Fireside Chat with Gail Goodman and David Friend, from Future Forward
I had a chance to conduct a "fireside chat" with two of Boston's most successful start-up CEOs this past Wednesday, at Future Forward 08.
David Friend is CEO of Carbonite; Gail Goodman runs Constant Contact.
Founded in 2005, Carbonite is an online back-up service that has raised $50 million in venture capital, and has users in 120 countries. David Friend had earlier started companies like eYak/Sonexis and FaxNet. Constant Contact went public last October, and I wrote about them recently in my Boston Globe column. Goodman had previously run the e-commerce group at Open Market Inc.
The audio file is an MP3, about 35 minutes long. Quality is good -- except for a few beeps at the end indicating that my digital recorder was about to run out of juice. We talk about what each CEO learned from prior ventures... raising money... going public... marketing and advertising... and surviving near-death experiences.
I asked each of the entrepreneurs to share the best piece of advice they'd ever gotten.
Sonia Khademi of Proxilliant Systems said, "Cash flow positive equals happiness." When you're cash flow positive, or even cash flow neutral, you don't get pressured into doing bad deals.
Don Bulens, most recently CEO of EqualLogic, said, "Don't love something that doesn't love you back." A lot of times salespeople, engineers, or CEOs get too enamored of a deal or a technology or a strategy that just isn't working out -- but they have a hard time letting go.
Hilmi Ozguc, most recently CEO of Maven Networks, said, "Pigs get fat; hogs get slaughtered." What he meant was that a lot of times when start-ups are negotiating to be acquired, they hold out for irrational terms -- and the deal winds up fizzling. Ozguc sold his latest start-up to Yahoo in January for $160 million cash. Just under $30 million went in. And the acquisition didn't require him to stick around for a year...in fact, he mentioned that he left Maven two weeks ago.
Cheng Wu, currently chairman of Azuki Systems, said, "A company is bought -- not sold."
(You can tell that we wound up talking a lot about M&A... Bulens mentioned that his company was getting ready to go public when they got a $1.4 billion all-cash offer from Dell last year. I asked him if there was much debate about what to do, and he said there was. They looked at the market cap of a competitor, Riverbed, that had recently gone public and was doing well. But ultimately the cash in hand was too alluring. Inevitably, that led to some discussions about why New England start-ups seem to sell rather than remaining independent. VCs and entrepreneurs got about equal blame from the folks I spoke with over dinner...)
Vinit Nijhawan offered up a nifty metaphor from the peanut gallery... finding the right business model for a start-up, he said, is like "hunting around for the radio station before you turn up the volume." You don't want to accelerate spending until you know that the business model works.
One nice story that Jay Batson shared.... at last year's pre-Future Forward dinner, people were griping (as usual) about how risk-averse VCs are. But Batson met an investor there from Sigma who ended up funding his company.
Invites for the 2008 Future Forward gathering, coming up on Nov. 19th, just went out by mail. If you're not already on the list, you can request one here. (As an FYI: the audience consists entirely of entrepreneurs, CIOs, CTOs, and investors.)
Filling Out Your Fall Calendar: Events Worth Knowing About
Here are a couple events for September, October, and November that I think will be worth going to. I'm planning to be at each of them in some capacity (reporter, moderator, organizer, etc.)
9.23-9.25: Emerging Technologies Conference @ MIT Werner Vogels from Amazon, Rich Miner from Google, and Craig Mundie from Microsoft top the list of interesting speakers (according to me, at least)
9.25: Tech @ The Movies This is the first entertainment industry panel that Mass TLC has organized, focusing on the role Massachusetts tech companies are playing in the movie industry. I'm moderating a panel, and giving a short talk about the historical contributions our state has made to the movies, based on my new book Inventing the Movies.
10.2: Mass TLC's Innovation UnConference Mass TLC is reinventing its big fall event this year (previously known as the investor conference), trying to make it more valuable for entrepreneurs.
I have to confess that I did not take copious notes during Future Forward yesterday, a conference I help organize, but I did shoot some video, which I'll post here soon. (Update: video is below.)
But there were some great questions raised, some really insightful comments, and lots of interchange between the speakers and the tightly-packed audience.
The big question in the opening panel, which featured CIOs and CEOs, was whether it makes sense to be the "first one in the pool" when it comes to deploying new technology, or to be a fast follower. Bill Wray from Citizens Bank said his budget doesn't allow him to experiment in too many places, so he tries the latter strategy. George Orlov from Forrester Research said he's creating a sort of sandbox, so that his employees (technology analysts) can play with new technologies they are writing about. Ken Chaisson from Legal Seafoods talked about how some of the company's servers gravitate to new technologies, and that others follow when they see that the first group of servers is turning tables faster and earning more tips.
CEOs Paul Sagan (Akamai) and Art Coviello (former CEO of RSA Security, now a division president within EMC) were up next. Sagan talked about Akamai's near-death experience after the dot-com bubble burst, which required letting go hundreds of employees and getting out of high-priced leases. He also talked about how the company had to focus - quickly - on what he called "permanent economy" customers. I asked whether the start-ups in the room represented the "transient economy." "Too soon to tell," Sagan quipped.
The question of whether the enforcement of non-compete agreements hampers entrepreneurship in Massachusetts came up. Sagan said cheekily that we should lobby California to institute non-competes, rather than eradicating them here. Attorney Gabor Garai from Foley and Lardner, in the audience, seemed to think that they're a real problem. When Art Coviello got on stage, the first thing I asked him was his position. EMC/RSA, of course, likes to hold on to its best employees, and Coviello said non-competes help them do that.
Next, Dan Primack ran a very high-energy panel about VCs, IPOs, and M&A. He started by exploring corporate venture investing ... and particularly the fickle nature of it. Corporations open and close venture groups as the economy changes, and one of the VCs on the panel, Maria Cirino, said that in her previous life as an entrepreneur, one corporate venture arm replaced the person who sat on Maria's board three times in four years. The panel also touched on the problem of big funds (Battery was named) trying to do everything from early-stage deals to buy-outs. There was quite a lot of skepticism about that, but no one from Battery or General Catalyst was present to defend the big boys.
Giles McNamee brought up a very salient piece of data - only one or two percent of companies ever make it to an IPO, so it's quite natural that entrepreneurs consider and explore the M&A route.
After a nice long lunch, we came back to hear from the delightful and insightful artist John Maeda, who works at the Media Lab. I've long been a fan of John's work, but this was the first chance I'd had to see him speak. (TED has a video of a shorter talk he gave about his book 'The Laws of Simplicity,' but yesterday John got a full hour.)
Next, George Colony and Fidelity exec Charlie Brenner sparred on stage about the future of IT. Colony is trying to change the term to BT (business technology), since he says IT people should no longer be talking about information-related metrics (how many records are in a database, or how many queries they handle every day), but rather business metrics, like how much they've increased the average order size on the Web site.
Colony blasted the news media, mentioning the NY Times in particular, for "pumping up Google like they pumped up Amazon in 1997." The degree of hype, he said, is "very irresponsible." Colony was very skeptical that Google can revolutionize the cell phone business, since its new Android strategy will require carriers to work against their natural interests.
The last session, as tradition dictates, is a murderer's row of entrepreneurs, showing new products they're working on. Mark Thirman of AirPrint Networks had a pretty nifty demo, of a small printer that can spool out lottery tickets, movie tickets, or little maps; it communicates via Bluetooth with your cell phone. And Mike Phillips showed off Vlingo's speech recognition technology, which speeds up data entry on cell phones.
One VC in the audience made a telling comment. He asked a question of Vertica CEO Ralph Breslauer, dismissing the rest of the panel as "not real companies" (I'm paraphrasing). Everyone else was a consumer-oriented play, and some have slightly hazy business models. Are Boston area VCs just a wee bit prejudiced toward heavy-duty enterprise tech? Hmmm....
One thing we've started doing is allowing the audience to "invest" play money into the start-up company that they like the best.... as a joke, we put General Georges Doriot on the face of the bills (Doriot was the founder of the first venture capital firm, ARD, and a prof at Harvard Business School.) During the cocktail hour, one of the FF attendees, Tom Hagan, told me that he'd actually been in a pitch meeting with Doriot, early in his entrepreneurial career. Pretty cool ending to the day...
I was at Web Innovator's Group last night .... big crowd, as usual ... really surprising how many of the folks who get up to explain their companies can't do it in a way that is either:
A) comprehensible, or
(That applies mostly to the "Side Dish" ancillary presenters, not the "Main Dish" demo-ers.)
My favorite concept of the evening was Lemonade.com, a site that makes it easy for anyone to create an online store containing an inventory of items they like. It looks like it's much easier to build a "Lemonade stand" than it is to set up an account with Amazon.com's affiliate program, which allows you to sell Amazon products. And many retailers still aren't hip to the idea of affiliates, so there's big potential for Lemonade to develop a big base of affiliates, and bring new retailers on board. Affiliates get paid a commission on any sales they generate, and can also earn bigger "bounties," for instance when they deliver a new customer to a company like AT&T. (The whole concept harkens back a bit to BeFree, one of the Web's first third-party operators of affiliate programs. But that was Web 1.0.)
The favorite entrepreneur of the night was Steven Bao. Bao is a sophomore at Wellesley High School who has created Student Concourse, a site that helps students manage all the school assignments they're working on, and collaborate with their classmates. He got a warm round of applause when he got up to explain what he's doing, and afterward, at his demo table, he was fielding questions like a pro. (Carolyn Johnson included Bao in this Globe story about young entrepreneurs.)
This morning, the Globe held one of its occasional small business breakfasts. We heard some great war stories from Rich Doyle, co-founder of Harpoon Brewery (in their early days, they decided to self-distribute, since no distributor wanted to carry their product) and Ian Lane Davis, founder of Mad Doc Software. Ian is the sole owner of the company ... which never took venture capital funding ... and today has 100 employees. He mentioned that they're now working on a version of "Bully" for the Xbox 360, a game originally developed by Rockstar Games, and several other projects he couldn't talk about.
Tomorrow is Future Forward in Weston. I'm told it's sold-out this year, and that there's a pretty substantial waiting list, so it should be a fun day...
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