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Intersouth's Dennis Dougherty: A pillar for southeast VC, entrepreneurs

May, 5 2017, 7:58 AM

From the launching of Intersouth Partners, which became one of the premier venture capital firms in the southeast, to helping create the Council for Entrepreneurial development, Dennis Dougherty has been one of the pillars around which the success of the Triangle and North Carolina as a tech and life science hub was built. In an exclusive Q&A, Doughtery talks about Intersouth, its founding and challenges, and much more.

Dougherty was one of five people named to WRAL TechWire's newly established Hall of Fame last week. Attending in person to accept the honor, he passed on the chance to talk about himself or his achievements. The modesty reflects Dougherty who has worked resolutely behind the scenes to help build companies and entrepreneurs while staying away from the more headline-grabbing attention sought by many high-profile VCs.

He is the founder and managing partner of Intersouth, which launched in 1985, and he oversees a firm that has invested nearly $800 million across seven different funds.

The first part of our Q&A follows, focusing on Intersouth.

Thirty-five years ago, I ran the small business consultancy practice in North Carolina for Touche Ross, now Deloitte.  I was so frustrated that my clients needed cash more than advice but there were no real sources of venture capital in North Carolina, or the whole Southeast for that matter.  

When we were successful at attracting out of area investors to a client, the interaction was at a very high level and thrilling.  I knew I had to be in venture capital.  And, I was already in the Research Triangle which was a most promising underserved geography.  

I enlisted a client, Roy Rodwell, who was a successful angel investor, to join me in forming a venture fund. We visited with the Duke University Endowment Office, the only institution in the region that invested in venture capital, and presented the case for a venture capital fund in North Carolina.  They agreed to back us if we could partner with an experienced VC.  They introduced us to Eugene Kleiner, founder of Kleiner Perkins, and one of America's most successful venture capitalists.  He agreed to be an advisory partner, if I agreed to meet with him to be mentored once a month for 10 years.  

What could be more special for a 36 year-old venture capital wannabe than to be mentored by the famous Eugene Kleiner and have to travel to Silicon Valley once a month?

Then KLM Airlines, who owned North Hills, agreed to invest. It took almost 2 years and 300 pitches to raise that first fund from 15 investors.

My wife, Nancy, had a Tax Consulting firm and paid all the bills while I scoured the country looking for a few investors.

Over the last three decades, Intersouth has recruited and mentored dozens of great individuals who have gone on to be managing partners of other venture funds, successful entrepreneurs, or key members of investment teams. I love it we they come back around to visit.  

Of course, my greatest recruitment success was bringing on Mitch Mumma. We have shared the leadership of Intersouth for nearly 30 years.

In 1993, Mitch and I were having dinner with Mr. Kleiner at the Washington Duke hotel. It had been about 8 years since we raised Fund 1 and 5 years after starting Fund 2 .  Together they totaled about $25 million.  We had no exits but believed we could begin to raise Fund 3  and realize some liquidity during the process.  

To Mr. Kleiner, who lived in the go-go environment of Silicon Valley, it looked like things just didn't work out. Gene says, "Lets face it boys, it was a good experiment (a venture fund in NC) but it just didn't work.  Pull the plug and move on."  

We had a software company, ISS, registered to go public, but it wasn't a sure bet. Mitch and I started jumping up and down saying " No! no! We are really close, Fund 1 is about to really work out!"  

Kleiner agreed to hang in for a few more months.

ISS did go public, followed by Cardiovascular Diagnostics and 3 others. I think we returned that fund 4 times over.  We closed Fund 3 with $26 million of capital.  

We are now on Fund 7.

Coming next: Will Intersouth raise another fund?





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