Posts filed under 'Founder Story'
June 22nd, 2009
Rajeev Madhavan is Chairman and CEO of Magma Design Automation, a public EDA company that’s a broad supplier. Madhavan is a serial entrepreneur, helping to found Logic Vision, Ambit, and Magma in the last 17 years. Ambit in particular was an ambitious startup, Rajeev went head to head with Synopsys and carved out a chunk of the synthesis market. But it was hard to get started, after he came away empty handed on Sand Hill Road he did an angel round with 25 seed investors who four years later were happy to have taken part when Ambit was acquired by Cadence for $260 million. He decided to found Magma in April 1997 after a disagreement with the board of Ambit. At Magma he was even more ambitious, aiming to be a broad line EDA supplier. Although the fund raising was easier, after the 2001 IPO Magma, like many EDA firms, has been faced with a challenging environment.
I was delighted when he agreed to an e-mail interview about his entrepreneurial journey. The words are his but I have added hyperlinks for entrepreneurs outside of EDA who may benefit from some more context to his remarks.
Q: Can you talk a little bit about your background?
Madhavan: I grew up in Southern India. I went to college and earned a B.S. in electronics and communication from KREC (Karnataka Regional Engineering College) in Surathkal. I went on to graduate school at Queen’s University in Ontario, Canada, earning an M.S.E.E. While completing my thesis, I went to work for BNR (Bell North Research), the research arm of Nortel in Ottawa, where I found I needed to create some CAD software applications to help complete chip designs I was involved with. I had no traditional background in EDA or computer science, but while working at BNR, I ended up developing a lot of EDA tools.
By 1991, I was working at Cadence Design Systems in San Jose as a BNR engineer involved in a long-term partnership between the two companies called the Analog Alliance. Jim Solomon was also at Cadence at that time, leading the Analog Division. Jim convinced me to join Cadence as a full-time employee in 1991, and I worked intensely on Cadence’s Spectre HDL for a year and a half.
See below: “For More Info on Rajeev Madhavan” has more on this period from other interviews.
Q: Can you talk a little bit about what led you to found your company, what problem or situation motivated you?
Madhavan: While I was at Cadence, Vinod Agarwal talked to me about licensing BNR’s BIST software since I had worked on it. Ultimately I helped to co-found LV Software with Vinod Agarwal and Michael Howells in July 1992, which became LogicVision in 1996.
While I was at LogicVision, I had an opportunity to integrate LogicVision BIST into Synopsys tools. Having worked on synthesis at BNR and watched the failure of Cadence and Mentor in synthesis, I felt there was room for another synthesis player to compete directly against Synopsys. I looked at Design Compiler, and felt I could do better. So, I left LogicVision and founded Ambit Design Systems in 1994.
After Ambit, I realized that simply building a better synthesis tool wasn’t enough. To truly advance IC design, synthesis and physical design needed to be integrated. We started Magma in 1997 based on that simple idea.
Q: Can you give me a brief overview of where the firm is today?
Magma was founded in 1997 and is my third “official” startup. Magma had a very successful IPO two days before Thanksgiving 2001, at a time when other companies were shelving IPO plans.
Magma is now one of the largest EDA software providers with products used by major semiconductor manufacturers to design the most complex, high-performance analog and digital chips made today. Our revenue for Fiscal Year 2009 was $147 million and we have approximately 730 employees worldwide.
Q: What are two or three key things you have learned?
I’ve learned something from each of the three startups.
- At LogicVision, I learned that creating great technology is not the only key to success. You have to know how to sell the software to the customer. We were woefully bad at licensing.
- After Ambit, I looked at myself to see what I could improve. I went over the mistakes I made and looked at how I could correct them. I had fought with some of the board members at Ambit and found that I had had limited ability to communicate with employees. It was a revelation to realize that I was a bad communicator. I learned that I had to be more extroverted and outgoing. This was a life-changing shift and changed the way I ran Magma. Because of this change, I have been able to build a much tighter community at Magma than at Ambit. And, personally, I am glad that I made the transition. I enjoy being part of the community and find that I’m happier.
- At Magma, the number one thing that I have learned is that, in spite of taking precautions and talking with employees about clean code development, we still had one bad apple. I learned very clearly to trust but to verify more than you think you need to!
Q: How have you changed since you started? What key skill or experience did you lack when you started that has caused you the most problem?
I now try to figure out what a person is all about and use that to help motivate them to do something great for the community. At Ambit, I didn’t. At Magma, I’ve built great relationships. If I disagree with someone, I can agree to disagree without holding a grudge. It’s been a good experience to change in this way.
Q: What are the two or three things that you have been able to accomplish that you take the most pride in or satisfaction from?
First, I’m very proud of creating the first physical synthesis system. Others may now claim to have a similar system, but clearly Magma was the first to deploy one.
Secondly, we survived an unfair litigation. I learned a lot from that experience that I wish I hadn’t had to. And, while I’m happy to say we won one of the key arguments on ownership, we still suffered from the litigation. Early on, I made the painful decision to order the complete rewrite of the Blast Fusion tool. In the end, it wasn’t necessary. The court upheld our position that IBM co-owned the technology and that we could use it because of a cross-licensing agreement we had with them. Given the risks, though, it was the right decision to make at the time.
After the lawsuit ended, we could have continued with Blast Fusion, but we had already launched Talus. I knew that when we had reached a few critical milestones with the new product, our technology lead would be even stronger.
Developing a production worthy version of Talus took some time and meant that we had to support two systems until we could migrate our customers to Talus. The last 18 months have been really tough, but now we’ve migrated our customers to Talus, and reached significant milestones in combining new routing and optimization technology into Talus. This new technology is as innovative as our original physical synthesis was.
Q: What has been the biggest surprise: what was one key assumption you made, perhaps even unconsciously, that has caused the most grief?
One of the biggest surprises in my years in this industry is how short-sighted the large EDA companies are. They shoot themselves in the foot with their licensing models. They literally give away “me too” tools in these “preferred EDA vendor or Flexible Access Model (FAM)” deals. Customers are never going to start paying for tools that they’ve been getting for free. This practice makes it impossible to grow the market. It hurts the large EDA companies, and the smaller companies and it hurts the industry.
It’s amazing that the brilliant technical minds at the large EDA companies continue to make bad business decisions. The good news is that semiconductor companies will always need EDA tools. I believe the EDA industry will transition away from these bad licensing models, but it will be a painful process and everyone will suffer.
What development, event, or new understanding since you started has had the most impact on your original plan? How has your plan changed in response?
For a while, Magma had the intention of becoming a full line supplier, just like the other larger EDA companies. But, I realized that customers won’t buy tools from me that they get free from somebody else –– UNLESS, it’s a truly superior tool. Now, Magma has put its focus back on developing truly differentiated products, rather than “me too” products.
Q: Any other remarks or suggestions for entrepreneurs?
While there’s turbulence in EDA right now, it’s not because we don’t provide critical technology. Once the industry has learned how to properly run a business, EDA will thrive again. So, I would encourage EDA entrepreneurs to hang on!
And for the entrepreneurial community in general, this is actually the perfect time to start a company, if you can get funding. Don’t get dazzled by your technology, make sure you and your team have solid business sense, as well.
Q: Thanks very much for your time.
For More Info on Rajeev Madhavan
I met Lucio Lanza when he was Vice President for Business Development at Cadence and a General Partner at USVP. Lucio gave me several start-ups’ business plans to look over and evaluate. By showing me those business plans, he helped me to understand the venture capital business and how ideas are funded. Specifically, Lucio was instrumental in funding EPIC. Reading their business plan and meeting with some of EPIC management made me realize a few things.
It was interesting to me to learn that you could earn a salary working at a start-up and that you didn’t have to be self-supporting. I wasn’t a rich kid and I had no idea that anyone could work for a start-up if they couldn’t support themselves on family money.
May 19th, 2009
Co-founder and chief technical officer of Forte Design Systems, John Sanguinetti talks about his experience of turning an idea into a business. He was the principal architect of VCS, the Verilog Compiled Simulator, and was a major contributor to the Verilog’s resurgence in the design community. He has 15 publications and one patent. He also developed the Verilog Online Training course. He holds a PhD in computer and communication sciences from the University of Michigan, 1977.
Q: Can you talk a little bit about your background?
I worked for several computer manufacturers: DEC, Amdahl, ELXSI, Ardent, NeXT, doing first performance analysis and later design verification. My PhD was in Computer Science (operating system design methodology), not Electrical Engineering. In 1991, I left NeXT and started Chronologic Simulation, the company that made VCS. VCS was the product of several technologies: language compiling, logic simulation, design verification, and performance analysis. We sold Chronologic to Viewlogic in 1994.
Q: What insights did you take away from the sale of Chronologic to Viewlogic?
- Take your time. We got rushed into doing the deal and didn’t take enough time to get to know the acquiring company.
- When a smaller company is acquired by a larger one, expect that the smaller company will lose its identity and disappear. If that’s not what you want, don’t do the deal.
- Corporate culture matters, and it starts at the top.
Q: As a result of the sale you were subject to a non-compete in EDA until 1998. In California non-competes are enforceable when they involve the sale of a business, on the theory that the seller is reducing the goodwill associated with the company being sold. What advice would you have for entrepreneurs contemplating the sale of their company to a larger firm?
A non-compete agreement is perfectly justifiable, but it should not be too long. Mine was four years, and that was about twice as long as it should have been. It should really be up to the acquiring company to make you want to stay, rather than having a legal agreement forcing you to stay, or at least not compete. I was never going to make a product to compete with VCS –– I loved it. However, I would have liked to do other things in EDA after leaving Viewlogic, and I couldn’t do that for several years.
Q: Can you talk a little bit about what led you to found CynApps: what problem or situation motivated you?
Chronologic and VCS was a great learning experience. I learned that there were two big problem areas in EDA––logic verification and logic synthesis. I also knew that the change in level of abstraction from gates to RTL was a great improvement in both design efficiency and verification efficiency, and that was enabled by logic synthesis. I was familiar with behavioral modeling from my verification days, and I was familiar with different levels of abstraction in system design from my graduate school days. It was quite apparent that the industry would undergo another change in level of abstraction, and that would again depend on synthesis.
In 1998 I got together with Andy Goodrich and Randy Allen to start CynApps, the company that is now Forte Design Systems. We set out to first create a higher level design environment rich enough to be usable, and then to create a synthesis product that would produce RTL from higher level designs.
Q: Where is the firm today?
Forte Design Systems is the result of two mergers, first CynApps and DASYS, then CynApps and Chronology. The company is now 11 years old. The original vision of high-level design is unchanged. The high-level design environment morphed from C++/Cynlib to C++/SystemC, which was a change in form, but not function. The Cynthesizer, our synthesis product, has been in customers’ hands for over six years now, and there are quite a few end products –– cameras, TVs, printers, and even cars –– which have chips designed either in part or in whole with SystemC and Cynthesizer.
Q: What are some key lessons you have learned?
I have re-learned the value of focus.
When we started CynApps, we knew there was no point in making a high-level synthesis program if no one was writing high-level code to synthesize. That meant that we had to develop and promote a design environment and also develop and sell the synthesis product. This was beyond the resources of a startup. We didn’t really start making progress on the synthesis product until we switched our input from Cynlib to SystemC, and let other people promote the design environment. If I had it to do over again, I would have gone with SystemC originally and done nothing but work on the Cynthesizer.
Having too much money can be a distraction. There is a real value to being lean –– it forces you to stay focused. The single biggest mistake I made with CynApps/Forte was spending too much money before the product was ready.
Q: How have you changed since you started?
One surprising way I’ve changed is that I have become even more optimistic than I was before. You have to be optimistic to start a company, and I’ve always been a glass half-full kind of person. But I have become even more-so over the years. Chronologic was a success, and Forte is an emerging success. After 11 years, and surviving through two bubbles, I think we can say that Forte has been a success, even though our overall impact on the industry has not reached its peak yet. On a personal level, I’ve had to become much less of a technical contributor than I used to be as I’ve gotten older.
Q: What key skill or experience did you lack when you started that has caused you the most problem?
When I started Chronologic, my biggest lack was understanding the EDA industry. I did not realize the staying power Verilog had as a design language, and this caused me to underestimate the importance of Chronologic and VCS. We could have stayed independent a lot longer, and I would have grown a lot more. When I started CynApps, I had never raised money and run a venture-backed company before. I made several mistakes as a result, trying to do too much, too soon, which cost a lot of money.
Q: What were some things that were “too much, too soon”?
I hired marketing and sales people before we had a product that was generally useful. This was when we were trying to sell the Cynlib/C++ design environment, before the Cynthesizer was finished. They were frustrated, the customers we did have were confused, and we drained our cash. We should have stayed in product development until the synthesizer was ready, let other people promote the C++ design environment, and developed sales resources organically.
Q: How do you tell when a product is ready? Where is money well spent before a product is ready?
I am not sure there is a general answer to when you know the product is ready. At Chronologic, we knew it was ready when it ran a particularly large model from Sun. At Forte, we knew Cynthesizer was ready only after it had actually been used to produce working silicon. While you are in product development, money should only be spent on engineering and market development. Market development basically means go talk to customers, tell them what you are doing, let them tell you if they like it, and repeat. It doesn’t take a lot of resources to do that, but it is very important.
Q: What are the two or three things that you have been able to accomplish that you take the most pride in or satisfaction from?
The success of VCS in the market is by far my most satisfying accomplishment. In a few years, I hope that Cynthesizer will rate up there in the same category. There is nothing like knowing that engineers have used your product to make the products that define our age. There is still something magical about your laptop computer, your camera, your iPhone, and your satellite HDTV and DVR. Knowing that your work made those things possible is really gratifying. When I bought a camera at Fry’s for my daughter, I could tell her that a chip inside was made using Cynthesizer. She didn’t much care, she just thought the face recognition feature was neat, but for me, it was a real kick. I think everyone in the EDA industry feels that way to some degree.
Q: What has been the biggest surprise? What was one key assumption you made, perhaps even unconsciously, that has caused the most grief?
The most surprising thing I learned was how hard a problem high-level synthesis is. There are many more degrees of freedom in synthesis than there are in simulation. If I had known that it would take eight years to get a mature product on the market, I doubt that I would have embarked on the project (and I doubt that I could have raised money to do it).
Q: What development, event, or new understanding since you started has had the most impact on your original plan? How has your plan changed in response?
Surprisingly, Forte’s business plan has changed very little since the founding of CynApps (except the time frame). The only real change we made was in going from Cynlib to SystemC. While we felt that Cynlib was more elegant than SystemC, the value of a standard is undeniable. We should have tried to influence SystemC from within sooner than we did. Andy Goodrich, who was the original author of Cynlib, is now the principal developer of SystemC.
Q: As we start to wrap up I wanted to ask you a personal question if I may. You are a cancer survivor. How has that changed your outlook on life?
Being diagnosed with cancer is a life changing experience for everyone who goes through it. You pretty quickly end up asking yourself what you are doing with your life, and if that is what you really want to be doing. I came to the conclusion that I was doing what I want to be doing –– I like EDA, I like small companies, I like our technology, and I like the people I work with. The only real change I made was to slow down a little and take more time off, but it has been a quantitative change, not a qualitative one.
Q: Any final remarks or suggestions for entrepreneurs?
It’s easy to give advice to first-time entrepreneurs. Lots of people will do it. Some of it is even useful. In a technical field like EDA, understanding the problem, and understanding the technology are prerequisites.
This industry is all about credibility. When you speak, you have to know what you are talking about. To be successful, you have to have credibility, and for that, you have to be a techie at heart. With credibility comes vision. If you know what you know, and understand what you are trying to do and why, then you can successfully resist the forces that will inevitably try to change your course.
Don’t believe the conventional wisdom that your startup needs a “seasoned business professional” to step in and run the company at some point. This is part of the VC formula, and it seldom works in EDA. The guy with the vision, and the credibility, is the guy for the job, and that is you. All the other stuff can be learned on the job.
For more information on John Sanguinetti
- Peggy Aycinena did an amazing interview with John in 2005 that is available in two places.
- Peggy Aycinena did another interview in 2007 with John and Scott Sandler, CEO of Novas, “Brown Bag Lunch: Sanguinetti & Sandler“
- The conventional wisdom prior to 1996 was that VHDL would soon eclipse Verilog, which added some urgency to Chronologic’s decision to sell. For some background on the source of much of this wisdom see ESNUG 316 Item 1 from April 8, 1999.
Update June 2: Welcome EE Times Readers. This post was selected as our first EETimes “Trusted Sources” Blog post. If you found this interview useful, we have other interviews with entrepreneurs in our Founder Story posts.
May 17th, 2009
John Sanguinetti was the founder and CEO of Chronologic Simulation, a startup that developed a compiled code approach to Verilog simulation. I am working on an interview with John and came across a very interesting position statement he gave as a part of a panel at DAC 98 called “The EDA Startup Experience: The First Product.”
The key ingredient to launching a successful EDA startup is customers.
Having a particular type of customer in mind, and a particular customer if possible, and knowing what their needs are is the key. In my case the original customer prototype was myself, since I had been a design verification engineer and used Verilog for regression testing. Very early on, we identified a particular customer, Sun, to be our target customer. We figured that if we made Sun happy, we would make other people happy, too. This turned out to be true.
We also identified the problem we were solving–simulation speed. We focused almost entirely on that, from company slogan (The Fast Verilog Company), to advertising, to customer benchmarks. The acceptance criterion for our product in competitive benchmarks was always “how much faster is it than the competition.” This focus was used internally in making design decisions as it was externally in positioning the company and product against competition.
If there is anything that can be generalized from Chronologic’s experience it is the value of a single focus on a real customer problem.
January 7th, 2009
This is part one of Anthony Scampavia’s interview with Ivaylo Lenkov, CEO and Software Architect at SiteKreator. Lenkov explains his team’s technique for doing daily releases. Look for part 2 on “Feature Management in a SaaS World” next month.
Anthony Scampavia: Will you provide a brief overview of your company SiteKreator?
Ivaylo Lenkov: We started SiteKreator in 2002 for business owners with no knowledge of programming or web design to be able to build and modify their own websites. Recently we introduced the first SaaS platform for creating custom web designs without coding. We work with many designers who use a private-labeled version of SiteKreator to deliver complete web solutions to their clients. Our technology powers more than 100,000 business sites and we operate from 10 global data centers with hundreds of servers.
Scampavia: What made you re-evaluate your release cycle and abandon traditional software development release cycles?
Lenkov: When we started SiteKreator, our release cycle was almost a year. We were spending more than half of that time in stabilizing and polishing the release, because there have been hundreds of new features. During that time our customers weren’t able to see anything new and by the time we finally released the new version, many of the cool new features were no longer cool and some were not even needed. The web is a very dynamic space and the annual release cycle was limiting our ability to be ahead of the curve and to deliver innovative solutions to our customers. We started looking for ways to shorten our release cycle, by reducing the features going into each release. We first tried a three-month release cycle, then one-month, then one-week and we ended up with daily releases.
Scampavia: So how you accommodate long-term project planning while doing daily releases?
Lenkov: Well, that’s not easy. When you are focused on a very small feature-set, you sometimes lose the big picture. You just can’t see the forest from the trees. We had to change our planning process. We still maintain a product roadmap with milestones and everything but we chop each milestone into many small releases. This way every day we have a working product. We also review our priorities every couple of weeks and adjust them as needed.
Scampavia: How you actually do these daily releases?
Lenkov: Our team is distributed between two locations: one in California and another one in Bulgaria. This has many cons and few pros, one of them being that we can work in two shifts using the so called “follow the sun” model. Our engineers in Bulgaria finish the coding for the daily release around 11am PST and deploy on several staging servers. Then our product managers, marketers and usability experts based in California review the release and file their comments in our defect tracking system. After 11pm PST our engineers in Bulgaria come to work, fix the reported problems, if any, and push the release to the production servers worldwide. Sometimes we may skip a release if we need a little more time to fix something, but this does not happen very often. When you make small changes, it’s hard to break something big.
Scampavia: How do you ensure the stability of the release?
Lenkov: The daily deploy model would not be possible without a large-scale automated testing. We run a big farm of screen-capturing and comparing servers. We basically compare thousands of sites before and after the deploy on our staging servers. This takes few hours as we capture all possible browsers, both on Mac and PC, and in many screen resolutions.
Scampavia: Visually. So, you are doing just a Pitman comparison really.
Lenkov: Yes, but on a very large scale. The rule of thumb is that by doubling the number of sites we compare, the probability of catching new problems increases by one percent. But every increase in the number of sites also increases the number of false positives that has to be manually reviewed. So we tweaked our comparison algorithms to be more tolerant towards small differences in the screenshots. We still do human review of some screenshots that do not match, but at least it’s manageable.
Scampavia: What happens when you find a problem after the software has been deployed on the official servers?
Lenkov: This does not happen that often, but if needed, we have a single button roll-back to the last stable version. It takes about 2-3 min and it rollbacks all datacenters. But we use this for only really critical problems. For non-critical or cosmetic issue, we just fix the problem with the next deploy. That’s the advantage of having a daily release cycle.
Scampavia: How do you handle larger features that cannot be implemented in a day?
Lenkov: We implement the larger new features as modules, which are initially in stealth mode. We enable these modules only for specific users, so they can be tested. Of course we start by eating our own dog food. Then we enable the new features for users who have signed up as beta testers, as well as for our reseller partners. Once we feel confident with the stability of the new features, we begin bucket testing with real users. We start with a very small bucket (usually top 100 most active users), while keeping a finger on the Off button. Then we expand the bucket few times and at the end we enable all users. After a few weeks of running everyone on the new modules, we decommission the old modules.
There are two potential complications from this approach:
- If there are differences in the interfaces between the old and the new module, we need to create some throw-away glue code that “talks” to both interfaces.
- If there are backward incompatible changes in the database schema, we usually need to add a wrapper on the database level.
Of course this approach could not be possible without having tens of thousands of users using the software on a daily basis. Even if we miss a defect or a use-case, it always pops up during the bucket testing.
Scampavia: What do you use for version control?
Lenkov: Subversion in combination with Trac.
Scampavia: You have been doing one-day release cycles for two or three years now. Has it been worth it?
Lenkov: Initially, I thought it would be very inefficient but it turned out that shortening the release cycle resulted in reducing the time we spend on bug fixes, stabilizing the release from 50% to about 20%. Also, now we can introduce new features in a matter of days, while before it was taking months even a year for the smallest new feature to become publicly available. Our users very much appreciate that. In the SaaS world, the ability to show something new every day helps a lot in building a loyal customer base.
Scampavia: I want to thank you for your time and your thoughts. This is valuable to the SaaS world for people to realize that there is information they should at least think about for their methodology. You have put in much thought in this through the years. I will say that not all SaaS companies have done that. My experience is many companies are too busy to get to the market and do not consider the method. If they do not have the stability and methodology in place, things start to tear apart.
Lenkov: Thank you for having me. I am happy to share our experience and hopefully it will be useful to other SaaS vendors.
Scampavia: Lenkov, thanks for your time.
January 4th, 2009
Francis Adanza worked for us in a project management role for the better part of two years before taking a business development role with Global West Communications. He was back in the Bay Area last week and attended last Friday’s Bootstrappers Breakfast and we had a chance to catch up. He sent me a short e-mail on his perspective on “entrepreneurial roller coaster” afterward. It’s a topic I have blogged about in “We Don’t Encourage Individuals to Form a Startup” and “Hugh Macleod’s Thoughts on Being an Entrepreneur” but I think Francis has done a better job of explaining it and with his permission I reprint it below:
The funnest yet scariest part about riding a roller coaster for the first time is the unknown knowns. You know there are going to be highs and lows, but you don’t know when they will occur. You know there will be twists, turns, even sporadic upside down thrills, but its hard to forecast them. Sometimes the adventure seems fast, and sometimes it seems long, dragging on forever.
Regardless of how scary the ride may be, we all have choices that can alter the experience. Some people keep their eyes closed the entire ride, trying to mitigate their fears. Others dare to keep their eyes open, embracing each turn of events. Some folks find reassurance and control by holding on to the safety bars. While others fly by the seat of their pants, hands waving free in the air.
At times the ride becomes so frightening, you wonder why you even got on. It doesn’t matter how much you yell or scream, all you can do is wait until it ends. Although you might walk away a little shook up with a few scratches and bruises, you know in your heart that you had the guts to give it a try.
November 22nd, 2008
Jeff Bezos was interviewed in the Harvard Business Review in an October of 2007 article “The Institutional YES.” The focus was on Amazon’s strategic planning process. I had a chance to hear Bezos speak in 2004 at a Stanford Entrepreneur Conference and was impressed at how relentlessly inventive and experimental the culture he had created at Amazon was. It made it less of a surprise that a firm that started by revolutionizing the book selling business is now a leading provider of “cloud computing’ infrastructure. Here are some excerpts that I found thought provoking and useful (bold added).
- First, we are willing to plant seeds and wait a long time for them to turn into trees.
- We may not know that it’s going to turn into an oak, but at least we know that it can turn out to be that big. I think you need to make sure with the things you choose that you are able to say, “If we can get this to work, it will be big.” An important question to ask is, “Is it big enough to be meaningful to the company as a whole if we’re very successful?”
- What I have found—and this is an empirical observation; I see no reason why it should be the case, but it tends to be—is that when we plant a seed, it tends to take five to seven years before it has a meaningful impact on the economics of the company.
- It helps to base your strategy on things that won’t change. When I’m talking with people outside the company, there’s a question that comes up very commonly: “What’s going to change in the next five to ten years?” But I very rarely get asked “What’s not going to change in the next five to ten years?” At Amazon we’re always trying to figure that out, because you can really spin up flywheels around those things. All the energy you invest in them today will still be paying you dividends ten years from now.
- Whereas if you base your strategy first and foremost on more transitory things—who your competitors are, what kind of technologies are available, and so on—those things are going to change so rapidly that you’re going to have to change your strategy very rapidly, too.
- I think most big errors are errors of omission rather than errors of commission. They are the ones that companies never get held to account for—the times when they were in a position to notice something and act on it, had the skills and competencies or could have acquired them, and yet failed to do so. It’s the opposite of sticking to your knitting: It’s when you shouldn’t have stuck to your knitting but you did.
It can be hard to cultivate a five to seven year perspective in a startup, but I do think the asking the question “What’s not going to change in the next five to ten years” is a good way to try and develop one.
November 14th, 2008
When you are very angry, think about how momentary a man’s life is.
Marcus Aurelius
I worked in the router software marketing group at Cisco in the early 90’s. I had left engineering and taken up residence in the marketing department. I was playing asteroid to a number of dinosaur protocols: we had realized that it wasn’t about supporting as many different protocols as possible (PUP, Chaosnet, Arcnet come to mind as examples) but to be really good at supporting IP. At one point I sent out an e-mail with the subject line “The following protocols are ‘on the roof‘.”
We had male admin named Ken. Cisco was a rapidly growing company then, with the stock doubling every year, and the culture was tolerant of a high level of direct conflict, what we would refer to as “a full and frank exchange of views.” Ken maintained a small but durable force field of calm in the midst of the frenzy.
I made him a sign for his cubicle wall (clearly I didn’t have enough to do):
“Boy Scout in Residence: Odd Jobs With An Even Temper”
He was always prepared and never rattled. He came from a family of four boys raised by a single mother. He told me a story of the time that his mother had saved up and bought a couple of gallons of yellow paint to re-decorate the kitchen. The boys woke up early and decided to paint her Volkswagen bus with the latex paint. He said “she went right past anger to tears. She was so angry and then she just started to cry. It took a while to get most of the paint off the windshield and windows, the rest of the car stayed more or less yellow.”
Ken passed away a few years later. It was a sad death for so young a man. I am not sure how he maintained his calm, perhaps it was such a huge opportunity for him compared to where he started that he was just grateful to be there. Or he may have been blessed with equanimity.
I think every startup above a certain size needs someone who can do “odd jobs” with an even temper. Especially as things get tougher in Silicon Valley, don’t underestimate the value of small kindnesses, a sense of humor, and cultivating calmness.
November 3rd, 2008
I met Scott Sambucci when I spoke at TVC in July of 2007 in Menlo Park as a part of their “Entering the Entrepreneurial World” seminar. He was kind enough to blog about his take away from the talk in “Definition: Entrepreneurship” where he concluded that even though it was a noun it should be defined as a verb:
“Leveraging resources to get things done” & “Prudent risk-taking.”
We had several conversations and came away very impressed with his business savvy. We retained him to help us with a planning session for our business later in 2007 and profited from his suggestions. He recently blogged about a business he was bootstrapping that he shut down in “An Entrepreneur’s Lessons Learned.” It’s candid, insightful, and makes for good reading for bootstrapping entrepreneurs. His key take aways:
- Start a blog not a website, you can publish immediately and anytime you need to without a webmaster.
- To leverage Google Adwords or any other search marketing vehicle you have to know how your prospects will describe their needs as search terms.
- Find something small to sell early.
- Maintain accounting records from the start.
- Know when to quit.
On that least point he has some excellent thoughts (emphasis added not in original)
Usually, you’ll hear from successful entrepreneurs that the mistakes were the most beneficial to their long term growth. That’s sort of true. It’s not the mistakes that offer the opportunity for growth, but the acknowledgement and deconstruction of mistakes.
There’s a difference between believing in something, and knowing it…Being blind to the obvious signs that your venture isn’t working is downright foolish.
I believe in myself, and that’s why I decided to close the shop. Good entrepreneurs know that there’s more than one good idea. Let the failures work for you, not against you.
Go ahead and read the whole thing, it’s candid and insightful.
I’ve written about knowing when to quit a few times, here are a couple of blog posts that are related:
The Dip does have “Three Questions to Ask Before Quitting (on pages 66-71) that are worth answering now if you haven’t already.
- Am I Panicking? Decide in advance when you are going to quit.
- Who Am I Trying to Influence? A person or a market? Markets value persistence far more than an individual.
- What Sort of Measurable Progress am I Making?
October 26th, 2008
The October issue of Inc. magazine made it to the top of my reading pile today and I was delighted to read another great “Street Smarts” column by Norm Brodsky “Secrets of the $110 Million Dollar Man” which offers ten guidelines for starting a successful business. Brodsky’s definition of success should be familiar to anyone who is bootstrapping:
By successful, I mean a business that lives off its own cash flow, provides a good living for its owners and employees, and generates the profit it needs to keep growing.
He offers ten rules from 30 years of entrepreneurial efforts that he continues to rely on. I have picked what I think are the top three for software entrepreneurs and encourage you to read the rest of the article
Numbers run a business.
If you don’t know how to read them, you are flying blind. A business is a living entity with needs of its own that the leaders must pay attention to or it will fail. the business will fail. The only way to determine business needs are to look at key numbers and the relationships between them. We spend a lot of time with clients on determining what the dashboard for their business should look like, typically starting with their sales funnel, and tuning strategies and tactics in response to the numbers.
A sale isn’t a sale until you collect.
You don’t collect on bad debt and how long it takes to collect can leave you short of cash even though you’ve made a lot of sales. Every business with receivables is in effect a bank. As I have written previously, every business that generates receivables is, in effect, a “bank.” When you deliver a product or a service in the belief that the customer will eventually pay you for it, you are making a loan. You need to determine whether a customer is creditworthy and monitor your average collection time on outstanding debt. Understanding cash flow and the credit risk you are assuming is key to getting through the downturn we are currently experiencing.
Forget shortcuts.
Everything a great business needs takes hard work and time:
- a diversified base of loyal customers
- experienced managers
- a vibrant culture
- efficient systems throughout the business
- a sales force that works as a team
- a great reputation in the industry.
This might also be called “the old man’s business model” in contrast to Paul Tyma’s “The Young Man’s Business Model.”
So why was Brodsky a $110 million dollar man? He is as frank about his shortcomings as his success:
I am more impatient than most and tried just about every shortcut in the book — like hiring salespeople from competitors and promoting employees just because they are available. It finally dawned on me that my shortcuts were serving only to prolong the process of building the great company I wanted. Why was I in such a hurry, anyway? A great company is one that can last forever, and I needed to make decisions in that frame of mind — even though I fully expected to sell the business someday. My records-storage business, CitiStorage, would be worth more if I took my time and did what was best for the company in the long term. Indeed, it was. As you may know, I ultimately sold it and two related businesses for $110 million.
July 8th, 2008
I was sorry to read the “VMware Announces Change in Executive Leadership” press release today from EMC.
VMware’s Board of Directors announced today that it has made a change in the leadership of the company with the departure of Diane Greene as President and CEO. VMware’s Board of Directors has appointed Paul Maritz as President and CEO of VMware effective immediately. Maritz was also named to VMware’s Board of Directors.
I heard her speak at a October 2006 Fireside chat at TiE and was extremely impressed by her low key style and forthright manner. She also said a number of smart things and as I blogged back then “I got a real sense of her as a genuinely caring leader (what Jim Collins would call a “Level 5 Leader” ).”
I always hate to see a founder get ousted from a company, especially one that’s still wildly successful (VMWare is expected to grow revenue almost 50% this year over last). I am interested in her perspective on events: she was against VMWare being acquired by EMC, mentioning it as one of the two “blackest days” she faced at VMWare during the Fireside chat, so I look forward to her being able to speak more candidly about the last few years once she is fully separated from EMC.
Update July 12: Ho Nam at Altos Capital has an interesting take–especially for a VC, but Altos is an unusual shop–in his post “Ousting the Founder.”
I was shocked to learn this week that Diane Greene, the co-founder and CEO of VMWare was ousted. I was not alone. Except for senior management (who found out very late, the night before) the employees of VMWare read about it, just like I did on Tuesday morning. […]
As co-founder and CEO, Diane Green built one of the all time great successes in Silicon Valley. Very, very few companies ever reach $1B in revenues. Even fewer in the technology industry. Even fewer in the software industry. And even fewer ever exceed $10B in market cap.
Why the hell would you fire her?? No, don’t tell me…I’ve heard all the reasons. VCs oust founders all the time. I’ve been in plenty of board level discussions around this topic! It’s almost a rite of passage in Silicon Valley. As a founder, you start a company, get VCs to fund you, recruit a “world class” management team…and eventually, find your replacement (or get ousted).
What people seem to miss, however, is that just about every great company ever created - in technology as well as low-tech, was built by a founder (or a CEO who happened to join the company very early in its growth phase) and a team of dedicated people who grew with their companies.[…]
I’d rather take my chances with the people who built the business and grew their companies than the “professionals” - the hired guns - the mercenaries - coming in, after the fact, to “fix” things or to “take it to the next level.”
We tell all of our companies this - if you want to build the leader in your industry, you have to have the world’s leading experts in your field working for you. But do NOT expect to find them outside of your company. Someone senior from the outside won’t come in to show you the way. They won’t save you.
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