Ken Imboden on Lessons From MMC, Candlestick, and NuSym

Written by Sean Murphy. Posted in 3 Early Customer Stage, Founder Story

I worked with Ken Imboden at  MMC Networks (acquired by AMCC in 2000). He managed a key group of microcode and embedded software developers whose efforts drove the successful adoption of MMC’s network processor chips. His role required him to manage both development and key customer issues and his judgment was sound across the board. He hired, developed, and motivated a very talented team and successfully buffered them from most of the chaos you would expect to find in a startup.

Ken went on to work at Candlestick Networks (acquired by Nortel in 2001) and co-found the now defunct NuSym Technology with Chris Wilson and Dave Gold. I reached out to him this week to get his perspective on lessons learned from working in software startups and he was kind enough to reply with this list of what he has learned from several startups over the years:

  1. Focus obsessively and relentlessly on providing measurable value for the customer. Ensure that your daily activities reflect this.  Insist that your co-workers do likewise.  Any effort you expend must be justified by value provided to the customer.
  2. All software is crap. (No?  Provide me with a counterexample.)  Most of the training that software developers receive, and most of the effort they expend, does not alter this fact, and in fact is perversely designed to ensure this result.  Decide what you can do to alter or ameliorate this fact.
    Humility is of great benefit in a software developer; hubris is of great detriment.
  3. Aggressively manage multiple development sites. Otherwise the sites will drift their separate ways, often to cross purposes.  Excessive interaction among the sites is a must.
  4. Periodically step back and dispassionately assess your company’s progress. Your goal is to generate profit — obscene amounts of profit.  (If you disagree, be sure to inform your prospective investors of your goals.  When you have gone long enough without funding, correct your goals and come back here.)
    • For a software firm, subgoals working backwards:
      • revenue,
      • purchase orders,
      • customer endorsements,
      • customer use,
      • customer use in a services model (taxicab mode),
      • in-house use,
      • development,
      • customer affirmation.
        (Note that software development is a small portion of the process.)
    • Periodically, ruthlessly measure your progress along the path of these subgoals.
  5. Stop doing the wrong thing. If your periodic assessment reveals you’re on the wrong path, change something in your process.  Otherwise, plan to keep getting undesired results; do not be surprised by this.
  6. Your initial idea is not your final product. Your first several ideas will not be your final product.  Customer affirmation of your idea is a necessary starting point.

Ken noted in closing:

I don’t think I’ve given you anything most folks did not already know.  The challenge is, of course, in the execution, especially reorienting the mindsets of egocentric and introverted software developers (pardon the redundancy), driving home the fact that the customer does not give a damn about their cleverness, the algorithms they implement, or their credentials.  The customer cares only about satisfying their own need.

Interview with Rajeev Madhavan, CEO of Magma Design Automation

Written by Sean Murphy. Posted in EDA, Founder Story, skmurphy

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.

Interview with John Sanguinetti

Written by Sean Murphy. Posted in EDA, Founder Story, skmurphy

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

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.

John Sanguinetti on an EDA Startup’s First Product

Written by Sean Murphy. Posted in EDA, Founder Story, skmurphy

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.

Francis Adanza on the Entrepreneurial Roller Coaster

Written by Sean Murphy. Posted in Founder Story, skmurphy

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 2” 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.

Paul Lippe on an Entrepreneur’s Accountability

Written by Sean Murphy. Posted in Blogging, Founder Story, Legal Issues, skmurphy

Paul Lippe is CEO of Legal OnRamp, a community of practice website for lawyers. He did a guest post on the AmLaw Daily Blog “Welcome to the Future: Leadership, Accountability, and Swimwear” that I enjoyed, in particular his observations on the entrepreneur’s accountability were worth bearing in mind in 2009.

Paul Lippe on an Entrepreneur’s Accountability

Legal OnRamp strives to simplify innovation and value delivery, primarily for in=house lawyers but also for law firms, both by providing tools to innovate and by sharing examples of success.

We have 7,000 members, probably 3,000 of whom have contributed content or otherwise added value. Perhaps 1,000 have contributed ideas on how to make our service better. Ninety nine percent of the good ideas and 99.9 percent of the work have come from someone other than me. More than 400 law firms and more than 700 companies are participating.

There are at least 100 things that need to go right; there are 200 things that could go wrong. When we started, 80 percent of lawyers thought we were nuts; 14 months later, 80 percent of lawyers think we’re the future. I “control,” in a formal sense, very little of this.

Still, if Legal OnRamp fails, it’s my fault.

There are no words we love to hear more than “it’s not your fault.” Whether from our mother, our friend, our cleric, or our consultant, when something goes wrong, we cherish absolution.

So let’s be clear: if you are running a law firm and it fails, it’s your fault.”
Paul Lippe in “Welcome to the Future: Leadership, Accountability, and Swimwear

The balance of the article is worth reading, he addresses the need to plan for a more competitive environment in 2009. Although his intended audience is managing partners at law firms it’s very applicable to software and consulting firms as well.

Related Blog Posts

Jeff Bezos on Strategic Planning

Written by Sean Murphy. Posted in 4 Finding your Niche, Founder Story, skmurphy

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.

Odd Jobs With an Even Temper

Written by Sean Murphy. Posted in 2 Open for Business Stage, Founder Story, Rules of Thumb, skmurphy

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.

Update June 20, 2014: I think everyone on a startup team needs to do “odd jobs with an even temper.” It’s useful to bring on someone, even part time, who is detail oriented and can tackle the swarm of small tasks that need to get done.

Scott Sambucci on “An Entrepreneur’s Lessons Learned”

Written by Sean Murphy. Posted in Consulting Business, Founder Story, Rules of Thumb, skmurphy

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.”

Norm Brodsky’s Guidelines For Entrepreneurs

Written by Sean Murphy. Posted in Founder Story, Rules of Thumb, skmurphy

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.

Diane Green Out At VMWare

Written by Sean Murphy. Posted in Founder Story, skmurphy

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.

Founder Story: Debra Willrett on Inventing MacProject

Written by Sean Murphy. Posted in Founder Story, skmurphy

I first met Debra Willrett, founder of Expert Software Consulting, at the IEEE Consultants Network for Silicon Valley (CNSV) when she gave a  great talk on the new CNSV website in February of 2006. When Francis and I learned that she was the  inventor of the Macintosh application MacProject, an application that has defined a paradigm for interactive graphical project management tools for the last 25 years, we asked her for an interview for our Founder Story series. What follows is Debra’s experience of turning an application into a business.

Q: Inventing MacProject is quite an accomplishment. What problem were you trying to solve when you started?

The initial motivation was to manage software projects. I was working in the lab at Hewlett-Packard, and my manager at the time was drawing large Pert charts by hand and taping them to the walls of our cubicles. But having a project with multiple people and complex dependencies between the components is a universal problem which applies to building nuclear reactors, bridges or software systems.

At HP , I was the user interface developer for a PC-based CAD system, one of a number of similar projects at HP at the time. My job was to build a graphical layout program for printed circuit boards.

When I saw a pre-release of Apple’s Lisa computer, I realized I had the components in place for a business. I had the problem to solve, the system to build it on, and the skills to build a WYSIWYG application with broad appeal. I proposed my product to Trip Hawkins, a member of the Lisa marketing team at Apple. Trip immediately understood the concept and we worked out a contract to develop the first implementation of my idea, LisaProject. This contract gave me the courage to quit my job at HP and work full time on pursuing my dream. By the time the Mac was released I was on my second revision, MacProject.

Q: What aspects of the process were a surprise?

The process was more challenging and exciting than I anticipated. Within the space of a couple of years, I started my first business (SoloSoft), negotiated my first contract, became the first Independent Software Vendor (ISV) for the Lisa, and shipped the first ISV application on the Mac. On the technical side, I wrote the first version of LisaProject in 6 months and released it to a community of users which grew to number 5,000 within 2 years. While I was supporting LisaProject, I wrote a new version, MacProject, for the yet-to-be released Macintosh.

Q: What alternatives existed when you started? What differentiated MacProject from your competitors?

First of all, Microsoft Project did not exist when I wrote either LisaProject or MacProject. The competitors at the time were complex non-graphical products. It took a specialist to understand how to apply them and consultants to help you figure out the data. I wanted to build something clean and elegant that anyone could understand and apply, even on a very small scale. Whether you are building the space shuttle or planning an event with friends, you are working with a group of people on a schedule and you need a vehicle with which you can communicate and monitor your plan.

Q: Today are many project management tools on the market: do you use any of them? What do you see as some of the aspects of project management still to be addressed by software?

I’m not a project management specialist today, but I have been asked for recommendations about what to purchase. More often I get asked the question, where can I get something like MacProject today? I think the tool that you pick should be easy to use and quickly be of value to you. Many solutions are more complex than they need to be. Also, project management is not done by one person working alone, so the social networking of the Web should revolutionize the way we approach the problem. I haven’t seen anything which I really like, so I’m thinking about getting back into the business. Stay tuned.

Q: It is very challenging to be both the inventor and the entrepreneur. Can you talk about your experience at SoloSoft and how you successfully structured the Apple deal? At the time, what were SoloSoft’s biggest challenges in negotiating the Apple deal?

My first contract with Apple for the Lisa was enough to pay the bills and keep the lights on. More importantly, building LisaProject gave me experience and relationships with people in Apple. I was in the right place at the right time when the Macintosh was developed. It can take years of work to make your investment pay off and many people get discouraged too early.

Another problem occurs if you ask for too much at the beginning. Until you demonstrate both your ability to deliver and the viability of your idea, you don’t have much leverage. The terms of the customer’s proposal for the first contract will reflect this. when They often feel that their work is worth more than it really is, and they walk away from a deal. I have also seen things fall apart when people get too fussy about every line on the contract.

You need to be flexible and realistic. In exchange, you can be firm about the issues which are important to you. One of the key terms of my contracts with Apple was that I would retain ownership of the software.

I also found that I could profit from being underestimated by others.

I requested a number of significant bonus incentives for meeting scheduled deadlines. Since software schedules are routinely slipped as additional features are added or the scope of the project changes, no one believes you when you say you will deliver something on time.

They will happily add terms in the contract which pay more for meeting delivery dates. And I happily collected on every one of my bonus payments. Of course, the customer also won, because having the new features earlier increased sales.

Once MacProject became a big success, there was pressure to restructure my agreement. Since I was making significant money, Apple wanted to reduce the royalty rate. Another consequence of success was that as the user base expanded, the list of desired features grew rapidly. I rejected many of these feature requests to maintain the elegance of the user interface. Nevertheless, the list of good ideas for new features eventually exceeded my ability to write the code. Tension developed between SoloSoft and Apple over this issue. I considered scaling up SoloSoft’s development team by hiring its first employee. Apple wanted to control the development by bringing it in-house. Apple offered to buy out the royalty stream. Any successful contract has to keep working for all the stakeholders. I was torn between my ambitions to grow SoloSoft into a large business and the demands of my growing family. I ultimately decided to sell MacProject to Claris, Apple’s spinoff of its software business, and went into a period of professional semi-retirement.

Q: You have started a new firm: can you tell us a little about what you’re doing with Expert Software Consulting?

Expert Software Consulting builds web applications for various types of clients. I like being my own boss. I enjoy the challenges of running a business, and I hope that some of my ideas today will enable me to make a larger contribution in the future. Recently a group of Stanford students led by B.J. Fogg created Facebook applications and found out that they had an installed base of millions of users within weeks with applications like “Kiss Me” or “Hug Me.” The Web is a phenomenal playground, and things are changing all the time. It’s exciting and fun to be a part of, and I enjoy going to work every day.

HP Way: Seven Objectives For Your Startup

Written by Sean Murphy. Posted in Founder Story, skmurphy

I re-read David Packard’s book “The HP Way” recently and was struck by the “Sonoma Meeting” section in Chapter 5: “From Partnership to Corporation”

Another significant event that occurred early in 1957 was the company’s first off-site meeting of senior managers. This was a two-day meeting that took place at the Sonoma Mission Inn, about 70 miles north of San Francisco. About twenty people attended.

Packard lists three reasons for the meeting:

  1. Get key managers together at least once a year to discuss policies and problems, to exchange views, and to make plans for the future.
  2. With 1200 people in the company, the founders could no longer personally manage all of the key issues. They still wanted to maintain a small company atmosphere.
  3. Get agreement on key objectives so that they would steer in a common direction. Allow everyone to comment and have a hand in developing them, with an eye to periodic revision.

They started with six but in 1966 they were revised into the following seven; reading them again I thought this would make a good default set for any technology startup:

  1. Profit. To recognize that profit is the best single measure of our contribution to society and the ultimate source of our corporate strength. We should attempt to achieve the maximum possible profit consistent with our other objectives.
  2. Customers. To strive for continual improvement in the quality, usefulness, and value of the products and services we offer our customers.
  3. Field of Interest. To concentrate our efforts, continually seeking new opportunities for growth but limiting our involvement to fields in which we have capability and can make a contribution.
  4. Growth. To emphasize growth as a measure of strength and a requirement for survival.
  5. Employees. To provide employment opportunities for HP people that include the opportunity to share in the company’s success, which they help make possible. To provide for them job security based on performance, and to provide the opportunity for personal satisfaction that comes from a sense of accomplishment in their work.
  6. Organization. To maintain an organizational environment that fosters individual motivation, initiative and creativity, and a wide latitude of freedom in working toward established objectives and goals.
  7. Citizenship. To meet the obligations of good citizenship by making contributions to the community and to the institutions in our society which generate the environment in which we operate.

Obviously the management team would have to decide how they were going to keep score in detail on each of these (#1 is fairly obvious but the others are a little more complex). For more background see the HP Memory Project and HP History Links at the HP Alumni site. It’s also interesting to compare the seven from 1966 with HP’s current corporate objectives which feel padded and much less action oriented.

Founder Story: John Nash, CEO Color Vision Store

Written by Francis Adanza. Posted in Founder Story

I recently I enjoyed a conversation with John Nash, co founder of the Color Vision Store. I met John at our Great Demos! workshop in October ’07. While doing our due diligence on the workshop registrants, I came across John’s website. Although I am not color blind, I was drawn by his niche market objective. A Google search on “color blindness” will retrieve less than 200,000 hits. Seems like an opportunity waiting to unfold.

Q: Are you color blind? Is that what led you to develop the site?
Yes, I am colorblind. I developed the site with my brother Keith–who is also color blind–over a decade ago as a channel to sell an educational guide that he developed, called the Color Vision Guide. Our goal then was to provide easy to comprehend information on color blindness and create awareness about related issues.

My brother was also a bit of a color blind activist. He took a swipe at the City of Palo Alto when they debuted their color-coded downtown parking zone scheme using purple, blue, lime and coral. My brother said “You know what that does. Makes color blindness a crime.” He got Herb Caen, the San Francisco Chronicle’s famous columnist, to print that.

When the website first launched we just took orders by mail: for the first couple of years there was not a shopping cart built into the website. But once we figured out how to take credit cards and add cart features, the site started carrying clinical color vision tests and other screening instruments. Slowly but surely the tenor of the site was less about education and more about providing tools to the commercial sector designed to screen color blind people from jobs. I’ll be the first to admit I may not want a color blind person reading the color-coded strips on dialysis machine, but over time I think we drifted from our mission of awareness and community for those with color blindness. So after my brother decided to move on to do other things and my mother, who was taking our orders to the post office, became too elderly to keep up the day to day business, I opted to scale back and take us to our roots: return the Color Vision Guide to the forefront, license our original illustrations, and start a blog with a bent toward supporting those with color blindness, not excluding them.

Q: I’m not color blind, can you help me understand some of the challenges you face?
I have a red-green hereditary (genetic) photoreceptor disorder (color blindness of the red-green type), also known as deuteranopia or Daltonism. I fail the Ishihara tests every time I take them. The challenges I face with my impairment are, fortunately, not too severe. In my daily work, as a consultant in the social sector, I don’t have a great deal of issues that need to be resolved due to my color blindness. I work on the computer a great deal, and some interface designers make poor selections when it comes to color that are hard for me to distinguish. I cannot generally tell the difference between purple and blue, and many times I can’t distinguish green and tan even when they are right next to each other. They just look like two shades of green. I recently posted a couple of examples on my blog of instances where color choices made by Google and Apple do not impart information as intended by their designers for people who are color blind.

As a child I dreamt of being the pilot of Boeing 727 and was eventually told that people who are color blind can’t be pilots. However, there are many documented cases of color blind pilots now. The issue comes down to how the aspiring pilot is tested. Many pilots who are color blind fail the clinical printed tests, but pass the practical light test which is conducted while standing in an airfield and identifying lights shone from a control tower. So maybe it’s not too late for me–although I might aspire to pilot something else besides the 727 now.

Q: Your site offers some great resources to other links, informative articles, and products. Is your business model a combination of ads and e-commerce?
Yes–that’s a fair assessment. The color blindness business, such as there is one, tends to be a bit seasonal. We see a big uptake in orders for the Color Vision Guide around the time that schools are sponsoring their annual science fairs. Color blindness is a great science project topic for school children. In between the market swings on our Guide sales I would like it if people visited the blog, commented on the articles and, yes, clicked on few ads.

Q: We highly recommend that people introduce their offering into a niche, it seems like you found one. What are some of the challenges you face in promoting your website?
One challenge lies in trying to determine who our readership is. Since I’m trying to wear the white hat and appeal to those with color blindness and others who would like to know more about it, it’s not crystal clear to me how big that audience is. On the other hand, statistically one in eight of your male acquaintances is color blind in some fashion. In pure numbers, about 10.5 million men have the problem I have: cannot distinguish red from green, or cannot see red and green differently. So they’re out there. I just have to find out what they want to know or hear.

Q: What are some strategies or methods you have found useful?
I’ve been touching base with other bloggers in the color blind community. I’ve also been working with a talented writer who helps sift through the myriad of Google alerts I get on everything related to “color” and “colour” blindness.

Q: Are there any practical tools for website and interface designers? Which ones do you recommend?
There are several good tools out that help programmers with normal vision create interfaces that are truly accessible to all. I have listed quite a few on my blog, but two come to mind. I have a post about a tool by Cal Henderson as well as well as a tool called a color decoder for color blind users who want to identify the color they are looking at.

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.

HP’s Early Customers Came From Fred Terman’s Social Network

Written by Sean Murphy. Posted in Customer Development, Founder Story, skmurphy

The founding team for a startup typically provides the basic intellectual capital, and frequently the initial seed capital. But a young team often has to rely on advisors for social capital–existing relationships based on mutual trust and prior shared success. These relationships act as points of departure for market exploration and social navigation to early customers.

One early example in high technology is Fred Terman‘s role in the formation and early success of Hewlett Packard. In “The Engineer Who Jump-Started Silicon Valley” a 1997 Business Week article by Joan O’C. Hamilton it’s clear that he provided the founders with considerable social capital:

Packard’s recollections complete the picture: “We built the first production model by Christmas, and I clearly recall having [the first oscillator production unit] sitting on the mantel above the fireplace,” he wrote in “The HP Way.” “There we took pictures of it and produced a two-page sales brochure that we sent to a list of about 25 potential customers provided by Fred Terman. We designated this first product the Model 200A because we thought the name would make us look like we’d been around for awhile.”

Social navigation, or the ability to navigate in a population and gain cues and guidance from individuals both directly and by their actions, is a key skill that founders must develop. As much as they want to focus on technology, finding prospects to validate that they are solving a real problem and that their solution is compelling is twice as important. Navigation requires that you know where you are, where you want to go, and how you want to get there. It may also involve experimentation and exploration of the market, and in many cases for a startup’s founders, one or more revisions to your destination.

Postscript: just so it’s a little clearer that a few of the names that Terman supplied became customers, here is another paragraph from same “Litton Answers the Call” section of the “Garage Becomes Workshop” chapter of the “The HP Way” the first excerpt above came from.

“We weren’t expecting much from our first mailing, but amazingly enough, in the first couple of weeks in January back came several orders…and some were accompanied by checks.”

Founder Story: Dave Stubenvoll of Wowza Media Systems

Written by Francis Adanza. Posted in Founder Story

I interviewed Dave Stubenvoll late last November as a part of our Founder Story series. I first met him at the Streaming Media 2006 show and was immediately impressed by him. Sean invited him to be on a panel at Startup Epicenter on “Scaling Up Your Product Development” and Dave made some of points there that he expands on in this interview. What follows is an edited transcript with hyperlinks added to provide context and background for some of Dave’s remarks.

Q: You’ve been through 5 startups; can you compare and contrast your experiences between them?

Three of them were independent startups: GALT Technologies, Freeworks and WOWZA; two of them were intrapreneurship projects, that is new businesses within large companies. The two intrapreneurship projects were in different companies that looked at things very, very differently. The first one was when I was at Intuit leading the payroll business application set, and we knew we were absolutely starting a new line of business, no doubt about it. The second one was when I was at Adobe and it was a skunk works project: let’s see what we can do in this area.

As far as the startups, the first one, GALT Technologies, was a website for mutual fund information. We were venture-backed, but didn’t raise very much money at all. It took less than a million dollars in total. I was not actually a founder for this one. I was the third person in the firm and was lucky enough to get a very reasonable sized equity stake. I joined in 1993 and to tell you the truth, nobody really knew what the heck they were doing. This was during the early days of the web and we kind of just built something and stumbled into some good situations. We ended up selling the company to Intuit in 1995.

The first company that I founded was Freeworks, which did not work out so well. We raised significantly more money, but it was during the dotcom bubble, and the company ultimately folded when the bubble burst. We offered an ad-supported suite of free services targeted to individuals working in small businesses. We were trying to develop marketing collateral automation for small business employees.

And now, with WOWZA, the only commercially available alternative to Adobe’s Flash Media Server, we have not taken any venture money at all. We just did it ourselves and became profitable very, very quickly. In terms of comparing and contrasting the three experiences, I definitely kept the same sort of cost methodology and management philosophy

Q: Can you please elaborate on your cost methodology and management philosophy?

For example during Freeworks, we had a Business Week interview. The reporting crew came in, interviewed us, and wrote an article comparing us to a startup in San Francisco. Honestly the reporter came in and said, “Dave, I don’t want to offend you, but this place is a dump.” For our team, this was the nicest office any of us have ever had. It’s about understanding the value of the capital that you have or don’t have. And it’s about using your capital properly to get the best people and to invest in the right projects, for example a marketing vehicle or product feature set. With WOWZA we were able to read the market, react quickly, and reach profitability: as a result we did not need to raise money.

The management philosophy was really refined during Freeworks. It’s really about letting people make decisions. It’s not all about me, it’s not all about the other founders, it’s about everyone making the best decisions that they can to move it forward. Micro managing people becomes time consuming. You have to have faith and trust that you have surrounded yourself with the best people and just let them work.

Q: Your cost methodology and your management philosophy make a lot of sense. Besides raising money, what were some of the things you made sure to avoid in starting WOWZA?

One thing that we work darn hard to avoid is running out of runway, which is wrapped up in a number of other things. It’s about making sure that the company is going to be here for the long term and that we are not going to be dependent upon any specific event or any other single party.

Many people tell us constantly, “You know you are building this to sell.” Part of my response is, “if I was dependent upon the sale of this company to some single entity, I probably wouldn’t survive.” If their comments were true, I would be doing things to sell as opposed to doing things to make sure that the business is around next year and the year after, and the year after.”

At WOWZA, we’ve taken a much more pragmatic approach. It begins with, what do customers want? What do customers want today and what are they willing to pay for now? The number one job is making sure we have products people want to buy. Then layering on top of that, what do we think they are going to want to buy two years from now? How can we gauge where the market is going? The number two job is having a really good architecture for our products and aligning our product roadmap with our customers’ objectives. If we do this successfully, we can assume that the company is going to be around years from now.

For example, we are porting our Pro offering to the new Amazon virtualization servers, Amazon EC2. We are going to host our product there. As we are developing it for beta, which will be released shortly, we will run the standard evaluation questions. Can we do this? Should we do this? What are our options? Which one is more flexible? Which one is going to constrain what we can do in the future? Which one is going to let us do more in the future? Since it’s also about gauging the market, how good do we have to be to start the beta? It doesn’t have to be perfect for the beta, because we really don’t know what people want. But it does have to be good enough.

Q: It seems like you have had a clear sense of priorities with WOWZA?

With WOWZA our focus is on three key things: making sure that we will be around, making sure that we are meeting customer needs today, and staying flexible enough to meet customer needs for the future.

Q: I talk to many entrepreneurs who take a “if I build it they will come approach.” We met just over a year ago, before you had even launched. Can you talk about the amount of preparation, the strategies, and your implementation plan just to get ready for launch?

This time with WOWZA, launch was sort of a crazy thing for us. We basically started the company because we wanted to explore the possibilities for new applications that emerging media technologies enabled. Originally, we never actually expected to make money with what we built. Not really your typical way of starting a business.

My co-founder and I had prototyped a hybrid video blogging system. It was this unholy hybrid of WordPress, the Adobe Flash Communication Server, and then Flash Media Server. While messing around, we found out that Adobe Flash Communication Server, Flash Media Server was just not good enough. The product wasn’t stable enough, it was unreliable, it had lousy performance, it was ridiculously expensive, and it just was not good enough for us. So, we decided to write our own, and we put that into our product.

Prior to launch we did all the standard things like press releases, some advertising, having reference customers, having customers ready to buy on the launch date, and building up the market. However, we did not pour boatloads of money into the initial marketing. For two reasons: first we figured we would get it wrong at the start, and second we felt that this was a one off product. Our primary intention was to establish the company and build a reputation. We want to be the guys who know what they are doing, tell you the truth, and deliver a damn good product. The truth is with a one off product there are going to be problems, no doubt about it. We went ahead and launched in February 2007, got out there, got press in a couple of places, people came, and we made sales.

Our first sale started with a twenty minute phone conversation where I sold our first customer the ability to license our server for fifteen hundred dollars a month for a maximum of seventy-five connections. It was ridiculously expensive compared to where we are priced today. Our server was performing phenomenally well, and we exceeded our forty-five day sales goal, which was insane. So far it’s working out well, in October we revised our estimate for our 2007 revenue. That was six weeks or seven weeks ago, and then yesterday we reached that goal. It could be that I’m a really poor forecaster, but we are extraordinarily pleased.

We continue to evolve both our marketing and the product. Our focus is on three things; market development, product development, and organizational development. We are finding that if you take an evolutionary approach to organizing yourself to ensure survival, performing enough trials so that no one mistake can kill you, you get stronger.

Q: Can you elaborate on this evolutionary approach? What led you to start the company?

My founding partner, Charlie Good, and I enjoy working together. We were working with a venture capital firm, Kleiner Perkins, on some projects they were incubating and we decided to explore video blogging. We created the corporate shell so we wouldn’t put our personal assets at risk.

There is a great book, “The Origin and Evolution of New Business” by Amar Bhide. It’s a very dry academic tome that talks about how small businesses get to be big. He looked at the Inc 500 instead of the Fortune 500–which I think is a more accurate approach than looking at a big business–and wondered “how did it get that way?”

What Bhide found was that there are basically three sources of new businesses: large businesses creating new businesses, venture backed startups, and the crazy entrepreneur. What was surprising was that you get the greatest returns from the crazy entrepreneur hitting it big. Large businesses only invest in other businesses that are guaranteed to be large: think about Toyota investing billions to develop and introduce a new car. Venture capitalists invest millions in a startup but only if they believe their return is going to be large: they have to see a billion dollar market from the beginning. With so much money at stake they can’t take large risks.

When you look at the businesses created by entrepreneurs–which include Cisco, Intuit, and arguably Google–it wasn’t with the expectation of a large return but structured for survival. These entrepreneurs didn’t quit their day jobs. They took an evolutionary approach that spread a large risk over many small experiments. When Google started, Yahoo owned search. Who in their right mind would start a search company? I haven’t met the founders but they are certainly very smart and they created something that was interesting and ultimately compelling: when they made it available people were clamoring for it. They wouldn’t have received Venture Capital funding if that hadn’t happened, right? They were able to prove success on a shoestring just with their interest. Then they had to decide whether to build the company or finish their doctorates. That’s what success looks like: you can consider quitting your day job because your side project has taken off to the point where you can make that decision.

Q: So, do you compare what you are doing with WOWZA going up against Adobe’s Flash to what Google did to Yahoo?

Ha, that’s a good question. I’ll put it like this, if you asked Larry and Serge when they started writing the algorithm if they were going after Yahoo, they’d probably say no, we just think this is kind of interesting and I have no idea where it’s headed. We started out just to meet our own need. We created the server because we needed it to get our little video blogging application working.

Even today as WOWZA Media Systems, still a very small company, we are not trying to take on Adobe, just pursue opportunities as they present themselves. I don’t think it’s a valid to compare us to Google except that we started this venture doing things that we wanted to do, and found out that other people were interested in it. We were not and are not trying to take on Adobe. That said, we are able to fit into what many people want.

I believe this is a common thread for software startups. It’s pretty rare when someone sits back and says, “I’m going to create this new market.” OK, a few people say it, and it might make all the sense in the world, but most of the time it doesn’t actually happen. Look at Intuit’s QuickBooks business. It is a huge, phenomenal business. Do you know how it started? They had Quicken, a personal finance manager, and found out that many of their customers were actually using it for their own small businesses. So they designed a new product that’s focused on small business instead of just household checking. And the customers loved it. It’s about reacting flexibly when you get nudged by customers, keeping your eyes open to a new opportunity, and making sure that whatever you do is isn’t going to kill you.

I like this “Do Not Run Out of Runway” approach. However, I have also heard fail fast. How do you fail fast if you never run out of runway? How do you measure progress?

Our approach is fail fast and fix. It’s an evolutionary approach where you tolerate a lot of mistakes, but you make sure that none of them are fatal. The truth is, this methodology of infinite runway is really hard to do. Fundamentally it’s based upon not quitting your day job until you are certain you can cover your living expenses. It’s hard to do these things when you quit your day job. The team has to be able to invest time in the idea and not rely on outsiders to get it up and off the ground.

If you are a lone entrepreneur it’s better to team up: far, far, far better to team up than to do something alone. With two, you both can commit a certain amount of time to it, but keep your day job. Slowly this side project develops and you just keep plugging at it, plugging at it, plugging at it. Eventually, if you are reasonably smart, you’ll find something. Listen to the market, be aware of opportunities, and make sure nothing you do absolutely kills it. It’s hard to do. It takes a lot out of you, but it’s definitely possible.

Q: You mentioned how valuable it was to find partners and team up. How did you find your co-founders?

Well, the GALT guys found me. The two founders asked me to join, which was wonderful and worked out well. There were three of us there, and we sold the company to Intuit. Then Freeworks was founded by me and three other guys, two of whom were with me at GALT. The fourth person was part of the department that GALT merged with at Intuit. The four of us made a great team and had great chemistry. I still believe Freeworks had a chance, but bottom line is we ran out of runway. At GALT, I took a chance because I really didn’t know the founders well. I got lucky, but be careful because after six, eight, ten dinners with someone and you think you know them and you don’t; you just don’t.

By the time we started Freeworks, I knew these guys well. I knew them all for years, and that was a good thing. We were all very comfortable working together. People change over time and all that, but we had the type of relationship where we didn’t hold back, everyone was brutally honest with each other. We just got along well, we could yell and scream when we disagreed on something, and then go out to lunch and have a great time. We understood how each other worked; we understood that it was okay to be confrontational.

Now, with WOWZA, Charlie and I have known each other for several years. We met at Adobe and ended up working on a Marketing Collateral Automation project. He turned out to be a guy that I certainly trust. We are very similar in a lot of respects, but our skill sets are very different. So, we fit very well together as a team, and I think it’s vitally important that you don’t go through this alone. If you’ve got to start something, you need to get a buddy.

Q: WOWZA sounds like it’s starting to take off. What do you see as the significant challenges ahead?

Our product focus today is Flash centric; the WOWZA Pro is a Flash streaming server. When you mention Flash most people think of Adobe because they acquired Macromedia the inventor of Flash. We have a cordial relationship with Adobe, frankly because we are still way too small for them to worry about us. They need to pay attention to and react to Microsoft. But streaming media is becoming more and more important; it’s becoming a bigger industry, which raises the stakes. Adobe, Microsoft, and others continue to make significant investments in the space.

It’s hard to believe, but we were selected as the number three player in this space. The 2007 Streaming Media Magazine readers’ choice poll voted Adobe, Microsoft and WOWZA as the top three choices for streaming media servers. Behind us were Apple and Real, who are both much larger companies.

If you look at all four of the major players–Adobe, Microsoft, Apple, and Real–they all care more about other things than their streaming media server. They care about particular codes, particular clients, operating systems, and all of these other things. We are the only independent streaming media software company out there, and we think that that’s a significant opportunity as this market evolves. Our mantra as we enter 2008 is any code, any protocol, any device, any client. Going forward we plan to deliver the necessary components to wherever the customer needs to stream content, whether it’s the desktop, a mobile device, or the living room. We believe we are in a unique position to be able to provide that.

Q: It’s been quite a journey for you. What advice would you give to others, so that they can avoid any of the challenges you encountered in your experiences? Any words of wisdom, tips, gotchas?

I think the two biggest pieces of advice would be: (1) get a partner you can trust. (2) figure out how to get things rolling without quitting your day job. I know people don’t want to hear that second one, but it’s that infinite runway that is your absolute, absolute greatest strength. It allows you to fail fast and fix.

Think You Have a Great Name, Think Again!

Written by Francis Adanza. Posted in Founder Story

We have all heard of brands like Google, Cisco, Nike, Starbucks , and Lowe’s. Have you ever wondered how these companies got a great name? You probably haven’t heard of Ansearch , N-TRON, InSport International, Caribou Coffee, and Handy Andy. To me Ansearch sounds more like a search engine than Google, N-TRON seems more like a network router than Cisco, InSport is closer to sports apparel than Nike, Caribou Coffee appears more relevant to coffee than Starbucks, and Handy Andy sounds more like home improvement than Lowe’s. We all know there is more involved in marketing than just names, but I wanted to learn how developing the right name can improve my marketing effectiveness.

Today, I was able to sit down with Athol Foden, Founder of Brighter Naming, to gain some naming insights. Athol has over 15 years of experience in helping clients name companies, products, services, and taglines. Please visit his website for great articles on name generators, characteristics of good names, and naming biases and influences.

In addition to this blog, Athol will be joining us next Friday, December 7th at the Bootstrappers Breakfast in Palo Alto. Come join us and engage in a round table discussion and ask Athol your own questions.

Q: How does a strong company name influence presence in the marketplace?
It allows you to stand out from the crowd, gain quick and clear customer mindshare, and shorten all your sales and marketing messages.

Q: What do you think is more important, a name or a logo?
In retail, a logo (or even more importantly a color scheme) are the most important when you are selling “off the shelf” via packaged goods. For items where the logo cannot be seen, for example fashion clothing, the name recognition is more important. In high tech, when selling via the internet or phone, the name is more important. In some cases, the icon (mini logo) may be also very important e.g. embedded in a website, cell phone, etc.

Q: In our experience we see startups rollout a product name which is different from the company name. We believe they should put all their weight behind one name instead of confusing people with multiple names. What are your thoughts about this strategy?
Most startups only have so many marketing dollars at their disposable, so it is often easier and cheaper to have one name to initially promote. However, if the company will have a number of product lines in the near future (under 18 months), then you need a naming architecture that plays off the company name, or you need separate product names.

Q: It seems like naming the business is an emotional step that most founders want to own, how do you convince people you can produce a better result?
Many smart founders waste many, many hours before they call for help. Very few have the talent, experience and knowledge to do it themselves (unless they will always be a small Mom and Pop). This is especially important for a business that will go nationwide soon. The legal costs and risks alone are enough to have many ask for help. However, they still own the process and final decisions. All we do is enable the creativity, provide names that are legally clear, and facilitate the decision making process.

Q: Your website says you can help a startup come up with a name in three weeks, how much of the founders time does this require for you to deliver?
For a small business, we only engage the founder in meetings and discussions for about 3-4 hours a week during the project. Of course, they spend time (usually after hours) thinking about the names, discussing with colleagues, etc. We want to make sure they are very comfortable with the final name.

Q: What are the legalities of finding a name?
To register a small sole proprietorship, it only has to be clear at your local county business office. They don’t check with anyone else, or to that matter really care. To incorporate, it only has to be clear in your state. They don’t check with anyone else, not even their own counties! All this is OK, as long as no one else in your same line of business has the same name… and you will never run into them doing business anywhere in the world.

So the real protection is to do a thorough nationwide search, starting with both registered and common law (unregistered) trademarks, which provide Federal protection. A simple Google search is not enough.

Q: Without having to hire an expert, what are three pieces of advice you would share with startups to figure out a good name?

  1. Don’t try to find one name. First list as many as you can… 100+ is a minimum starting point.
  2. Don’t be naive. People have been naming businesses for years… and 1000 trademarks are filed a day. You will probably have to be somehow unique or different. Think outside the dictionary.
  3. Remember, you are naming it, not describing it. First list all the major players in your industry and all competitors. Make sure you don’t end up sounding like them.

Quick Links

Bootstrappers Breakfast Link Startup Stages Clients In the News Upcoming Events Office Hours Button Newsletter SignUp