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To Get Returns on the Winners You’ve Got to Take the Risk

A Slice on Ray Croghan, Serial Investor

Ray Croghan and I first communicated when he was on vacation in Mexico. A place that he frequents as he owns a condo there. He answered my video call with a picturesque beach view behind him, not of the real beach but rather the Zoom filter. The tropical scene had been set, (for both of us) and I had the hunch I was in for an entertaining interview, fast forward 20 minutes later and that was exactly the case.

Croghan couldn’t recall a time in his life he hadn’t been intertwined with the software industry. Shortly after graduating college as a computer programmer (a career which he noted is the equivalent of today’s software engineers except computer programmers didn’t make nearly as much money), he began work at ACI. ACI, co-founded by one of Ray’s college friends, was working to develop a platform for the big banks of the world to run their ATM networks.

Unlike what we know today, there was a time back in the 90’s that in order to use an ATM you had to utilize your specific bank’s machine. Croghan and crew didn’t find that whole idea very economically sensible, so they set out to change it. Modeling their idea after the payphone, they felt you should be able to use an ATM from any bank to access your funds.
The idea was a smashing success and ACI went public in 1983 with no outside investors, the employees owned the entire company. Croghan quipped that he’s never seen a company do something similar since. Post IPO, Croghan transitioned to CEO to steer the ship for a few years, and today, the product is in 100 countries and is a market leader in every country it’s in.

Croghan moved to Colorado after his time as CEO with ACI came to a close, and invested in a few more companies along the way while also starting his own healthcare payments company. It would later merge with Margolis Health Enterprise to form The TriZetto Group. Trizetto went public in 1999 and nine years later would sell for approximately $1.4 billion.

Since the successful transaction of TriZetto, Croghan spends the majority of his time investing in early-stage companies, with deals clocking in anywhere from $100k-$2 million and focused primarily on software companies. Although he is not considered an angel investor due to the amount of each investment, for Croghan it’s not all about the money. “I try to invest in companies where I can offer something other than money, companies where I can help.”

Though helping startups is his ultimate goal, he did divert from his self-appointed mission for a small startup out of Boulder, Colorado called Crocs. Yes, that’s the Crocs, the powerhouse plastic shoe touted for its “distinct” look and irreputable comfort which earned the shoes their cult following. Croghan served on the board of Crocs for 11 years and continued to invest in businesses throughout Colorado, Arizona and Omaha. A few other investments of notoriety include a handful of Harley Davidson dealerships and five other power sports businesses. Croghan, tired of spending countless hours in boardroom meetings, takes a different approach now with founders, “What I tell founders is I’m available for coffee, lunch, or beer after work anytime if you want to discuss strategy or some options I’m happy to get together anytime.”

It was just about at his point in our conversation, surrounding his investor model that Ray started looking for one of his business cards to show me. He mentioned that on the back of the card there are five things listed that he looks for in a potential deal. In order, they are:

1. Market
2. Team
3. Plan
4. Product
5. Resources

Croghan shared that entrepreneurs are quick to question number four, saying, “Wait! How can my product be number four on your list? It’s really cool and you haven’t seen it yet!” He went on to share that without a market, team and plan, it really doesn’t matter how cool a product is. Croghan shared there is a correlation to the number and priority of each.

Market is obvious, is it going to be there five years from now? One of the mistakes I’ve made is bringing a product out too early. What I really like is if I find a team that has done something together before and been successful, they’ve proven they can work together. Then the plan, I’ve been known to tell founders that I know one thing for sure about your plan, it’s wrong. They ask me what the bad assumptions are, ‘Did we misread the market?’ I say, ‘I don’t know where it’s wrong, but it’s not gonna work exactly like you think it is.’ That’s why the first two items are so important, if there’s a strong market, and you have a good team, they’ll change the plan and adapt to what’s happening. Of course, the product has to be well thought out and built on technology that’s extendable. Number five is the resources, if I checked the boxes on the first four- do I believe you’re going to have enough money to execute your plan? Do you have the right advisors around you, do you have the right lawyers, accountants, board members? That’s the final checkpoint.”

Outside of the five steps to entrepreneurial success, Croghan shared that being an entrepreneur or investor requires a high level of risk, and is not for the faint of heart. “I’ve had some notable successes, but I’ve had some notable failures too, so to get the kind of returns I get on the winners, you’ve got to take the risk.”
Although life hadn’t always been a beach for Croghan, he was at one now, and I had to let him get back to his upcoming golf game. He currently resides in Scottsdale with El Jefe (pictured below), who was abandoned in Cabo by a family that moved away, but who now enjoys the Arizona lifestyle. Investors, they’re not as intimidating as you think.

Founder Bio

Ray Croghan is a serial investor and former entrepreneur based in Scottsdale, Arizona. He had an influential role in expanding the development of ATMs with ACI. His notable investments of his include Crocs, Contatta, FireHost and Tallwave Capital. Croghan also owns two Harley Davidson dealerships in the Rocky Mountain region. Connect with Croghan on LinkedIn.

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