Building a successful business
Gillings describes the early financial life of his company. He took out loans using his house as collateral before seeking venture capital and mezzanine financing as Quintiles grew. Like the other elements on Quintiles's growth, money came easily, flowing to Gillings through personal and business ties.
Citing this Excerpt
Oral History Interview with Dennis Gillings, June 10, 1999. Interview I-0072. Southern Oral History Program Collection (#4007) in the Southern Oral History Program Collection, Southern Historical Collection, Wilson Library, University of North Carolina at Chapel Hill.
Full Text of the Excerpt
JM: You mentioned you were profitable from the get go. Any occasion where you had to go out and find a bank to give you working capital or something?
DG: Yes. One of the things that I calculated early on was that if we grew twenty or twenty-five percent annually, we were totally self-sustaining. But, as we started growing forty and fifty percent annually, we used up more cash in capital expansion than we could generate profits. I came to this conclusion pretty quickly, actually. We did have to start borrowing in order to finance that cash flow. To start with, we borrowed through bank loans. I cosigned all the loans and they were secured against my house and things like that. As the company got larger, I think the banks were willing to continue financing as long as all the assets of the company were put up. Then the next stage really was to seek a little bit of venture capital. Now we weren't really a venture capital company so much as we were at that time called mezzanine financing. It seemed clear to me that [by] around 1990 we needed some financing like that for the main reason I've just said. We were carrying on growing at that rate. The second reason [was] I felt that we could then be valued high enough that we wouldn't overly dilute the ownership of the company. So, for about twenty-five percent of the company, we were able to raise a fairly substantial amount of venture capital.
JM: How did you go about that? How did you go looking for someone to fund you, find the right sorts of perspective investors?
DG: It was odd how that turned out. There was a person called Epps Robinson who was part of a limited partnership of what was then NCNB, which is now Bank of America. At that time it was NCNB, before it was called NationsBank and then Bank of America.
JM: I’m actually interviewing Hugh McColl on Monday.
DG: Okay. Well, at NCNB--. Sorry, I'm losing the question now.
JM: How you went about--.
DG: The venture capital. It was Epps Robinson. They had a limited partnership and Epps Robinson sort of called me up out of the blue. It was funny. I don't know how he learned about Quintiles, but he wanted to become an investor. That happened to be at the same time that I was thinking we needed some infusion of capital through equity, but I was a little bit queasy because it's your heart and soul, and you don't like to give up these shares all that easy. I must've discussed this with Epps for six months or more. Then I finally said, “Look Epps. I don't really want this stage there to be a big investment in the company, but I would really like someone on our board who was knowledgeable about financial and business matters and capital formation. I feel that if that person had a modest investment in the company, that would be the best of all worlds.” I think the actual figure he invested was $140,000. It was very modest and it wasn't really for the capital. It was more so that he had put some money down and then we would value his advice. Putting your money where your mouth is. That was the proposal I gave to him and he accepted it.
JM: This was about 1990?
DG: This was about 1989 or 1990, something like that. From there, as we were more comfortable with that, he introduced us to people that were venture capitalists that would put more money in. That's how that whole thing evolved.
JM: Did that tend to be a circle of North Carolinians initially?
DG: It was really interesting because NationsBank had a connection with a London bank called Panmure-Gordon. I don’t know whether they owned them or what it was, but there was a connection. Through that connection I was introduced to Richard Thompson of Thompson Clive. Thompson Clive was a London based venture capital group. Since we were international, I was quite interested in that. Thompson Clive or Richard Thompson wanted to invest, and we came to an agreement. At the same time Epps Robinson invested more, and then there was a third investor, David Smith, who unfortunately now has recently died. David Smith had founded Praxis, which was a biotech company and sold that company to then American Cyanamid. Then David had retired from that situation because he had made some money and was then looking to make some investments. I had met David earlier because we had helped him with his drug that he developed at Praxis. He also became an investor, so we had three different investors that in combination raised money for about twenty-five percent of the company.
JM: You mentioned one advantage to Epps Robinson's participation was that he could bring a certain sort of financial expertise to the board. How did you go about putting a board together from the early stages and then how did you gauge the need for new sorts of perspective and expertise to add to that?
DG: Well, in the earlier stages, I used valued advisors and colleagues. Professor Chester Douglas, who had been a colleague of mine -- he was at Harvard -- joined our board. Then Dr. John Fryer -- who had actually been a colleague of mine back in the United Kingdom and then he'd come to the University of North Carolina to assume the professorship in biostatistics that I had vacated -- he joined our board. Then with the venture capitalists on the board and myself, we began to have a really viable board.