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This article originally appeared in the Bentley Magazine.
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Bring on your innovative concepts, early-stage business models, and creative entrepreneurs! Venture capital investor Paul Flanagan ’86 thrives on unleashing the value in a good idea and helping to build a great company around it. And his track record speaks for itself.
As a managing director of Boston-based Sigma Prime Ventures, Flanagan currently serves as a board director of six emerging companies that his firm has invested in. His other focus is seeking out the Next Big Thing(s).
“Finding the early-stage ideas and figuring out how we can create a plan to harness the value in what the technologies do — that’s the fun of it for me,” says Flanagan, whose guidance over the past two decades has swayed to the tune of billions of dollars in private financing. He also has overseen multiple public offerings and management turnarounds that have helped numerous budding businesses expand and prosper.
Starting with a pre-dawn commute to his downtown office from the coastal South Shore of Massachusetts, Flanagan typically spends his days reviewing financial results, advising CEOs, and otherwise supporting the companies in the Sigma Prime portfolio.
Meanwhile, on perpetual prowl for new investments, the alumnus scours scores of unsolicited emails that come his way and acts on referrals from his Boston-area business network. He plows through news articles and business research, and keeps tabs on the many incubator and accelerator programs for startups in and around the city.
Unlike an angel investor who makes many small bets investing in new and untested companies, Flanagan’s firm is a Series A/B investor that usually puts $1.5 million to $4 million into companies with a proven market. He and his colleagues commit to taking an active board seat for four to six years — a collaboration over time that adds special intensity to Sigma’s due diligence.
“In five years, that process has led to six investments,” Flanagan notes. “It is very hard work to find the right combination of people, product, market and business model to get behind.”
Building a Better Balance Sheet
What does it take for a startup to fly? More than a great idea, according to Flanagan. “The entrepreneur behind an emerging company has to be smart, ambitious and highly dedicated to the quality of his or her work.”
And of course the numbers need to work. Here Flanagan plays to his strength: expertise in finance and accounting that started at Bentley.
“The technology piece, I know enough to be dangerous, but trust my partners to understand and figure out,” he says of the emerging tech companies that are Sigma’s focus. “The numbers are the parts of the puzzle that I love — drilling down to figure out how we can bring a business to market successfully. We review every investment opportunity as a team.”
That ability to look at company financials and mine greater value from the business is a Flanagan hallmark. One of his biggest successes was at Vistaprint, an online printing business that had just finished a $24 million year in 2003, when Flanagan was tapped to become CFO.
His first major move — bringing print production in-house — involved a significant capital investment to buy equipment and establish production facilities. But the bold action expanded profit margins from 40 percent to 70 percent, as the company moved more work through its system at a lower cost.
The starting line for Flanagan’s career was the Entrepreneurial Services division of Ernst & Young. In 1992, assigned to work on the accounting side of an initial public offering by Boston Scientific, he followed the numbers and saw how an early-stage company manages explosive growth.
“I loved that entrepreneurial environment and learned a tremendous amount from the perspective I had access to in that deal,” says Flanagan, who left EY to try his hand working inside the industries he had been advising.
Before Vistaprint, the group included Lasertron (VP of finance) and Storage Networks (CEO), which he helped bring public in 2000. In every case, Flanagan has found that having a good management team in place is critical for business success.
“I have been fortunate enough to work with great people,” he says. “My successes have all been team related.”
Flanagan left Vistaprint in 2005 after leading the company through a $1.2 million IPO. The move returned him to the early-stage companies that are his passion. As he puts it: “I would always rather be building the company versus just pedaling the bike.”