The business environment was far from ideal when Steve Lebow and Yves Sisteron began their first independent venture capital fund in 2000.
Soon after the founding of GRP Partners, the tech bubble burst and the stock market crashed without signs of a quick recovery. Then came the Sept. 11 terrorist attacks, and business became even more challenging.
"There were very difficult times between 2000 and 2003," said Sisteron, 52. "We just made sure that the company survived by spending money cautiously and respecting the money that had been given to us to invest."
Unlike many other entrepreneurs of the era, the pair managed to hang on. Now Century City-based GRP has $650 million in capital that it is putting to use backing online and brick-and-mortar retail, retail technology, financial services and digital content companies.
"It is a matter of going through cycles. If you do it long enough, things will turn around. You have to be disciplined and know you are able to survive those difficult cycles," Sisteron said.
Lebow and Sisteron met when Lebow worked at Donaldson Lufkin & Jenrette, the investment bank eventually acquired by Credit Suisse. Lebow was responsible for opening the company's Los Angeles investment banking satellite office.
Sisteron managed the U.S. investments of French company Carrefour S.A. the second largest retailer in the world. Through Lebow, Sisteron was introduced to investment opportunities in companies such as Starbucks, PetSmart and Dick's Sporting Goods.
In 1996, Lebow and Sisteron went beyond the banker-client relationship when they created an investment fund called GRP I, which was owned and operated under DLJ. The pair eventually struck out on their own in the Los Angeles market.
"We just wanted to own our own company," said Lebow, 51. "Entrepreneurship is the American way."
Working in Southern California has been an asset for GRP because of the large economy and small number of venture capitalists compared to the Northern California region. Though they don't limit themselves to companies in Southern California they also have an office in England and work with a number of companies in Sisteron's native France Lebow and Sisteron do significant business with local companies.
Two of GRP's most recent fundings were Santa Monica-based companies: a mobile technology company called TeleFlip Inc. and Zag.com, an online car retailer. Lebow is actively involved on the board of BabyStyle, an L.A.-based online baby merchandise store.
GRP approaches the Southern California market in part by financing startups and late stage companies. "You could say we are stage agnostic," said Sisteron. "In Northern California there are more VCs and more companies, so VCs have to be more specialized. They have to carve out a niche. In Southern California, if you bind yourself you are limiting your revenues."
One of GRP Partner's biggest success stories was DealerTrack.com, a company that provides software and data solutions to the auto retail industry in the U.S. The company is the only one in GRP's most recent fund that has gone public. Shares are still rising.
"There is always a way to exit. Sometimes you are dependent on where the market is. If you are smart, you wait to the market time," Sisteron said.
Despite their success, Lebow and Sisteron are mindful of the vulnerability of the business. One of their funded companies Ulta Salon Cosmetics & Fragrance is now opening stores, but about four years ago it was in poor financial shape.
"Each and every single company has had its challenges during its inception," Sisteron said. "You try to build software, build clients and spend money because it takes money before people start paying for it. You do whatever it takes to build a great company."
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