Frank Addante's FounderBlog:
Starting startups by a serial entrepreneur.

My team is sure to crack a smirk every time someone asks me what our timeline is. They smirk because they know exactly how I’m going to respond. I say, “we like to go fast, but we don’t hurry”.

A startup company’s strengths are centered in its abilities to move quickly and be agile. I believe that the success-rates of all of my companies is largely due to speed being ingrained in the company culture. Having said that, there is a very, very fine line between “going fast” and “hurry”.

At my current company, the Rubicon Project, our top priority is product development. The very first day that we opened our doors, we started developing. We didn’t wait for planning meetings, we didn’t discuss strategy, didn’t discuss architecture, didn’t talk to customers, didn’t look at similar or competitive products , didn’t write specs or requirements. We just started developing. Our goal was simple – get a product to market as quickly as possible so that we could get real market feedback.

You, like most people, might be thinking - how’s that work? How do you ensure you develop the right product? Well, it’s simple. First, acknowledge the fact that the first version of your product is almost NEVER the right product. It’s simply an exercise for prospective customers to tell you what they DON’T like about it. Second, we talk about the product every day. It is top of mind for everyone. We plan and develop in real time. Third, we acknowledge that we WILL waste time. What was waste in “redo” we gain in momentum and speed. Speed is contagious.

Having said that, while we make speed our mindset, we are careful never to hurry or move at a pace that we are not comfortable with. How do you know when you go from moving fast to hurrying? First, it’s when communication breaks down. It’s like running a long distance. You always want to be running at a pace where you can still speak. If you are running so fast that you are out of breath and can’t speak, your body is going to tire out and won’t be able to go the distance. Continuous communication is key. Second, it’s when you make careless mistakes. You will make mistakes, many of them in fact, but careless mistakes are a sign of hurrying. Third, and most importantly, it’s when you’re moving faster than the market.

Pace is something that is top of mind for me personally right now. My team’s ability to move fast and execute has astonished me and, as a result, gives me new found levels of confidence in the business. In less than three months, we have developed a “whiz bang” prototype of the product, have had about 30+ high quality meetings to solicit (positive, encouraging, constructive) market feedback from website publishers, have hired over 10 A++ people (all of which are firing on all cylinders), have planned a big upcoming event with an overwhelmingly positive response and have already started working with ad network partners. All of this in less than three months time and ahead of plan. It sounds like I am bragging, but that is not my intent. I’m trying to give you a real world scenario of balancing fast with hurry. The team has been exceeding my expectations, therefore, we are moving at a pace that’s faster than I had originally planned. That combined with the fact that the online advertising market is on fire these days and the problem is only intensifying, makes me anxious to accelerate our plan. Do we launch the product and the company sooner? Do we invest more capital into the business to grow it faster? Do we hire more people? How much insight should I give the board into the fact that things are moving faster than planned? (and risk elevating expectations) These are all questions I ask myself. My emotions tell me to go faster, logic and fear tell me to stay the course. My gut tells me to set some short term additional “accelerated validation” goals and measure ourselves against these accelerated goals in the next 30 days. If we can step up the pace (go fast) and it doesn’t break (hurry), then we’ll accelerate the plan.

Every team, every company and every market has a different pace. “Fast” and “hurry” are different for everyone, but you should always recognize that there is definitely a line. It’s a fine line, but there is one. Know what it is, always be aware of it. Use it to push you to move faster, but also let it humble your over-zealousness.

Labels: internet advertising, product development, startup, timelines

The first few weeks of starting my newest company (Startup 6.0: the Rubicon Project) have reminded me of how critical it is to have the right team. I have been absolutely amazed by what an A++ team can produce in short periods of time. It has reaffirmed every thought I have ever had about my philosophy that great companies are built by great people.

To me, bringing together the right team has always been a product of trusting my instincts and my initial gut on people. So, I decided to spend some time trying to document what it is that I look for.

Here is what I came up with:

1. Trust
If you can't trust someone 100%, don't bring them on to your team. Period. If you do trust them, support them 100%.

2. Winners
Once someone has had a taste of success, they can never shake it. No one wants to do something less than their last win. So, those who have been part of a winning company have set the bar and anything less than exceeding that bar, in their mind, is failure.

3. Fire in the Belly
Hire people with an insatiable appetite for getting things done. You can generally tell who these people are because they can't sit still in their seats.

4. Good Athletes (versus Good Resumes)
Things are constantly evolving at a startup. It's more important to hire quick learners that can adapt versus deep experience. Smart people figure things out and will help evolve the business. Plus, they bring a fresh perspective.

5. No Egos
Strong egos will kill the culture of an early stage company. They will bring out the negative egos in everyone. Kill it fast, otherwise it will spread like a contagious, mutating disease. All for all and none for one.

6. Active Communicators
Communication is contagious. The more "in the flow" communication, the better.
Case in point: Our team at the Rubicon Project communicates so efficiently that our weekly team meetings have been averaging only about 40 minutes (covering all areas of the business).

7. Diversity
While it is good to have like minded individuals, it is equally important to balance that with people who have different perspectives and points of view.

8. Entrepreneurs
People who are driven to build something, will. Don't be afraid to hire people with high ambitions to start their own company. These people will be your best leaders.
See my previous posting: "Hire Entrepreneurs!"

9. Hard Working
Speed is one of the core strengths of an early stage company. Hard working people that are committed to winning will spend the extra time to learn. It allows them (and the company) to make more mistakes (on the path to finding the right answer).

10. Pride
You can't teach people to take pride in their work, so find people that do. Pride trumps all other motivators to do a superb job.

11. Purpose Driven - Focused on Results, Not Methods
All too often, people focus too much on the methods and not enough on the results. Find people that are driven by the results and are bored by the methods.
Warning: Stay away from people who talk about things like planning and architecture before they talk about purpose (the end goal). The most productive people start every plan by clearly stating the purpose first.


To me, these are the minimum requirements; all are required without exception. This is not a case where 10 out of 11 is good enough.

Another thing to note, is when bringing a founding team together, ensure that you all share the same criteria and values in people. Great people attract more great people. I have seen this first hand here at the Rubicon Project. Craig, Julie and Duc (my co-founders) have set the bar high, and as a result, our first 5 hires have been A++ quality. They sacrifice nothing. We've been very fortunate to have received a flood of outstanding resumes for our open positions. With so much great talent available, and only one slot to fill per position, it really forces you to be disciplined in evaluating the intangibles in my list above. It requires discipline in hiring, focus and trust in your team's gut to bring in the right people.


PS - We're planning our first event at the Rubicon Project (scheduled for August 9). This will be the first of a series of industry networking events that we'll be hosting. If you are interested in receiving an invite, please sign-up at http://www.RubiconProject.com/events.html

Labels: startup, team building, the rubicon project

OK, as I eluded to in my previous post, I have decided to take the plunge, yet again, and start another company. So, I am on to Startup 6.0...

This one is so new, we don't even have an official company name, yet. So, we decided to code name it "the Rubicon Project". Rubicon is a popular idiom that means to "go past the point of no return". The phrase "crossing the Rubicon" has come to represent the moment when people commit themselves to a risky and revolutionary course of action. If you want to read more about the history of the name, click here and go to About Us.

As I mentioned previously, I am taking a slightly different direction with this blog. I plan to do more frequent, informal updates to document the events and decisions that need to be made from the inception of a startup company. I will try to be as transparent as possible while still preserving the level of confidentiality that the company needs to maintain its edge.

This new company is in the Internet advertising (technology) space. See my previous post for some background on my thinking: GoogleClick - Who owns your cash register?

I'll go into our plans in future posts, as they unfold.

Today, I figure I would give a little background on how and why I decided to start a new company.

Let's start with the "how". After being involved in the start of 5 consecutive (fast-growth) companies, I really thought long and hard about how I wanted to do this next one. My initial thinking was that I was going to either do more of a "lifestyle business" (slower growth, complete control, but steady growth that would give me a lot of flexibility and low stress, presumably) or an "incuabator" (invest in multiple ideas, lend my experience, vision and network to each of the ideas and expect to hit a bunch of singles and doubles and hopefully a triple, home run and maybe even a grand slam). I debated this with myself for a while.

As I was talking with someone about my internal debate, they said to me -- "why don't you just keep doing what you're good at?". That struck a chord with me. I quickly came to realize that I'm not the "slow-growth" guy, I'm not the kind of guy that can do things part-time (as in the incubator model). I'm the 0-60mph, go as fast as you can, pedal to the metal, stop at nothing in my path kind of guy. Every time I try one of these slow-growth or incubator type models, I've always ended up jumping into one of them and going full force. So, I figured, why fool myself into thinking it would be any different this time? So, here I am, getting ready for 0 to 60 again.

So, now the "what" part. I'll get into details on the business idea itself in later posts... But, here's what happened. I've ALWAYS been very passionate about the Internet advertising space. I just love the space. Big opportunity, cool people, creative, dynamic and it is very much a relationship driven business... I recently took some time off to reconnect with old friends. I met with my old team from L90, the team that built adMonitor (the advertising platform that delivered billions of ads per month for over 3,000 blue-chip customers, where we had a successful $112 million IPO and then DoubleClick acquired it). I've worked with some of them in more than one of my companies, so we all have a long history of working together. After a few lunches, dinners and drinks, it turned out that they were all ready and eager to get the "old team" back together, jump back in and do something big in the Internet advertising space. This all happened in a matter of days, by the way... I had no intentions of starting another company so soon. We were just catching up... Next thing you know, not even two weeks later we're rushing around looking for office space, building a website, hiring, etc.

So, the "what" is simple. I'm getting back into a space that I love. I'm working with a top-notch, first class, A++ team (Craig, Duc and Julie) -- that just happened to fall into place. They are all rock stars. And, the market that I love just happens to be on fire right now and the gap seems to be widening. The stars just came into alignment all at once. I always say that first thing to do is to find a big market and then connect an army to that market. So, that's where I'm at, and that's what got me into doing Startup 6.0. If I only had 1 part of that equation (big market or great team), I wouldn't be here -- having both is essential.

As I said, I'll get more into the vision later. But, the short of it is that while the Internet advertising market is an enormous market ($27 Billion today, and growing), it is a highly inefficient one. We are going to make it more efficient through highly innovative technology. There is a lack of technology innovation available for website owners and publishers to most effectively monetize their sites through advertising. Because of this, the websites, the ad networks they use and the advertisers are not working together as efficiently or as effectively as they could be. We are going to target the publishers, arm them with the smartest, most innovative technology and help them work more efficiently with all of the advertising networks and advertisers that are available to them today.

To learn more about we're up to, you can visit http://www.RubiconProject.com.

If you have any comments, thoughts, ideas, insights, questions or concerns about the Internet advertising space, I’d love to hear your thoughts. Please leave your comments on this post.


PS - We are looking for great, A++ team members in the Los Angeles (Santa Monica) area. If you know anyone, please send them to: http://www.RubiconProject.com/hiring.html.

Labels: internet advertising, startup, the rubicon project

(Part 2 of a 5 part series: "So, you need to develop a product?")

I've learned that more process doesn't necessarily equal higher quality and it definitely doesn't result in increased productivity. The level of "process" required also depends heavily on the product, industry, maturity of a company and the size of a development team. For example, a dot.com should require less process than an enterprise software product. A dot.com is centrally hosted and can be changed anytime. On the contrary, enterprise software needs to be fully tested before a release because it typically affects a customer's business process. (Consumers are certainly more resilient to bugs than businesses.)

I've seen a lot of companies try to apply a "one-size-fits-all" development process to a wide variety of products. I don't believe a one-size-fits-all process exists. It is important to look at the type of product that you are building and apply the appropriate level of process to it, and adapt it over time as your business evolves. Particularly for consumer web sites, things don't have to be perfect all of the time. Try to find a good balance between moving fast and producing quality. We have all seen small, scrappy startups outpace venture-backed or established companies. I believe it is because they make speed their mindset and process takes a back seat.

At Starting Point (Startup 1.0), we didn't have a QA team. We had millions of users visiting our site on a daily basis. We considered our users to be our QA team. We would quickly build a prototype of a feature, launch it on the site and instantly get feedback and make changes. This helped us develop better features, and it also created an extreme sense of urgency for our engineers. Once it was out there, there was no turning back and the priorities instantly became clear. There was never a question as to what we should be working on because our users made it very clear to us. Further, there were also a lot of half-baked features that we would introduce that wouldn't gain any traction. We killed them right away and ultimately didn't waste time on things that we normally would have if we had fully baked it before launch.

Sure, some of the features broke often. It required us to always be on our toes. But, we were always gaining 10X more users because of our innovation and losing a very small percentage because of quality. As long as our new user rate far outweighed our lost user rate, we were satisfied. We outpaced many of our competitors (including some that raised 10's of millions of dollars in venture capital, while we had raised $0) and our search site ultimately became the 7th most popular site on the Internet.

Don't let the methods get in the way of results...


Next... Virtual Location, Location, Location (Part 3 of a 5 part series: "So, you need to develop a product?")

Labels: process, product development, Starting Point, startup

In today's high-tech, highly competitive world, more and more companies are describing their products or services using too many fancy, jargon words. This is particularly a problem in crowded markets where they are trying hard to differentiate themselves from their competition. Particularly with startup companies, they think that they have to use fancy words or names to make their products sound more sophisticated. Unfortunately, they wordsmith themselves so far away from describing what it actually is that they sell, that their customers or users need a jargon-decoder ring to understand what they do.

I'll take a simple example and "jargon it up" to illustrate my point. Let's take a bicycle. What if I were to describe a bicycle as:

"A multi-wheel personal transportation device"

If I were a motorcycle manufacturer trying to differentiate myself from a bike, I would say something like:

"A multi-wheel next-generation, high performance engine-driven transportation device"

Oh wait, that could also be a car, so if I wanted to differentiate the car, I would say:

"A quad-wheel, next-generation, high performance engine-driven quad-seat transportation vehicle"

Oh no, that could be an SUV, too... Well, you get the point. Describing something using a) jargon and b) competitive comparison could spiral out of control, quickly.

I was fortunate enough to learn this lesson years ago. My third startup, L90 (Startup 3.0), was in a very crowded, highly competitive online advertising market. We tried many different jargon-driven ways of describing ourselves. The more jargon our competitors used, the more we used, the more we used, then the more they used... What worked best was when we very simply described ourselves "The Premium Advertising Network". It was simple, to the point and it worked. Customers immediately knew what we did and we established a supreme perspective by adding one descriptive word, "Premium".

Ever since then, I've constantly used what I call the bicycle test: "We build bicycles". Anytime I think of ways to describe a new business, product or service I use this statement as a foundation/test to ground my thinking. The closer I can get to this statement, the better...

Because, if you can't simply say what it is, than what it is won't matter.

Throw away the thesaurus!

Labels: branding, internet advertising, L90, startup

Often times, companies get distracted by all the things that they -could- do, and don't focus enough on what they do best. This is especially true, and very tempting, for startup companies who can seemingly do "anything" because they are so flexible and agile. This is dangerous behavior. It results in a lack of focus and diluted brand equity.

You want to pick the #1 problem that you solve and be the absolute best at solving it. This way, when someone says "I have X problem" the default company everyone thinks of is yours.

Here are some examples:

"I have a database problem" = go to Oracle
"I have a networking problem" = go to Cisco
"I need to sell something on the Internet" = go to eBay
"My cell phone is dropping calls" = go to Verizon
"I need a portable music device" = iPod
"I need a photocopier" = Xerox (this worked for them years ago, then they started to dilute their core message and competitors quickly stepped in with a vengeance)

Sure, all of these companies do a lot of other things... But, each have positioned themselves as the "default" or "defacto" standard for solving a problem.

With startups, it is difficult to commit to just one thing that you are best at because:

a) You don't know if that one thing is always the right thing
b) You aren't confident that you truly are "best" at solving it yet
c) You try to cast a wide net so you don't miss out on any opportunities

Bottom line is that you have to do it. Pick something, stick to it and be best. Period.

My first company, Starting Point (Startup 1.0), was an Internet search engine and directory. We were simply the best metasearch engine on the Internet. When people wanted to "search the search engines", we were the place to come. At the time, finding stuff using search engines was difficult. You had to go to multiple sources before finding the results you were looking for. (It seems as though this trend is starting to repeat itself with today's search engine results). Starting Point was best at searching the search engines and, as a result, we quickly became the 7th most popular site on the Internet.

L90 (Startup 3.0), my third company, was the "premium advertising network". When companies wanted first class advertising placement and high-end marketing technology, we were the place to come. Sure, we lost out on some of the low end business, but in the end, that actually helped the business survive the dot-com bubble burst.

At Zondigo (Startup 4.0), my fourth company, we never really answered the question "what do we do best?". So, what we became best at was changing our business plan. As a result, we ended up doing a lot of one-off custom work for clients and never really gained traction in any particular area. The company eventually failed.

At my current company, StrongMail (Startup 5.0), we struggled with trying to stick to only one core message. We can solve so many different problems with email delivery ranging from performance to reliable email delivery to dynamic content. As a result, we weren't the default answer for companies when they said "we have X problem". So, we put a stake in the ground. We focused on proving that StrongMail is the best way to get email reliably delivered to the Inbox. We went out with the message that we are like "FedEx for email delivery" and now, when people have email delivery problems, we are their first call.

It takes confidence and discipline, but it is very important to be best at something. It will help your company stay focused, it will build confidence in your entire organization (especially your sales/marketing team) and most importantly, your customers/users will think to go to you first.

Labels: internet, L90, problem solving, product development, Starting Point, startup, StrongMail, Zondigo

No, this posting is not intended for your IT department.

I'm not a big fan of secrets, NDAs or the term "stealth mode". I've noticed that a lot of people are afraid of getting their ideas out into the public. They are afraid of their competition finding out about the idea, a bigger company trying to steal it or some other entrepreneur doing it first. So, as a way to protect themselves, they keep it a secret.

Well, my philosophy is that if you keep it from your competition, you're also keeping it from potential users or customers. In trying to hide it from the 5-10 would-be competitors you're also hiding it from thousands or millions of users and customers.

Sure, you need to take the proper precautions to protect your idea first (patents, copyrights, etc.), particularly with international patent laws. However, I say throw away the NDAs and get your ideas out there! Solicit feedback, see what users think... Maybe you'll attract partners you never thought of or maybe you'll learn that no one cares about it and you won't waste your time.

If you are so concerned that someone is going to move faster than you, then that is the first problem you need to solve. Whether it be now or later, it's an issue you'll need to address before someone else comes along to crush you. Why not figure it out early before you invest a lot of time, money and energy into a new product or business idea?

Up until my current company, StrongMail (Startup 5.0), I never had people sign NDAs. At L90 (Startup 3.0), we threw our new ideas out into the public while they were still in the planning phases. We saved a ton of time in development because we allowed our customers, prospects and even our competition to provide us feedback before we built anything. Yes, I did say competition. We were able to see how they were going to react, far in advance, and we were always able to one-up them in the end.

At Starting Point (Startup 1.0), an Internet search engine, I would put links up on the site to announce new ideas. They would go to pages that said "Coming Soon..." with a "Feedback/Comments" button. I tracked the pages to see how many people clicked on it and would read all of the feedback. That is how I decided how popular an idea would be. If it was popular, I got a lot of good user feedback. If it wasn't, I didn't waste any time planning or building it. Funny thing, though, is that I found our competitors running out and building features that were never used (likely because they saw it on our site). While they were wasting time building unpopular features, I was able to develop and grow faster with far less resources. This ultimately lead to Starting Point being the 7th most popular site on the Internet with zero outside venture investment and a tiny staff.

At my current company, StrongMail (Startup 5.0), we started off signing NDAs with everyone we talked to. I thought we needed to do things differently because we were an enterprise software company. Well, the result was that we just made it more difficult for people to learn about our products and it slowed everything down. We spent a lot of time shoving paperwork back and forth and negotiating NDAs with lawyers. All this before we even got to talk about our value proposition. Well, one day, I decided to push everything to the opposite side of the spectrum. We took our software and put it on the Internet free to everyone for viewing and download. It was a dramatic shift in philosophy internally. Within weeks, we shortened our sales cycle. In fact, we had deals closed in less than 48 hours (which formerly could have taken weeks) because we had prospects that were able to find and evaluate our product while our sales reps were asleep. Intangibly, I think it also exuded a sense of confidence and also gave prospects the perception that our product is easy to use. Even further, a former competitor evaluated our software online and was so impressed that they contacted us to strike an OEM deal, leading to a very successful partnership. Probably would have never happened, had all of our information been behind our "information firewall".

So, I say, tear down your firewalls and let the world know what you're doing! You'll be able to move faster, increase agility, reach more people and, if you're smart, stay a step ahead of your competition. If not for any other reason, but because once you put your idea out there it will force you to run like hell to stay ahead of the pack.

Labels: L90, NDAs, partners, Starting Point, startup, StrongMail

I was looking at the website of one of our (StrongMail: Startup 5.0) investors, Sequoia Capital, and I came across the following list of "Elements of Sustainable Companies". I think this list is spot on. I guess this is how a world-class firm like Sequoia Capital finds and invests in world-class companies such as Google, Yahoo!, Cisco, Oracle, Apple, Electronic Arts and Atari.

I have copied their list of "Elements" below and I have included a few additional ones of my own at the end.

Clarity of Purpose
Summarize the company's business on the back of a business card.

Large Markets
Address existing markets poised for rapid growth or change. A market on the path to a $1B potential allows for error and time for real margins to develop.

Rich Customers
Target customers who will move fast and pay a premium for a unique offering.

Focus
Customers will only buy a simple product with a singular value proposition.

Pain Killers
Pick the one thing that is of burning importance to the customer then delight them with a compelling solution.

Think Differently
Constantly challenge conventional wisdom. Take the contrarian route. Create novel solutions. Outwit the competition.

Team DNA
A company’s DNA is set in the first 90 days. All team members are the smartest or most clever in their domain. "A" level founders attract an "A" level team.

Agility
Stealth and speed will usually help beat-out large companies.

Frugality
Focus spending on what's critical. Spend only on the priorities and maximize profitability.

Inferno
Start with only a little money. It forces discipline and focus. A huge market with customers yearning for a product developed by great engineers requires very little firepower.



And here are my additions:

Be Scrappy
Emerging markets change rapidly. Companies need to react quickly, sometimes on instincts alone, to take advantage of a new opportunity. Not everything has to be perfect immediately.

Start Simple
It will only get more complicated. Start simple and do it best.

Handle with Care
Take care of your customers, they will help you build better products, recruit better talent and attract other customers.

Speed
Make fast decisions and figure out if they are right or wrong as quickly as possible. If you're right, you've taken a leap ahead, if your wrong, you didn't lost minimal time.

Customer, not Competition
Be a leader, not a follower. Companies often focus too much on their competition. Sometimes companies focus on the wrong competitor and follow them to failure. You'll never go wrong focusing on the customer first.

Labels: elements of sustainable companies, sequoia capital, startup, StrongMail

I have used the old saying "We're not saving lives here" many times when things
get too serious at work. However, I don't think I ever understood the full gravity of this statement until this past week when my dad had to have an emergency open heart surgery.

Through this experience, I learned a couple very valuable lessons that I would like to share with all of you.

My dad, Anthony, is only 51 years old and had never been in a hospital before this week. He had always received outstanding results from his physicals. So, you can understand how surprised I was to get a phone call from my family saying that they thought he was having a heart attack.

Dr. Silver was the first surgeon I have ever met. The night before the surgery, Dr. Silver was explaining the process and risks involved with open heart surgery to my family. As he was standing there explaining the surgery in a very serious tone, I couldn't help but think to myself "this guy saves lives." And he was about to save my dad's.

How can Dr. Silver stand there calmly and matter-of-factly explain to someone that they potentially have a 5% risk of complications developing from surgery and that they could possibly die? As he says "5%", I think to myself "that's not that much." Then he further clarifies "that's 1 in 20." Why does "1 in 20" sound so much worse than 5%? I know 20 people. (With marketing, I've always believed that absolute numbers have far more impact than relative percentages.)

People have different ways of consuming information. For me, I analyze it. Knowing nothing about medicine, the only way for me to break this down, in a non-emotional way, was to analyze it in context to what I know - starting companies. I tried to pretend the surgery was like starting a company. Starting a company involves a lot of risk assessment and risk management, so I tried to apply these generic principles to this very serious life and death information that I was receiving. I am certainly not trying to suggest that they are even remotely comparable. There is absolutely no comparison, but it was the only way for me to digest all of the information, sanely. Being an optimist, I thought to myself "there is a 95% success rate." If I had a 95% success rate in starting companies, launching products and selling, I would be, by far, the most successful entrepreneur ever to live. If only 1 in 20 of my products failed, or I only lost 1 in 20 deals that I pitched that would be remarkable. But, when I fail, people don't die. How do you assess the risk of failure when you only have one chance at success? I think about the things I have written in my blog, things like "make mistakes", "fail fast"... I sure hope surgeons don't read this blog.

Then, Dr. Silver explained that the way they decide whether to proceed with a surgery is relatively straight-forward: "Do the benefits outweigh the risk?" If the answer is yes, they proceed. After all of the tests, the analysis, the research, the statistics, the potentially fatal risk, the emotion... For these doctors, the go/no-go decision all came down to one thing -- focusing on whether the benefits compared favorably to the risk.

At work, it is easy to get hung up on all of the risks. It's easy to over-analyze. It's easy to get stressed. It's easy to fear making mistakes. And it's easy to fall into the trap of feeling like things are as serious as "saving lives." But, even for those who do save lives -- it seems as though it comes down to one simple test: "Do the benefits outweigh the risks?" If so, proceed and don't look back.

If it works for people who save lives, then it works for me.


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P.S. - This week, I learned a lot more about heart disease than I cared to. The information is astonishing. Heart disease is the #1 cause of death in the U.S. There are over 500,000 open heart surgeries performed every year. The number of cases continue to increase every year. There is still a lot we don't know about this disease, but we do know that there are ways to decrease some of the risk factors: eat healthy (low-fat/saturated fat, low cholesterol, low sodium), exercise / stay in shape, avoid smoking, decrease stress, get regular check ups.

In today's highly competitive and busy world, we are spending less time taking care of bodies and spending more time taking care of our careers, our houses and other material belongings. It seems as though many of us tend to take better care of our cars than we do our bodies. We take our cars for regular oil changes, we change brakes when they squeak, we wash them when they get dirty and we take them for regular tune-ups. Today, we have so many choices; requiring us to think and stress so much more. We have far less time and a plethora of conveniences; causing us to exercise less. Eating and sleeping have become more of a nuisance rather than a refueling; so we put more garbage chemicals, fat, cholesterol and preservatives into our bodies. I know this has little to do with this blog's topic of starting companies, but I learned a big lesson this week -- if you don't take care of yourself, you can't take care of anything else.
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Thank you to my dad for being strong and teaching me yet another valuable life-lesson, albeit a very difficult one for him. Thank you to all of my friends and family for their support during this difficult time for my family. And thank you to Dr. Silver, and all of the other doctors in this world, for saving lives.

Labels: business, cost benefit analysis, heart disease, risk assessment, saving lives, startup

I realize that I have not made a new posting in a few weeks. My apologies for the sporadic activity… I am in the process of relocating back from the Bay Area to Los Angeles, so things are a bit hectic at the moment. I hope to resume my weekly posting schedule as soon as possible.

I had some time to put together this post over the weekend… This is probably one of the biggest lessons I have learned throughout my past 5 companies.


Move Fast. Be Agile. Stay Focused.

I believe that a startup's biggest assets are speed and agility. The ability to execute at faster speeds and to rapidly adapt their course is what enables them to compete and to protect themselves from the big companies.

This can be both a strength and a weakness. Moving fast without focus can be dangerous. It can quickly move you off course.

"Getting Big"
Some of my companies have moved faster as they grow, some have moved slower. The tendancy is for companies to move slower as they get bigger; they add more processes, they have to keep more people "on the same page," there is less tolerance for "scrapiness" and real-time, active communication is a great challenge.

It all comes down to company culture and the team that you build. Moving fast definitely requires a team that has the "entrepreneurial spirit." The team must be empowered, must have flexibility to experiment and it should be "OK" to make mistakes. A culture where it is not "OK" to make mistakes puts everyone in CYA (cover your a**) mode, limiting their potential and speed of execution. I've found that people will allocate bigger buffers for setting expectations, they over-hire to make sure they have more then enough resources, they over-perfect things, they have more frequent and longer time-wasting meetings, they concentrate too much on the methods instead of the results and they over-process things. I always say if you aren't making mistakes, you aren't moving fast enough.

"If you want to double your rate of success, quadruple your rate of failure" (-- Thomas Watson, IBM Founder )

As a leader, encouraging this kind of behavior requires a lot of discipline and extreme trust in your team.

At L90 (Startup 3.0), an online advertising technology company, we moved faster and became more agile as we grew in size. The team was like lightning. Our meetings were quick and infrequent (if we were in meetings, we weren't producing). I would describe them better as "touchpoints" and "rallies" as opposed to "meetings." The focus was so clear that there was never a question as to what it was. It didn't require a detailed definition or a plan. In fact, I don't even think anyone ever had to ask what it was, it was just ingrained in our culture. There wasn't a new-hire orientation or weekly staff meetings that said L90's focus was X. Everyone was just running so fast towards it that it was hard to avoid the focus or the momentum heading towards it. It was an amazing thing to be caught in the middle of.

On the flip-side, at Zondigo (Startup 4.0), a wireless and voice applications company, we had a team of people that were running fast, however, we had a severe lack of focus. This was the first (and only) company that I had started with outside capital from day one. I believe this factor caused us to behave differently than my previous startups. It's like the clock started ticking from day one and we had to rush to find the "right" answer. Zondigo was an idea, a team and capital in search of a business plan. We were afraid to make mistakes. Meetings, meetings, more meetings... longer meetings... more debates... "what if..." "that won't work because..." We spent more time "talking" than "doing"... If something didn't work immediately the first time, we would try something new and switch our focus rather than staying the course and finding an alternative solution. It seemed as though we decided to change our focus every other week. Part of this was due to rapidly changing market dynamics (2001, dot-com crash), however, most of it was due to lack of confidence in our own plan. Interestingly enough, if we had stuck with our original plan, I believe we would have been much more successful. This lack of focus was my fault, I was not an effective leader for my team and we did not start the business on a solid foundation (vision, mission, goal, focus). Unfortunately, I didn't learn this lesson until years after Zondigo's exit.

There was a brief period of time at my current company, StrongMail Systems (Startup 5.0), that we went through a similar phase; lack of confidence in our plan, vision, focus. We had tried to change it multiple times and every time that we did, it would take us further and further away from our goals. Fortunately, this time I recognized the pattern and we were quick to correct it. We reverted back to our original business plan and it turns out that it has been, by far, the most successful for us.


So, what I have learned: Believe in your plan, let loose, stay confident and go go go!

Labels: internet advertising, L90, startup, StrongMail, Zondigo

The Kool-Aid Test:

1. Why do I need anything?
2. Why do I need yours?
3. Why do I need it now?

Put yourself in the shoes of your customers or users. If you cannot come up with very compelling answers to all three of these questions, you likely do not have a viable business. Answering only one or two of these questions won’t work. The more compelling the answer and wide-reaching the audience, the more successful your business will be.

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Examples:

B2C Example (for an eBay user):

1. Why do I need anything?
> I need to turn my junk into money.

2. Why do I need yours?
> eBay has the most reach.

3. Why do I need it now?
> I need to pay the rent.


B2B Example (for a StrongMail user):

1. Why do I need anything?
> I need to send marketing, e-commerce or e-statements emails to my customers to drive revenue or reduce costs.

2. Why do I need yours?
> StrongMail is proven to be the fastest, easiest and most reliable solution for email delivery. The world’s most demanding enterprises, such as Ticketmaster, Fox Sports/MSN, Intuit and Williams-Sonoma turn to StrongMail for their critical customer communications.

3. Why do I need it now?
> On average, 25% of legitimate business email goes undelivered and every day that I don’t fix it, I’m likely losing money or revenue potential.

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Most companies can answer #2 (Why do I need yours?) because they are so focused on being better than their competition. Some companies are good at answering #1 (Why do I need anything?) if they started a business that was driven by market demand (as opposed to new/cool technology). Few companies are good at answering #3 (Why do I need it now?) - what is the compelling event that will cause people to use it today?

For me, this test also serves as a strategic guideline for almost everything I do:

- business plans
- investor pitches
- sales pitches
- marketing messaging
- product management
- press/media calls
- etc.

Try it! Take your last business plan, the marketing/messaging on your website or sales PowerPoint deck and see if you have clearly provided answers to these three questions. If not, go back and update it – I bet you will find it to be much more effective!

Labels: entrepeneurs, internet, product development, startup, StrongMail

[Startup 5.0] StrongMail Systems, Inc. – Digital Messaging Infrastructure Company (incubated by Addante and Associates, LLC)

Age: 25 - 29 (present)
Time Period: 2002 - present
My Role: Founder
High Point: TBD

Here is a summary of my experiences to-date with StrongMail:

1. Relaxing
2. Incubation
3. Genesis
4. Go-to-Market
5. Spam Changes Everything
6. Venture Capital Funding
7. Relocation of Headquarters from LA to Silicon Valley / Culture Confusion
8. Stress
9. First-time Sequoia CEO Insecurity
10. Growth
11. Transition from CEO
12. Off to the Races

StrongMail is a digital messaging infrastructure software company. We provide turnkey digital messaging appliances for enterprises, service providers and software developers to send marketing, e-commerce, CRM and customer service email. Blue-chip customers such as Intuit, Williams-Sonoma, Fox Sports/MSN, Ticketmaster, Glaxo Smith Kline, Clear Channel, WebEx and Netflix turn to StrongMail infrastructure to bring enterprise-class reliability to their email systems. StrongMail’s software ensures reliable and timely delivery of their critical customer communications. Prior to raising $16M+ in funding from top-tier venture capital firms such as Sequoia Capital, Globespan Capital and Evercore Ventures, StrongMail was self-funded and cash-flow positive.


1. “Relaxing”
At the age of 25… After four back-to-back, high-action startup companies, it was time for me to take a rest. I decided that I was going to consult/advise a few companies and relax for a bit. I setup a nice little home office for myself and started dabbling with a few ideas. I started an incubator/holdings company called Addante and Associates to be the umbrella company for my ideas and consulting projects. I started dabbling with a few ideas around online advertising, search engines and other random projects. I developed a technology product called DHARMA (stood for Dynamic Hybrid of Advertising and Response Management Applications). It was intended to be a single solution for all-things advertising online (banner ads, email, content management, search advertising, etc.). This would later inspire the genesis of StrongMail. The LAST thing that I wanted to do was start another company. So much for resting!


2. “Genesis”
At the same time, I was consulting to the company who acquired Zondigo’s (Startup 3.0) technology as the foundation of their voice-recognition personal assistant product. During this time, L90 (Startup 2.0), was transitioning its technology group over to DoubleClick and many people from the L90 team were left behind, including Tim McQuillen, a great friend of mine and my co-founder at StrongMail. Tim was my right arm at L90. We initially hired him as our in-house recruiter. We needed to ramp up very quickly. Tim did such a great job of hiring the best, brightest people so quickly that our company infrastructure wasn’t keeping up. Our IT group was not able to support all of the new people we hired. As CTO, it was my job to solve this problem. So one day I had an idea… I walked up to Tim, put the MIS pager on his desk and said “congratulations! you are our new IT manager.” This interaction was about 20 seconds long. I had to run to catch a flight and was gone for the next couple of weeks. I came back and he had everything under control (even though he had no prior IT management experience). From that point forward, Tim was my “go-to-guy." Whatever the biggest, most challenging, most demanding, most important job we had at L90, I always turned to Tim. He went from recruiter to IT manager to technical sales… Then, he did such a great job in sales that we had to build up more infrastructure for our ad-serving and email delivery platform to support the increased demand. So, I put him in charge of our data centers and technical operations. He became a technical operations expert and did an outstanding job managing our entire infrastructure of over 750 computer servers which processed billions of advertising and email transactions per month. Companies such as Visa, Microsoft, Disney and Proctor and Gamble relied on this infrastructure to facilitate millions of dollars in revenue on a daily basis – so, needless to say, it had to work 100% of the time. This was one of the largest, most demanding IT infrastructures ever built, and Tim conquered it; a guy, who less than 2 years prior, was hired to be our recruiter. This proved to me that smart, motivated people, with a passion for learning, can accomplish anything if given the right opportunity. Tim is one of the smartest, most honest, driven and passionate people that I have ever met. This, combined with his expertise in managing high performance email systems, was the reason that I started my next company with him.


3. “Incubation”
I brought Tim into Addante and Associates and we worked on various projects together. Addante and Associates had a number of projects going at the same time. Including everything from one-off development consulting projects, to building an auction site for Ticketmaster (called TicketExchange, recently launched), to developing a search engine, email hosting service and an online photo slideshow site. Some ideas lasted months, others lasted hours. We used some of the proceeds from these consulting projects to fund the development of StrongMail, along with personal funds. StrongMail was originally supposed to be the email infrastructure for the DHARMA project. We needed an email delivery infrastructure solution that was easy to operate and maintain, cost-efficient, could scale to handle millions of email messages, address the needs of a wide-variety of customer demands and could later be expanded to deal with other forms of digital messaging (e.g. SMS, MMS, Instant Messaging, etc.) Our “little project” turned into something that had enormous potential and wide-reaching demand. From there, we focused all of our attention on StrongMail…


4. “Go-to-Market”
Halfway through the development of StrongMail, we realized that every company that was using email had the same needs and went through the same rigorous process of developing custom infrastructure. About 80% of any email application is the same. Companies were spending most of their time developing the plumbing behind their email applications and a very small percentage of their time on the business logic. We thought that if we could invert that percentage that we could advance the way the world uses digital messaging to communicate. So, we decided to focus on developing a turnkey, digital messaging infrastructure solution that we could supply to enterprises, service providers and software developers. With StrongMail software, companies could focus on their business logic and create innovative email applications without having to worry about the underlying plumbing. Now, finally, we would see advancements in the way people use email!

We invested the first $1 million to develop version 1.0 of the product, file patents, hire a small sales team and launch a marketing program to take StrongMail to market. It took us about 18 months to develop and prepare the product. Within 3 months of launching the product, we were cash-flow positive.


5. “Spam Changes Everything”
Not so fast… While we were getting the product ready for market, email broke. All of this stuff started happening around us – spam, phishing, regulatory compliance requirements (e.g. SOX, HIPAA, CAN-SPAM)… Everything changed. Now, email systems around the world were breaking. Receivers were trying to block and tackle spam and senders were trying to keep up with all of the change. At first, I thought this was going to destroy our business – email was no longer trustworthy. Then, the opportunity became clear. With all of the changes came new laws, new protocols, new industry standards and a whole lot of complexity. These things would require every company in the world to adapt their existing email infrastructure to deal with the changes, and keep up with the rapidly evolving requirements. It turned out that this drove even more demand for StrongMail. This became the immediate compelling event.


6. “Venture-Capital Funding”
As I mentioned earlier, the last thing that I wanted to do was to start another company. But, this opportunity was hard to ignore, that entrepreneurial itch came back… Ah, why not scratch it?

Since everyone in the world will need to make a choice between continuing to update their existing, cobbled together email infrastructure or move to a commercial solution, we saw an opportunity for someone to own the market for an enterprise-grade digital messaging infrastructure solution. We wanted to get there first.

So, we said if we can find the right partner, with the right terms, then we would go raise venture capital. I went up to Sand Hill Road looking for a “pile of money.” To my surprise, within 3 weeks we had a number of competing term sheets from well respected VC firms. It appeared that we were really on to something…

We decided to go with Sequoia Capital and Evercore Ventures and closed a $6M Series A round. Sequoia has a tremendous reputation, but it was also important to us to have a local (Los Angeles) VC as well. We really liked the partner at Evercore and thought that he would make an excellent addition to the Board and the company.


7. “Relocation of Headquarters from LA to Silicon Valley / Culture Confusion”
Shortly after closing our Series A, we realized that it was difficult to find enterprise software people in Los Angeles. So, we decided to move the company to Silicon Valley (with a little encouragement from Sequoia, of course). We made the decision quickly and assumed that we could move along, business as usual, with little impact to the company. The reality was that I had no idea what kind of impact this would have on the company’s development.

We moved into an office in Redwood Shores, we lost some good people because of the move, we hired a bunch of new people and started growing the company. A startup company is extremely fragile, I never realized this until we relocated the company. With the move, we had lost part of our culture and identity. We also did not anticipate the full bearing of the distraction it would create (setting up a new office, learning new hiring standards/benefits, restart on our hiring progress and customer networking (typically it's easier to find your first few customers close to you geographically so you can visit them face to face), looking for places to live, replacing the employees that we lost...) We underestimated the full weight of such a move and we never adjusted our plan to take all of this change into consideration. Additionally, we did not fully appreciate or understand the different nuances in the work culture between Los Angeles and Silicon Valley. With tech companies in Los Angeles, people show up to work in jeans, are laid back, work hard, have diverse work experience (beyond software) and simply focus on results. In Silicon Valley, people are much more competitive, have more focus/experience in software backgrounds and often focus more attention on the methods first, then the results. In the beginning, we hired a bunch of people based on the “LA profile” that we were used to, and ended up hiring the wrong people. It took us about 6-9 months to adjust to the cultural changes, put the right team in place and put the distractions behind us.

Looking back, if I were to do it all over again, I don’t think I could have avoided this adaptation – I just chalk it up as a great learning experience. The one thing that I would change, however, is the way that we arranged our office. We opted to go with an office layout that had executive offices on the outside and a mix of high (private) and low (open) cubes in a big, open space. Tim (my co-founder) and I were the first (and only) two people in the office. Since we were hiring and interviewing a lot, needing privacy, we setup shop in the exterior offices. We were moving so fast that we never left those offices and it set a pattern. As we hired VPs, they wanted offices and everyone else wanted to sit in the “high cubes.” This created a culture of “management” and “employees” which, in turn, created a “big company” type of communication environment.

I have spent a lot of time trying to foster a more efficient, open communication culture. Fortunately, we have a smart, adaptable team and communication continues to improve and it makes us stronger everyday…


8. “Stress”
Stress was always a foreign concept to me. One day, I remember asking my wife to explain to me what “anxiety” felt like. I would always move forward, adapt, let anything negative roll off my shoulders and kept focus on “the goal.” With this company, at the age of 26, I learned what stress was. Stress is what happens when expectations are not in alignment. I figured out why I learned stress at the age of 26. Up until that point, I don’t think anyone had set any expectations of me because I was always viewed as the “young kid, over-achiever who never knew what he -couldn’t- achieve,” so people simply let me go as far as I could and expectations could have been limiting. This time, there were a lot of expectations from my family, our team, investors and my co-founder, Tim. Expectations are fine, provided that you understand them and properly manage them. This was a lesson that I have since learned.


9. “First-time Sequoia CEO Insecurity”
Even though I had started many companies before, I had never been the CEO of a “Sequoia-backed company.” Since Sequoia has such cache, I thought that meant I needed to do things differently. So, I tried to do everything “by the book.” I listened to logic and reason instead of trusting my gut. I listened to everything that my Board told me to do. I hired people with lots of experience in enterprise software and I tried to do things like other Silicon Valley enterprise software companies. There was one problem with this – I never felt good about my decisions, because they were not my own, and it resulted in a loss of confidence. It made it even more difficult to trust my gut. This was the first time in my career that one of my companies was not doing well and I did not know how to handle it. I became more stressed, unhappy and frightened of failure – these were all feelings that I had never felt before with any of my companies. Before giving up, I owed it to myself to try one more thing – do it my way.

So, from that point forward, I promised myself that I would always trust my gut and my instincts –right or wrong- and move forward. I needed to feel confident in my decisions. That’s exactly what I did and almost overnight, the entire company was transformed – we started growing quickly, exceeding our targets and we have been seeing extremely positive results ever since. Interestingly enough, we ended up going back to exactly the same business plan that we started with – with some extra polish and improvements. And, most importantly, it all feels good.


10. “Growth”
StrongMail is my first enterprise software company. Traditionally, growing an enterprise software company is very different from a dot-com or an application service provider solution. Things seem to move a lot slower. With the web, you can change things everyday because it is always in your control. With enterprise software, your product sits at the customer’s site. So, you cannot change it all that often because it usually takes “work” on their side to update the software. So, most software companies only update their software quarterly. I would pull my hair out if we could only make updates 4 times per year, so I have been determined to change the dynamics of enterprise software. It involves changing the way people think, starting with our team. There are a few things that we have already done that accelerate the dynamics of enterprise software including turning our software into a turnkey appliance and creating “Live Updates” capabilities that let us change the behavior (frequently and often) of the software to adapt to industry change without any risk or work from the customer. The market has responded extremely well to this type of turnkey, auto-updating model and it will enable a new model for growth going forward. As a result, StrongMail is growing faster and stronger than ever.


11. “Transition from CEO”
Entrepreneurs need to ask themselves how they can best serve the company to move it forward. At different stages in the company, that might take on different roles and responsibilities. I believe a founder’s #1 job is to always think about how to move the company forward by running out a few steps ahead of everyone else and “pulling” them along. A CEO, on the other hand, needs to be constantly “pushing” the team to achieve the company’s immediate objectives while preparing it for what’s next. Additionally, entrepreneurs get tired. After putting in a constant 110%+ effort to build a company, a product and take it to market – things only continue to get more difficult. There are more people to manage, more products to support, more customers to satisfy and more investors to answer to. There comes a point where it is a good idea to bring in another “partner” to build the company with. Often times that is a CEO, in some cases it is a COO.

I transitioned from the CEO role and simply took on the title of “Founder.” I purposely did not assume a new title for two reasons: a) I wanted to set an example for everyone that titles are only what you make of them, and b) I could not fit myself into any one particular box – I describe my role best as “free safety.” One hour I might be spending time working with customers and partners, the next day raising capital, the day after that working on product vision and the next hour talking to the press.

Companies need to be careful when doing such a transition. Again, a startup and its culture are fragile, and entrepreneurs are fragile in the sense that they are self-motivated by their own emotions and inspirations. We probably did not do the best job that we could in making this transition. The CEO and I got along very well. We recruited him as our Executive Chairman and then slowly transitioned him into the CEO role. He went from Chairman to Interim-CEO to CEO. We were moving so fast that we did not do the best job of communicating the transition to the company, I did not do a good job of communicating to the rest of the Board what my expectations were, nor did I take the time to understand how their expectations would evolve. As such, it created a lot of confusion. Fortunately, again, the company is strong and resilient and we worked through it. In the future, I know not to take such a serious thing so lightly.


12. “Off to the Races”
It may have been a roller coaster ride getting here, but the company is well-positioned for great success. It is all about focus and execution from here. We are in a very large market with enormous opportunity. It is up to us to prove how far we can take it. We will need to adjust with the rapidly evolving market, we will need to re-invent ourselves from time to time to take us up another level, but that is all within our control. If we make the right decisions and execute them well, then we will succeed. If we make the wrong decisions, we will not move as quickly and risk failure. The important thing is to make decisions, feel confident about them, pursue them with “animal execution” and find out as quickly as possible if they are right or wrong. If they are wrong, we’ll have time to quickly adjust, if they are right then we take another step ahead of everyone else.

Today, the company is in high growth mode. As with any growing company, it will most certainly continue to be a roller coaster ride. It should be interesting…

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SNAPSHOT:

Venture Capital Funding: $16.5M+ total ($1M seed funding (self funded) + $15.5M (Sequoia Capital, Evercore Ventures and Globespan Capital))

Exit: TBD

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
LESSON(S) LEARNED:

Trust your gut: As an entrepreneur, you have to trust your gut. There is no “how-to” book for your company. You’re writing that book as you go along.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
BIGGEST…

…reason for success: Focus on the customer; thinking outside the box.

…mistake: Pushing too hard too early.

…challenge: Moving the company from Los Angeles to Silicon Valley; adjusting to the geographical cultural differences and rebuilding the company’s culture and identity.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
IF I WERE…

…smarter: I would have trusted my gut more and avoided the period of insecurity.

…dumber: We would not have stepped on the accelerator at the right time. We hit the market with the right product at the right time.

…to do it all over again: I would have stuck to the original plan from the very beginning; but would have “walked” before we “ran.”

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Now that I have brought you up to speed on the past, the future focus of this blog will be to share various trials, tribulations, thoughts, ideas, lessons learned, advice and personal strategies…

Next on deck... "My golden rule: Keep it Simple"

Labels: entrepeneurs, startup, StrongMail

[Startup 4.0] Zondigo, Inc. – Wireless and Voice Application Development Software Company

Age: 24 - 25
Time Period: 2000 - 2001
My Role: CEO and Founder
High Point: Partnering with Intel and having Craig Barrett (Intel CEO) present Zondigo’s technology as “the future”

Wireless was going to be the "next big thing." I left my CTO position at L90 (Startup 3.0) to start a company called Zondigo (genesis of name: "its-on-the-go"), a wireless and voice technology company. We developed software to enable developers to quickly and easily create and deploy wireless and voice business applications.

So, I did what any other opportunistic entrepreneur does when they want to quickly build a company to capitalize on an opportunity. I immediately raised some venture capital and then recruited the most experienced team I could find. The individuals we recruited had very impressive backgrounds. However, they did not function well together as a “team.” I missed, perhaps, the single most important company building fundamental – I had failed to consider the dynamics of how everyone would work together. Nonetheless, though it was a bit of a struggle, the individuals eventually learned to work together as a team. We accomplished great things – we signed Intel as a customer and partner, developed a very strong product and generated a fair amount of awareness. But, there was always something “missing” in the teamwork category that prevented us from going full throttle.

Zondigo was the perfect example of why all good companies must be “right idea” AND “right time.” We missed out on the “right time” part. The company was about 5 years ahead of its time (starting this company today would be the right timing). Zondigo was creating the types of innovative wireless applications that you are seeing in use today. We were creating applications similar to the wireless phone/texting voting system used by American Idol or the rewards program that Coca-Cola recently launched (MyCokeRewards.com). As a matter of fact, we even pitched the idea to Coke about 5 years ago.

Again, like most opportunistic entrepreneurs, part of our growth plan was to raise venture capital. As CEO, I spent 6 months on the road, full-time, trying to raise our Series B funding. This was in 2001 when the market was tanking and all VCs were gun-shy. All of a sudden, wireless went from being the “next big thing” to being the last thing on people’s minds. As a result, like many entrepreneurs, we changed our business plan about 10 times to “fit” what the VCs were looking for so that we could fund the company and survive. Big mistake. Finally, we convinced a firm to invest.

After a small celebration, a few days later, I realized that two very bad things happened while I was out raising capital: a) the market opportunity disappeared and b) we had mangled our business plan so much that the plan no longer made any sense. But, the VCs liked it! So, for the first time at this company, I acted unlike other opportunistic entrepreneurs and I made a very unpopular decision – GIVE THE MONEY BACK!

So, we did just that. A couple of months later, we sold the technology and the rest was history.

An entrepreneur’s most valuable asset is time. You can always raise money, build things and find people – but you can never raise more time. Therefore, for true entrepreneurs, it is not about ROI, it is all about ROT (Return on Time).

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SNAPSHOT:

Venture Capital Funding: $1.25M

Exit: Technology acquired

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
LESSON(S) LEARNED:

Teamwork is critical: A startup company, like a baby, is fragile and impressionable. It is important to bring in the right people at the right stages. Personally, in the very beginning stages of a company, I think it is important to find young-thinking, hungry, passionate, quick learners who are willing to make mistakes, work as a team and constantly learn and adapt. I’ve learned to put experience far behind the rest of these traits.

Believe in YOUR business plan: If VCs (or anyone else, for that matter) had all the right answers, they would be starting their own companies – they’d certainly make more money that way. At the end of the day, right or wrong, you need to believe in your business plan and execute it to its fullest potential.

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BIGGEST…

…reason for success: We did not let emotions cloud “market judgment.”

…mistake: Raising capital too early.

…challenge: Getting a bunch of smart, experienced individuals to learn to work together as a team.

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IF I WERE…

…smarter: I would have been more careful about how I built the team and adapted the business plan.

…dumber: Instead of giving the money back and moving on, I would have wasted a bunch of money and time.

…to do it all over again: I would have secured a customer first and validated the market timing before rushing to build a company.

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Next on deck: Startup 5.0… ”I’m just going to chill out for a bit… (OK, for a month…)”

Labels: L90, product development, startup, voice application, wireless, Zondigo

[Startup 3.0] L90, Inc. – Premium Online Advertising Company

Age: 21 - 25
Time Period: 1997 - 2001
My Role: Chief Technology Officer, Technology Founder and Chairman, Advisory Board
High Point: $500 million market cap; 3,000+ customers; 8 billion transactions per month; 65% Internet reach

Warning, this will be a long posting. I am extremely passionate about what we accomplished at L90 in a short period of time with very little resources.

I can sum up three of the most action packed, exciting years of my life in 14 phrases:

1. Bootstrap
2. 7th Horse in a 7 Horse Race
3. All-Star Team
4. Rapid Growth and Dominance
5. Patent Lawsuit
6. IPO
7. Global Expansion
8. Acquirer
9. Leaving
10. Personal Lawsuit and Litigation
11. Acquired
12. SEC Investigation and Securities Fraud
13. Jail
14. Liquidation

After developing one of the most popular sites on the Internet and inventing a technology platform that enabled companies to grow their user base and generate revenue through online advertising, I felt it was time to take these experiences to market on a much larger scale. The next company was an Internet advertising and technology company called L90, Inc. L90 was the premier advertising network on the Internet. We had over 3,000 customers, delivered over 8 billion e-mails and online advertisements per month and reached over 65% of the Internet population through our technology (adMonitor). We focused on Global 2000, blue-chip customers such as Microsoft, Visa, Disney and Proctor and Gamble. At its peak, the company had hundreds of employees, offices around the world, and produced over $100M in total revenue. All of this was supported by the technology platform (adMonitor) that I invented at ReaXions, Inc. (Startup 2.0). We eventually took the company public, raising $112M in an IPO led by SG Cowen.

1: “Bootstrap”
A handful of desks, a handful of passionate people and the “money machine” (a.k.a. the fax machine); that’s how it all started. Our top priority was always clear: get the next order. The very first version of our ad-server software (adMonitor) was being run on my personal desktop computer and plugged into my ISDN line at home. One of the very first ads that our software delivered was promoting the launch of a brand new product from Microsoft called “Outlook” and it was placed on a very small website called eBay. A few months later, eBay called us to say that they were pulling all of the advertisements from their site because they were distracting and they didn’t want people to leave their site. I said “I don’t understand… that doesn’t make any sense… how will you make money?” I guess they found another way… Starting with companies like eBay and Microsoft, we built our business one customer at a time.


2: “7th Horse in a 7 Horse Race”
We were not the first to build an ad-serving technology platform. In fact, we probably had hundreds of competitors including seven that were either very well funded with significant venture capital or publicly held (e.g. DoubleClick, 24/7 Media, AdForce, Engage, Flycast). They had products that were already in the market, piles of cash, tons of customers and revenue, seemingly endless resources and lots of employees. We had customers and revenue. I remember meeting one of our larger competitors. They were interested in acquiring us, so I flew up to Silicon Valley with our CEO. I was 21 years old at the time. I walked into a big, flashy, modern office with tons of people running around (it seemed like they had a “money machine” on every desk). I walked past a large glass window that housed hundreds of computer servers with glowing, flashing lights; which ran their ad-serving technology software. Their server room was larger than our entire office and our entire ad network was being run on the exact same type of computer that their receptionist used as her desktop computer.

I sat in a meeting with the two guys that ran their technology teams (they were old enough to be my dad). One guy was the creator of Microsoft Excel and the other created the first network for IBM. (No, that’s not intimidating for a 21-year old on their first trip to Silicon Valley) They proceeded to tell me how they had an engineering staff of over 50 people (and rapidly growing) and millions of dollars invested into infrastructure. I had zero engineers, zero infrastructure, zero venture capital and a desktop computer running our ad-serving software on an ISDN line.

On the flight back, our CEO asked me what I thought. I said “we’ll beat them.” To be honest, I don’t know where my response came from because the truth was that I was very intimidated and had no idea how we would beat them. Either the pressurization in the plane was off or my gut was trumping logic.

Two years later, we were unstoppable, taking their customers and everyone else’s. They ended up going out of business shortly after our IPO. DoubleClick was the only one in front of us and we were stopping at nothing to beat them. And, we were very quickly chipping away at their customer base, too.

3: “All-Star Team”
We won because we had the best team. Period. Every person on my team was A-class. We didn’t hire resumes and experience, we hired smart, good people who wanted to be entrepreneurs. Everyone was a “friend of a friend of an L90 employee” and it made all the difference in the world. In fact, many people had no prior experience at all in the jobs that they were hired to do. But, every one of them rose to the challenge and ended up mastering their jobs. No one wanted to be the first person to leave the office, everyone took an enormous amount of pride in their work and no one wanted to let their “friends” (co-workers) down so they always jumped in to lend a hand.

Sometimes people tell me that this was the “dot-com days” and everyone was just trying to get rich. I refuse to believe that. I think our team was second to none and it showed in everything that we did. I think it is evidenced by the fact that many people from our team went on to be very successful; some are successful entrepreneurs, some are holding very high level executive positions at successful companies and some started non-profit/charity organizations.

A team like that is addictive, I have been in rehab, dealing with withdrawal ever since.

I’m proud of all of them. We had fun; worked hard and played hard.

4: “Rapid Growth and Dominance”
We refused to lose. We took it personally. We grew from a handful of employees to hundreds of employees worldwide in just a few years and the winning attitude was never diluted. There were a lot of growing pains, but there was no obstacle too big for us to conquer. In fact, the bigger the obstacle, the more pumped up everyone got. The interesting thing is that we never looked at our competition, we never did any kind of competitive analysis on the products --- we wanted to be leaders, so we acted like leaders – we focused on our customers, not our competition.

5. “Patent Lawsuit”
We were on the IPO track and our #1 competitor (DoubleClick) filed a bogus patent-infringement lawsuit right before our IPO. They were trying to block the success of our IPO. It was ugly. We had lawyers everywhere; digging through files, reviewing all of our emails and mounds of paperwork. This was a multi-million dollar lawsuit and it could have crushed our business. But, we never let it phase us. We did what we needed to do, adjusted and moved on. In fact, we were so agile that we were able to readjust major plans, literally overnight. We thought that DoubleClick was going to file the lawsuit in Virginia because we were planning to open a new data center there. One night, we hopped on a red-eye flight to Virginia and moved millions of dollars of heavy, high-end computing equipment out of Virginia in less than 24 hours and redeployed it to Austin, Texas. In the end, we settled the bogus lawsuit in our favor.

6: “IPO”
Business as usual... While the prospect of an IPO was exciting, we never let it consume our minds or let it affect our behavior. It was just another step towards conquering our market. There were a lot challenges leading up to it (e.g. raising capital, underwriters backing out, extreme criticism, patent lawsuit from our competitor, etc.) In fact, we even had to change our name (original name was Latitude90) because Latitude Communications was going to sue us because our names were too similar. So, almost overnight, we became “L90.” To top it all off, on the day of the IPO, the market took a big dip (January 21, 2000). Even through all that, we had a very successful IPO - the offering share price went from $8 per share to $15 per share and we raised $112 million. The market capitalization eventually peaked at almost $500 million (half a billion dollars!)

The IPO came and went, we had parties, we celebrated and took a deep breath. Then, we went back to work – harder and faster than ever. I believe our entire team bought their friends and family stock. I have yet to talk to anyone who did not hang on to it well-after the IPO. That either shows extreme passion for the potential of the company or poor investment advice – I like to believe it is the former.

7: “Global Expansion”
We had offices everywhere in every major city in U.S. (Chicago, New York, Miami, Detroit, San Francisco, Los Angeles, etc.) I spent a lot of my time traveling amongst all of the offices. We were also expanding overseas which were exciting times. The most important thing that I learned as we were expanding was that it is extremely important to learn the nuances of the different cultures in different cities in order to hire the right people. New Yorkers (i.e. aggressive) are very different than people from Los Angeles (i.e. laid back) – if you hire a laid back person in New York, they’ll get run over…

8: “Acquirer”
There was a period of time where I had a stack of business plans on my desk of companies we were considering acquiring. I was 23 years old, I barely knew what a business plan was… yet, I found myself evaluating business plans put together by experts, investment bankers and lawyers. What the hell did I know? To me, it was simple, does this move our business forward? If so, buy them (at a reasonable price, of course). Funny thing, we were moving so fast that there were few companies that fit this very simple criterion.

9: “Leaving”
During our IPO process, one of the common questions was “What if Frank gets hit by a bus?” While many told me that I should have been flattered, I took this as an extreme insult. How could we be a real company if it is perceived that one individual is so critical and such a risk to its ongoing operations? I viewed that perception as personal failure. From that point forward, my #1 goal was to eliminate that perception and make it so that the company did not need me. I succeeded. I was satisfied that I achieved my goal, then, there was a period of extreme sadness. At that point, I knew that I needed to move on. My job was done.

I wanted to stay very close to the company, so L90 invested in my next venture (Startup 4.0: Zondigo) and I became Chairman of the Advisory Board, found my replacement and moved on. This was one of the most difficult things that I’ve ever had to do. My team felt like I was letting them down, they were nervous, scared and confused. During that time, some of them had very sour feelings over my leaving – I think they felt that I abandoned them. I believed that I was doing what was best for them and what was best for the company – they needed to grow and they all stepped up to the challenge. It turns out that they saw something that I didn’t. As you’ll come to learn in the next few paragraphs, everything changed after my departure. I doubt it had anything to do with my leaving, I certainly wasn’t anything special. I think it was just bad timing, but I still often wonder what would have happened if I stuck around. It is, perhaps, the only decision I’ve ever gone back and questioned.

10: “Personal Lawsuit / Litigation”
One day, everything got weird. I was planning to sell my stock in the company and I came to learn that there was a problem with my stock. After getting the run around from the CEO, I was advised to take action to remedy the situation. I ended up having to file a lawsuit against the CEO and the company. This was the first and only personal lawsuit that I had been involved in. How could I sue the company that I was so passionate about building? It didn’t make any sense to me – I was very confused, the Board was very confused… I was planning my wedding at the same time that we were in litigation. It got to the point that I was worried that a process-server would show up on my wedding day with a counter-lawsuit. It turned out that the CEO wasn’t honest with anyone, including myself and the Board. He was trying to hide something. He is now in jail (details to come in the next few paragraphs). After he was fired, I ended up settling the lawsuit with the company and now have great relationships with the people who were once “sitting on the other side of the table”. Funny how things can change so quickly...

11: “Acquired”
After my departure, L90 sold the technology platform (adMonitor) to DoubleClick. It was a dumb move and it did not make any sense. How can you run an ad-network without an ad-serving technology? Turned out that the CEO had his own agenda and he was able to convince the Board that this was the right thing to do. There were later suspicions that he pushed to sell the technology so that he could cover-up some of his wrong-doings. I brought my concerns to the Board; however, we were in litigation over my personal lawsuit, so I did not have much influence with them. The acquisition went through and that was the start of a terrible chain of events.

12: “SEC Investigation and Securities Fraud”
I met the CEO for lunch at Jerry’s Deli in Marina Del Rey, CA, across the street from L90’s headquarters. My purpose for the lunch was to confront him on the things that “didn’t seem right.” Halfway into lunch, he said “Are you wearing a wire?” I said “No, what are you talking about?” he said “lift up your shirt, I want to see that you aren’t wearing a wire.” I was so confused... The guy that I used to go surfing with on weekends, considered a friend for years and someone that I had an enormous of respect for, had turned into a completely different person right in front of my eyes. Huh?

One week later the SEC announced that they were investigating him for securities fraud. What the hell happened? Who was this guy? It all started making sense. To this day, I am not angry with him (even though everything that we had all worked hard for was being destroyed) and I don’t think he was a bad person, I think he simply made some very poor decisions. He was fired and a few others resigned from the company. I think there were some very good people that were caught in the cross-fire and now the CEO and a few others are in jail.

I helped the company’s Board to clear the company from the mess and cooperated with the SEC. Testifying at the SEC, even when you are one of the “good guys”, is not a good feeling and I hope it is something that I never have to experience again. All I can say is that walking into a dark room with gray walls and sitting in front of a bunch of government officials and a team of lawyers firing questions at you for hours is not a comforting experience.

13: “Jail”
It is sad to see good people go to jail, even though some of them made some very bad decisions. Maybe they truly are bad people and I am just the ultimate optimist, but I have trouble accepting that. I understand why it needs to happen. Many people lost a lot of money, including myself and many of the hard-working, passionate people on my team. I just simply wouldn’t wish that on anyone, and I feel especially bad for their families. I’ll probably never know the whole story on who did what, why and to whom --- but I still have a lot of respect for some of the people that had to go to jail over the whole fiasco. I hope, for them, that they are able to bounce back and when they get out that they do something good for the world.

14: “Liquidation”
The SEC investigation and the acquisition of L90’s technology by DoubleClick destroyed the future growth potential of a very good company. This was the opposite of your typical “dot-com bubble bursting” story. L90 was a great company with a good business model (profitable before any venture-capital funding and the IPO), it had a lot of money in the bank and it ended up being shut down (by choice). The advertising services group was sold to AskJeeves and then the company began a liquidation process to give tens of millions of dollars in capital back to its shareholders. The story is still not over yet. The company is still technically in business, awaiting the final stage of the liquidation.

Wow. I don’t know what to say… I am not happy with the way things ended, as I don’t think it reflects what a great company we had created, but I wouldn’t trade anything for all of the positive experiences that came from it.

Today, at my current company, StrongMail Systems (Startup 5.0), I am still working with some of the superstars from L90. In fact, my co-founder (one of my greatest friends), Tim McQuillen, and I met at L90 (more on this later...).

I will never forget my experiences at L90 – I was inspired every day by the team that we had created. It was unfortunate that, for many of them, their hard work was tarnished and their dream was destroyed. Sometimes I still feel that I let them down by leaving when I did – had I not left, I could have potentially prevented the mess that was created after my departure.

Today, a company like L90 would be thriving with the success of online advertising.

To the team at L90, you were all superstars and I hope that you all go on to achieve your dreams in the future!

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SNAPSHOT:

Venture Capital Funding: $2M angel (Initial), $12M (total)

Exit: $112M IPO, led by SG Cowen; technology acquired by DoubleClick; advertising services group acquired by AskJeeves

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