Always ask: Missionary or mercenary?

John Doerr of the renowned Silicon Valley venture capital firm Kleiner Perkins framed a critical question for analyzing any executive or investor: Are they a missionary or a mercenary?

A missionary is a guy like Apple’s late Steve Jobs. He believed in his company and its power to change the world.

A mercenary is a guy like hedge fund manager Carl Icahn, who developed a reputation as a corporate raider, beginning with his hostile takeovers in the 1980s.

There is a place for both missionaries and mercenaries in American capitalism. Some companies are so poorly run that they deserve mercenaries who can downsize them or put them out of their misery. Other companies have untapped potential and require dedicated, visionary leadership to bring it out.

The important thing to know in business is whether you are dealing with a missionary or a mercenary so that you are not surprised by the outcome.

Many, if not most, private equity investors are mercenaries with well-defined cost-cutting and exit strategies. But today in Texas Inc., reporter Erin Douglas explores a rare group of private equity investors who are indeed missionaries.

Platform Partners is small by private equity standards, managing only about $450 million, but its partners love Texas and invest primarily in Texas companies. Their goal is to hold on to their investments for years on end — not to flip them as quickly as possible. Nevertheless, they boast of big returns. And the entrepreneurs who sell stakes in their companies to Platform say they are truly partners, not only with capital but with expertise.

“It’s a partnership, a friendship, that is tremendously helpful,” says Mike Vellano, who sold a 52 percent stake in the company he founded, Vortex Companies, to Platform.

Activist investors can make money growing companies, but they can also make money taking them apart, merging them with competitors or sticking them with other buyers. If you know whether the investor group and leadership is in the missionary or mercenary class, you can often predict a company’s future.

Companies backed by Platform will likely prove to be assets, creating jobs and productive economic activity for the Texas economy.

David Paul Morris / Bloomberg file John Doerr of Kleiner Perkins posed a key question for analyzing executives or investors: Are they missionaries, like Apple’s late Steve Jobs, or mercenaries, like hedge fund manager Carl Icahn?