Gordon Gund is an entrepreneur at heart.
His commitment to business partly comes from an early job where he was exposed to the passion entrepreneurs profess for their business and partly from the business acumen that seems to run in the family.
“I had been in the Navy for four years as an officer, then went to work at Chase Manhattan Bank in 1965 in the special development program,” says Gund. “I became a lending officer and spent a lot of time in the middle part of the country calling on people. I met a lot of entrepreneurs from just cold calling. These were entrepreneurs that had built their own business, and they were very exciting people to talk to and hear about. I wanted to be involved with people that had the entrepreneurial spirit.
“I wanted to feel I could add value and have a lot to do with implementing positive change.”
Adding value is a major theme in everything Gordon Gund does. But he’s not talking about money; he’s talking about making positive contributions to people’s lives and ventures.
“In a major organization like Chase, I wasn’t going to be able to do that. It was like the military in that everything had to go up a chain of command. I wanted to take charge of what I liked in business.”
Adding value was one of the things Gund wanted to focus on.
“In those early years (in the Navy and at Chase), I learned that people really want to feel they are adding value to an organization, and they want to feel like they are valued,” says Gund. “Even within a chain of command or within a large bureaucracy, in order to optimize efforts in an area someone is responsible for, there has to be a mutual trust and respect. The person has to agree with it and be given the tools to do it.”
In 1968, Gund started his venture capital firm, Gund Investment Corp., of Princeton, N.J., to give people the tools they need to succeed and add value to their efforts.
Adding value is something the Gund family has been doing in Cleveland for much of the family’s history. While everyone may know that Gund owns the Cavaliers and that the arena downtown bears the family name, what many may not realize is that the Gund family has a long history of successful business ventures here and that innovation runs in the family.
George Gund, Gordon’s grandfather, made his mark in the brewing industry at the turn of the century. He was one of the first brewers to put beer in disposable cardboard cases rather than in the then-standard wood cases that were expensive and unsanitary. George Gund II, Gordon’s father, ran the brewery business for awhile, then parlayed a $130,000 investment in a new product known as decaffeinated coffee into $10 million when he sold the process to Kellogg Corp. The product today is known as Sanka.
Gund II then turned his attention to banking, and grew the Cleveland Trust Co. into a major power in the industry. Many years and several mergers later, it is now part of Key Bank.
Gordon Gund, who besides serving as chairman of the Cavaliers, also is co-founder of the Foundation Fighting Blindness and chairs his venture cap firm.
With so much entrepreneurial spirit in the family, it’s little wonder that Gund was attracted to the venture capital world, where working with entrepreneurs who are passionate about business is the order of the day.
Leadership is everything
The difference between success and failure is often determined by the person who is ultimately in charge of a company, regardless of whether that company is big or small.
How effective a leader is also determines whether Gund invests in that company.
“It doesn’t matter how good of a product or service the business consists of,” says Gund. “You’ve got to have a strong leader or leadership. If it’s not there, you can’t go any further.”
A strong, passionate leader who has a business with a so-so product is more likely to attract Gund’s interest than a so-so leader with a great product.
“We wouldn’t invest in a so-so person,” says Gund. “Try to get a sense of how passionate they are about what they are doing. What are their people skills, and how do they think about the future?”
Gund, who is on the board of directors of both Kellogg Corp. and Corning Glass, says that the entrepreneurial traits of success also apply to leaders of larger companies.
“There are certainly fewer leaders (with the necessary skills) to select from,” says Gund.
“The requirements of a large business are vastly different than one run out of a garage. Instead of maybe one employee, they might have hundreds, thousands or tens of thousands of employees. The whole equation is different. There are not as many people that possess those skills and have the passion to run a very large business. So the pool isn’t as great, and good ones are hard to find.”
One way a company can avoid having to search for talented leaders is to develop them in-house. This means identifying potential candidates early on and continually developing them so that they don’t leave.
“A smart big business will move people along that demonstrate the skills needed so they don’t get frustrated and can be constantly challenged,” says Gund. “That’s what they want and what they get their satisfaction from.”
They want to feel valued and like they are adding value to the company.
“A good business will have career paths for its top performers,” says Gund. “You have to be very conscious of the need to constantly drill down into the organization and find those that have the potential to go much higher.”
Constructive imagining and the NBA
Adding value to a business means being proactive in spotting problems. Just as an NBA player might picture in his head certain game situations before ever taking the floor, Gund says it’s a good idea to do the same thing in business. He calls this process “constructive imagining.”
“It’s a term for something we all do sometimes,” says Gund. “Take Gund Arena, for example. When we built it, and every year since then, we’ll step back and think about the fans and guest experiences, not only when they are in the building, but getting to it. What are their difficulties? Are they getting to parking? Does the signage help? Does it make a more enjoyable experience?
“We want to have excellence at every turn. We want to look at what their experience will be every step of the way. Is it the best it can be? Are there ways we can improve?”
Constructive imagining is not just about solving problems. It’s also about finding ways to expand the experience.
“This is something we do regularly,” says Gund. “We do it with all the things I’m involved with. We can always improve the way we do things.”
Improving the product off the court is one challenge; improving it on the court is another. You can’t always hit the lottery and acquire a franchise player like LeBron James. But it’s the entrepreneurial spirit that Gund relies on to keep the franchise moving forward.
“There are very few kinds of businesses where your main product can break down,” says Gund. “You never know what might happen. You can have injuries to key people, and we’ve had our share. Many of the key components are 18- to 20-year-olds who are being paid huge amounts of money. You have to deal with them growing up, and growing up with a lot of different things coming at them.”
Gund says the biggest difference between owning a regular business and owning an NBA franchise is the public and media scrutiny.
“Every day people are writing about your business and are passionately interested in it,” says Gund. “You read about bad decisions I make or bad decisions my employees make. But you have to be thoughtfully decisive.”
The team may lose games in the short-term, but the goal is always long-term success, which comes about by relying on the expertise of the people he hired to run the team. But that doesn’t make losing any easier.
“It was painful,” says Gund. “We knew it would be. But it was painful to read about how terrible we were and what needed to be done. I feel now that it is starting to pay off.”
Blindness, philanthropy and the strength of family
Gordon Gund has been blind since 1971 when, at the age of 30, retinitis pigmentosa, a hereditary disease in which the retina slowly dies, took the last of his vision.
“I certainly think at the beginning it taught me what I really care about is people and adding value to the people around me and being valuable to them,” says Gund. “When you lose a sense, I think the tendency is to think, ‘Gosh, now I’m not going to be able to be useful, helpful or valuable to those I care about.’ But indeed you can be, you just have to do things in different ways. Everyone wants to feel valued and that they are adding value.
“I keep stretching the envelope of the stereotype,” he says. “I loved both skiing and fly fishing when I lost my sight. Now I do them differently. I’m much more balanced on my skis and I actually ski better. With fly fishing, I feel when I do hook into a fish, I handle it a whole lot better than I used to.”
To spur research into blindness, Gund and his wife, Lulie, co-founded the Foundation Fighting Blindness, which he says is really no different than a venture capital firm.
“There was an important need that wasn’t being met,” says Gund. “All good businesses are started because of a need or problem. We started with a goal of putting together funding for equipment and people to run a multidisciplinary lab. It grew as companies grow. We knew we couldn’t keep funding them as the research grew and was published. We had to find new sources of funding, just like a business.
“First there was angel investing, then early and mid-state capital, then the private equity folk, then public funding or banks or insurance companies. At every step and level of risk, you have to bring in new financing or the original source can’t do any more.”
While Gund has a special interest in this particular foundation, philanthropy is a family tradition. His father left much of his $600 million estate to the Gund Foundation, which continues to be a major contributor to Northeast Ohio causes. In the first quarter of 2004, it issued more than $6 million in grants.
Gordon Gund has achieved much in his life, but ask him what his proudest achievement is and he quickly responds with, “I have a great and wonderful family.”
Numerous business accomplishments follow, but his personal triumph over blindness stands out. He says that for him, his proudest achievement is, “To be able to be effective and productive despite my blindness, and to have the relationships with people who have added value to my life, and to be able to add value to theirs.”
How to reach: The Cleveland Cavaliers, (216) 420-2000
