Founder Story: Mike Lanza’s Lessons Learned from Two Startups

Written by Francis Adanza. Posted in Founder Story, Startups

Last week I had lunch with Mike Lanza, a serial entrepreneur, who I met at the SDForum Startup SIG in September ’07. He gave a thought provoking presentation on his entrepreneurial career, bootstrapping a company, and working with VC’s, which I blogged about here: Mike Lanza: Starting Companies Without Venture Capital. I thought a more in depth personal analysis of his “Lessons Learned” would be a great addition to our Founders Story series.

Q: What are your thoughts about partners compared to going at it alone? Did you have co-founder(s) for any of your companies? If so, how did you find them?

I have seen several approaches to starting a company. Some founding teams are formed before they think of the idea. A group of really smart people join forces, brainstorm a bunch of ideas, pick one and then go. I think I am more of a visionary, so I like to think of the ideas first and then assemble the team. I believe the idea is the core of the business and that you need the idea to attract the right people.

I have built companies with and without partners. Once I come up with something, I start off by informing all my contacts about my idea and plans. Then I ask them to spread the word to see if anyone is interested in joining the team. At first, I always try to find partners, but if I can’t find partners I hire doers. In the early stages, its more about execution and follow through. If you have too many senior people on the project, nothing ever gets done because its all strategic.

Unless I happen to find the perfect partners, I like to hire more mature junior personnel rather than experienced veterans.

Q: For those looking to hire ambitious junior personnel, can you share any tips on recruiting, retaining, and managing them?

When you interview them, figure out whether they can take a particular project tomorrow and make a big impact right away, without a lot of supervision. These are the ideal first employees. I call them “heat-seeking missiles.”

As for retaining and managing them, people like this thrive if they are constantly given new challenges. Don’t give them challenges that are too big – give them things that are a bit outside of their comfort zone, and let them knock down success after success. If you’ve got the right person, you’ll find them growing tremendously in a very short time.

Q: After you figure out the idea, develop the team, and hire the necessary people, how do you start building a company?

Most important thing you can do is manage your time. In early market exploration, I believe most of your time is spent evaluating the market and incorporating customer feedback into your product development efforts in order to get a purchase decision. Reference customers are key. After you have identified a target market, figure out who in the market will serves as a reference to other potential prospects. Make sure your first reference customers are not too big. Big reference customers take a long time to close, beat you up on price, require additional services, and extra support. They will consume all your resources and you won’t even have the time to use them as a reference for new prospects. You don’t want a big brand name, otherwise you will get killed on the deal.

A good reference customer is usually a company that is roughly the same size as you. They will help you refine your product and your technology will play an important role in their success. For as much as you put in for them, you will get out in return. They will vouch for your offering and put a name behind the testimonial. Another strategy I use is what I call a “throw away customer.” This is a prospect whom you have a lot of bargaining power. Consider walking away from the deal early but come back later when you get a favorable price.

You need to realize that you’re not going to do a very good job with that customer initially, so you want someone who is a cutting edge enthusiast, familiar to you and understanding when you fail to deliver perfectly. There’s no away around the fact that you’ll learn a lot from servicing this first customer, so you don’t want to do this first project for the largest potential customer in your market.

Q: What was the hardest decision you had to make in any of your ventures?

At 1 View Networks I realized that a bubble was forming and it was a good time to get out of the business. Word got out that the company was going to be acquired. There was a group of employees that approached me and threatened to quit if they were not given more stock.

At the time I had a convertible note from investors that were pleasant to work with. I had a short window of time to issue them stock so that they could participate in the acquisition benefit. I was basically juggling a group of disgruntled employees, trying to sell a company, and do good for some investors who I wanted to do business with in the future.

I did not want the employees to quit because it would look bad to the acquiring company. However, the three that were threatening had all been there less than six months, so I felt that they had not even earn what they were asking. Ultimately, I gave in to the blackmail. It was one of the toughest decisions I’ve ever made, but it was the right one. Unfortunately, my most loyal employee resented me intensely for this. So, I got no love from anyone for this decision – the blackmailers just took the stock and ran, and the person closest to me ended up hating me. However, we closed the deal. Welcome to the loneliness of being a CEO…

Q: What were three things that worked from Just In Time Solutions that you implemented into 1View Network?

  1. Sell to big, fat customers that don’t have adequate internal resources but have big budgets. Then, go “crazy” to satisfy them, but bill for every minute you spend.
  2. In the sales discussions, tell them exactly what you think they need. Don’t give a “here are our capabilities – we can do whatever you want” presentation. Remember – you’re trying to build a company, not a one-off project, so you need to sell a product vision that works for your entire market.
  3. Always be true to your ideals, even in the most tiring of management situations.

Q: I am sure there are many problems, but if you could just pin point one thing you learned from Just In Time Solutions that you made sure to avoid in starting 1View Network, what would it be?

I would avoid raising venture capital as long as possible. Most of the time the founders get replaced. Also people associate raising capital as a form of success. I have seen founders raise capital and then set the speedometer on cruise control. People begin to spend money carelessly. If money is around, companies tend to start spending it and relax a bit, even if their largest challenges lie ahead of them.

Q: What are you up to now?

Right now, I am working on a project that is more of a cause than a business. Who knows, it might turn into a business, but I right now I am having fun and doing something that I have always wanted to do. I am developing an online community for parents who want their children to go outside and play, but are frustrated with the lack of opportunities in their particular neighborhoods. It’s called Playborhood.

Our goal is to reach out to people who seek better play-based communities and neighborhoods for their children. So many families now have structured play all the time and neighborhoods where they don’t feel safe letting their kids play outside unsupervised. We’re lucky to find the rare place where they can. So Playborhood aims to become a great community resource where parents can go to find the right neighborhood for them and engage others in that neighborhood in the process of creating a safe, inviting Playborhood.

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