Reid Dennis: Model of Stick-to-it-tiveness

It’s probably fair to say that the defining characteristic of Reid Dennis is dogged perseverance.The 82-year-old formed the venture firm Institutional Venture Partners in 1974, and he still shows up once a week for partners meetings. (Dennis is a partner in each of the firm’s funds except its $600 million 12th fund, closed last year.)

Dennis also been on the board of the San Francisco Opera for 40 years (he’s vacating his seat at the end of this month), he’s been married for more than 50 years (with 10 grandchildren to show for it), and he has been flying planes nearly since the time family friends took him on their private plane when he was a boy. (Dennis owns his own jet-charter business.)

I just chatted with Dennis about the price of gas in Lubbock, the opera “Dr. Atomic,” and what’s wrong with the industry he helped to pioneer.
The venture class is a mess; what happened?

What’s happened is a long discussion. The problem with anything where people are able to generate substantially above-average returns is that that thing attracts more investors. In the venture industry specifically, that has meant larger and larger funds, with LPs getting smaller and smaller portions of these larger funds.

I don’t follow what you’re saying about LPs.

The first IVP fund only had nine investors. Its newest fund probably has 75 or 80 investors. In the early days, when we made distribution of a security in kind, we’d usually distribute enough to each investor that they’d have a big enough holding to pay some attention to it. They’d have one of their analysts look at it and decide whether they wanted to continue to hold it or not. Today, LPs look at everything as liquidity events, and the result has been tremendous pressure on public stocks. That’s what’s killed the public’s appetite for investing in these kinds of things. We’ve literally driven the public away from the product we want to produce: publicly held high-tech companies. VCs make so much managing the funds, they’ve lost sight of that.

That’s an excellent argument. So what happens from here?

I don’t know what the solution is. I think investors are going to be discouraged by lower rates of return in the future and they’re going to invest elsewhere and it won’t be so easy to raise these big funds.

I know these days you’re focused more on your jet charter business. How long have you been interested in planes?

Oh, I started flying in 1963. You remember that year, don’t you? [Laughs]. I took my first flight lesson with an instructor was on a Friday evening and six days later, I flew around the pattern myself. I took to it like a duck takes to water. I’ve logged almost 9,000 hours in the air now. I’ve flown to Europe on my own a number of times. I’ve flown around the world in my own airplane. I would have flown in the service, but I’m nearsighted, so during World War II, from ’44 to ’46, I was in the Navy.

Why start a business?

I started my company in 1980, mainly to sort of keep me off the streets and out of the bars as I was retiring from the venture business. Also, I don’t fly enough hours a year to keep good pilots, because they want to fly. At the same time, I wanted to have good pilots flying with me and my family. The only way I could have both was to go into business. I have two Citation Encores — seven passenger jets, flown always with two pilots — and we’re getting a new plane, a Citation XLS Plus, in February. Some people have made so damn much money that they don’t care how much it costs them to own an airplane, but I do, and the business reduces the cost to where it’s very manageable for me.

What are you charging passengers?

By the time you add on federal tax and fuel surcharges and landing fees, it’s about $2,600 to $2,800 an hour.

Gulp.

It’s a lot less than owning a plane.

How bad are jet fuel prices?

It depends where you go. In Hayward, you pay much less than in San Francisco or San Jose. We often stop in Lubbock, Texas, too. There’s a guy down there who loves to pump fuel. He says it’s not doing him any good sitting in the tank, so he gives us a good price, and we stop down and see him.

Where’ve you done some of your flying?

Well, two to three years ago, we flew one of Encores all the way to Copenhagen to see Wagner’s Ring. We have family in Scotland, and we’ve flown to see them. We’ve flown to Reykjavík, Iceland; that’s a fascinating town. We also flew to Chicago in December to see “Dr. Atomic,” about Robert Oppenheimer [father of the atomic bomb].

Did you like it? I saw it in San Francisco last fall and left at intermission; I couldn’t take it.

I thought it was wonderful: the emotional problems those people had in creating that terrible weapon. Also, you should never leave at intermission. Things always get better after the intermission.