of SubmitOrder’s business plan.
They eventually found a link, albeit a rather distant one. A former student of LaLonde’s was a top executive at Ingram Micro Inc. — a $30 billion company out of Santa Ana, Calif. — whose CEO used to work with Barksdale. It was a bit of a stretch, but it was all they had.
“He had a reason he needed to be in Columbus, so we sat down and talked about some of the strengths and weaknesses of the business plan,” Langdale says of the connection, whom he declines to name. “We talked about whether this might be interesting to Mr. Barksdale or not, and we felt together it might be a good fit for him.”
By the close of that meeting, Langdale knew he at least had a shot.
“He just said, ‘You place a call and I’ll put in a good word for you if he asks,'” Langdale recalls.
The wheels had been set in motion.
Closing the deal
Around the same time, Langdale got word that a newly formed venture firm based in Menlo Park, Calif., was ready to invest in the Internet fulfillment market.
As luck or fate would have it, one of the principals of that firm, Silver Lake Partners, was scheduled to be in New York at the same time Langdale was meeting with an investment banker there. Silver Lake caught wind of Langdale’s plans for SubmitOrder and arranged for him to stop by its New York office while he was in town. The meeting held particular significance for Langdale since the ever-elusive principals of Kleiner Perkins were involved in Silver Lake, too.
What started as a brief meeting with some junior partners in the firm quickly turned into an invitation to dinner with Silver Lake principal and co-founder Jim Davidson so the two could discuss Langdale’s plans in full detail.
“We found we had a lot of things in common and similar interests (including) our view about how to attack this e-fulfillment business,” Langdale says. “It became very apparent that we were going to work together. It was not whether to get it done, but how to get it done.
“By the next day, we were already setting up time lines.”
Although Silver Lake was willing to commit up to $1 billion to SubmitOrder, Langdale wasn’t ready to give up the idea of getting Barksdale involved in the company, too.
“We felt they would be a great addition to the team,” he says.
Silver Lake agreed to take the lead on securing Barksdale’s investment, and within three weeks, “we were pretty certain The Barksdale Group would be engaged with the deal,” Langdale says.
Only the due diligence process remained.
Langdale traveled to the West Coast to meet with Barksdale’s people. It was an experience unlike any other.
With many venture capital firms, the due diligence process is “almost adversarial,” Langdale says, “like they’re looking for dirt.” With Barksdale’s team, however, “If they uncovered a weakness, I didn’t feel like I had to overcome it by showing them another strength,” Langdale says. “It was, ‘How are we going to make this better?’ It was a very positive process.”
Within three months, the deal was finalized.
As part of the $75 million Barksdale-Silver Lake deal, Langdale had to give up his majority stake in SubmitOrder. That, he says, was the hardest business decision he’s ever had to make.
After all, for Langdale, who has started no fewer than eight companies, the idea of giving up control of even one of them was tantamount to asking him to abandon one of his children. Nevertheless, he had to put emotions aside and do what was best for the company and its shareholders.
“The opportunity for liquidity became so apparent and so large that I wanted to give up control,” he says. “There was enough value being created that I felt it was best for everyone — not just me.
“We had a firm offer on the table to buy the company outright for $100 million,” he continues. “So whatever we did, we had to create something that would create at least $100 million for the shareholders. We felt if we could get some of that money up front and stay in the business for a longer amount of time, that would keep our interests much more aligned than, ‘Let’s get bought out and go home, and they’ll take it from here.'”
Langdale still serves as chairman of SubmitOrder, while Barksdale, Davidson and two other Silver Lake executives hold a majority of seats on his seven-member board.
The company has taken some sharp turns since he relinquished control of it in exchange for that first big venture investment less than two years ago. Twice the company has changed CEOs, and its work force has been cut by roughly 10 percent. Langdale says he tries not to think about whether the direction the company is taking now is any different than the one it might have taken had he still been calling the shots.
“The most important thing I needed to do to come to the peace of mind to give up control was to never ask that question,” he says. “If you start second-guessing the management team you put in place or what you would be doing differently, you’re in the wrong mindset. To successfully be a minority partner in a growing entity is to support the team that’s in place wholeheartedly and bring suggestions forward, but let them take those suggestions and respect and support their opinion — or you’ll drive yourself crazy.”
Apparently the investment community isn’t second-guessing the direction SubmitOrder is heading, either.
Between July and November 2000 — the year of the big dot-com fallout — SubmitOrder managed to bring in a fairly steady stream of financing in blocks of $10 million to $30 million, although Langdale kept news of those deals under wraps.
“Submit continues to raise money,” Endres says. “It’s a testimonial to Rich and his business sense.”
Even when two of the company’s largest clients — Zany Brainy and Kmart Corp.’s BlueLight.com — admitted this spring to having serious financial troubles that would adversely impact online ordering, SubmitOrder still closed another $40 million deal with investors who clearly were not shaken by what appeared to be an increasingly precarious position for the online fulfillment house.
“Rich is optimistic,” Hilsheimer says. “He doesn’t focus on the negative side of things. He focuses on, ‘How do we make it better? How do we accomplish what we want to do?’ That’s typical of successful entrepreneurs.”
Restless by nature
True entrepreneurs never slow down. They’re always looking for “the next cool thing,” which, ironically enough, is what the “NCT” in Langdale’s investment firm’s name stands for.
“My strength is coming up with new ideas, getting the original business model in place and grunting it out,” Langdale says. “That’s the bootstrapping phase. My weakness is running a large company that’s scaling out. I tend to get bored and start dinking with other ideas, and that can be a distraction.”
That’s why Langdale no longer runs most of the companies he founded — even though he maintains a controlling interest in nearly all of them. Each has its own president or CEO who oversees daily operations.
Turning over the reins has “allowed me the freedom and the time and the increased financial ability to go out and do some fun things with NCT,” he says.
“I love the way things turned out. I love the role we play: the visionary role, putting financing together, putting the management teams together. It’s what I’m made for. Whatever got us here, I can’t say I have any regrets.”
So what’s next for the man with a million ideas and the money-raising ability to see them through to fruition?
“He’s got a lot of different interests,” Hilsheimer says. “One of the things we’re working on and trying to sort out now is where does he go from here?”
“I’m sure you’ll hear more about him — and that he’ll make things happen,” Endres says. “He’s very passionate about what he does and he works harder than most. That’s a pretty successful formula.” How to reach: Rich Langdale, NCT Ventures, 564-1045 or [email protected]; Larry Hilsheimer, Deloitte & Touche, 229-4653; Mike Endres, Stonehenge Financial Holdings Inc., 246-2500
Nancy Byron ([email protected]) is editor of SBN Magazine in Columbus.