Venture Capital Legacy: Harry Gruner, JMI Equity Founder and Managing GP on Advice for Building a Long-Term Firm

Jeff Harbach (0:02)

My name is Jeff Harbach. I'm the CEO of Kauffman Fellows and the host of the Kauffman Fellows Podcast. This season, our podcast is produced in partnership with Mighty Capital and features different Kauffman Fellows as co-hosts. In this podcast, we dive deep into the personal narratives of some of the most successful names in the venture capital industry. But we're not here just to explore their highlight reels, however impressive they are.

From failures and formative learning experiences to inflection points and aha moments, we discuss the real, authentic journeys that each individual goes through to become the best version of themselves in order to best serve the entrepreneurs they invest in. Covering various themes in venture capital investing, we speak with the world's top leaders in capital formation, all from a place of authenticity and vulnerability. Together, we'll unravel what truly makes a great venture capital investor.

Now let's meet today's host and their guest.

Code Cubitt (0:48)

Hi, I'm Code Cubitt, founding partner of Mistral Venture Partners, and I'm excited to host a series on building an enduring Investment Firm. Let's hear from my guest today.

Well, look, Harry, the goal of this call really is more than anything, looking to think about how to grow a firm to become an enduring firm, right? JMI, 30 years old, just about, really impressive track record. More than anything, you've outlasted the majority of your peers. There's very few firms, lots of firms get started, and then raise a fund two perhaps, and maybe even a fund three, but to have the staying power to go through multiple decades and cycles and teams, et cetera, is a serious accomplishment.

And so, what I'd love to spend the next half hour doing is really just kind of teasing that apart, but maybe we can, if you don't mind here, just go all the way back to the beginning. I'm curious, you have an undergraduate in history, and then you became a software engineer. I'd love to hear that transitional story.

Harry Gruner (1:48)

Well, happy to come. Let me just start by saying that we've had the good fortune.

When I got out of college and started in the financial world was 1982, and the Dow was at 700 Wow.

And interest rates were 18%. Software was emerging. So I professionally and JMI as a firm have been the beneficiary of equities compounding dramatically in return, and interest rates going from 18% to zero, right? So that's, as Woody Allen would say, 80% of life is showing up, and we kept showing up in a very fortuitous time to be investing in equities. And software in particular, and software, as you know well, has exploded. So yeah, I started, so that is a backdrop, better to have the wind at your back than in your face. And I think that's a sort of fundamental part of what you do and what we do at JMI. So yeah, I graduated in 1981 in history. I spent a year in the UK working in research in parliament, and I was a soccer player in college, so it was a good opportunity to do that. And then I came back and got a job in a technology group in an investment bank in New York, went and got an MBA, and then after that found a firm in Baltimore called Alex Brown and Sons that was one, at the time was known as one of the four horsemen with Ambrecht and Quist and Robertson Stevens and LF. Rothschild. Forgive me if this is ancient history.

But we, you know, software was emerging there and it was becoming from what was, since software was written by big companies, defense companies, IBM, you know, sort of proprietary systems. And it was, there was a lot of curiosity in whether software could become an industry that could scale or whether these were a collection of artisans, you know, that were not businesses, but more like a collection of product authors or that kind of thing.

Code Cubitt (4:11)

It was a hobby at the time, almost.

Harry Gruner (4:14)

And it was evolving as an industry. And so we had the good fortune in the 80s to grow with the industry professionally and watched, and at Alex Brown, we took Microsoft Public and Oracle and BMC and Ashton Tate, you know, a lot of the old companies, a few still with us.

Most have been acquired, of course. And so we called on literally thousands of companies. We'd get up Monday morning, get on an airplane, go visit a lot of companies.

And I was in the M&A group. My partner, Charlie Knoll, was in the corporate finance group. So we were sort of partners for a number of years in this initiative. And so that's how I got involved, really in the software industry. And then in the early 90s, we had a client named John Moores, JM, was that from JMI, John Moores Investments, JMI. And John had founded BMC Software, which at the time, system software, mainframe software company in Sugarland, Texas, outside of Houston. And John was interested in leaving the company. He'd started, had been wildly successful. We'd taken it public and he wanted to retire from that and felt that the best years in software were ahead. And he wanted to invest in that and as well as do other things.