Randall Howard

How to Get Rich Quick With a Startup?

It’s surprising how often an aspiring entrepreneur or young technology executive has tried to pitch me with that implicit proposition. And, guess what? When I hire executives, invest in a company or otherwise have to work on the same team, such “get rich quick” rhetoric suggests the best course is to steer well clear.

The notion that a real business, with lasting value, could be built in a few months or years seemed to take hold, like much else, during the heady “tech bubble” days of the late 1990’s. I can recall one such aspiring entrepreneur telling me that “we should be able to flip this business in 18 to 24 months”.

Why is such hubris a problem? For starters, it shows a healthy naivety around the amount of real work and time it takes to build a great business. Of course, there may be exceptions. Against the odds, some people winn the lottery. Likewise, in normal times, some seem to be able to build and cash out in record time. In my book, that’s largely serendipity. In addition, this short term perspective, almost always accompanies inexperience around the twists and turns that cause most business plans to take longer than originally anticipated.

And, more fundamentally, I got involved in software and technology originally as a passion. I remember saying in my early days that working in computers was “so fun, that I didn’t need to be paid for it.” Every company I’ve ever started, worked with or invested in has become a personal passion of mine. I strongly believe that long term success is rooted in passion more than money. Furthermore, it is my personal experience that almost every long term successful technology entrepreneur has shared this characteristic.

For those set on the notion of “get rich quick”, there’s still the lottery or Texas Holdem, the probabilities notwithstanding. But, building a great business almost always takes a tremendous investment of time and effort.

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ARISE Fair Sun …

The reference to Romeo and Juliet was apt when last week I had the pleasure to meet with Ian MacLellan, of ARISE Technologies (TSX:APV)

The Founder of ARISE, Ian is now Vice Chairman and Chief Technology Officer and I met him just after a great quarterly release to the public markets.

Having worked tirelessly for close to 12 years, Ian is a living example of the qualities we recently outlined in a set of blog posts entitled “Entrepreneurial Toolkit”:

1. Fearless Passion
   
2. Don’t Drink Your Own Bathwater
   
3. Embrace Change
4. Taste the Cash Burn
5. The Power of Two (or Three)

First of all, rarely have I seen someone more passionate about a business vision than Ian. His company vision, almost a mantra, is to “take solar mainstream” and that hasn’t changed since Ian first explained ARISE to me many years ago. In fact, I believe it was the founding vision way back in 1996. Indeed, even the company name itself, shortened from “Appropriate Renewable Intelligent Sustainable Energy” is a passionate embrace of Ian’s vision.

Having pioneered in the solar industry long before Green Technology was fashionable as it is today, particularly in Canada’s challenging technology funding ecosystem, meant that the company was forced to run on fumes for many of those formative years. By watching cash burn like a hawk and by being able to sell and articulate the vision clearly, Ian was led the charge to fund those early days. Indeed, Ian spent significant time in fund raising mode for many of those years. In our investment climate, this is something almost all early stage technology companies will easily relate to. I would credit Ian with more persistence in riding through a challenging funding environment than almost any other entrepreneur I can think of.

As an early ARISE advisor and investor, it was instructive for me to watch Ian lead a charge which necessitated navigating through a number of key stepping stones to attain their current status as an advanced solar manufacturer. Now they produce both proprietary PV solar cells in Germany and refine specialized solar-grade polysilicon feedstock in Waterloo. As part of the means to an end, ARISE acted as a distributor/reseller of solar components. As well, they honed their brand and expertise by integrating solar systems into a number of, primarily residential, projects. Although this potentially diverted much energy and focus, it was necessary to generate awareness, cashflow and to be ready when the market was ready for ARISE to ramp up production of their proprietary products.

Today, having raised over $100 million in financing, which is in itself a rare feat in the cash-starved Canadian technology ecosystem, ARISE is growing at breakneck speed. They will transition from effectively a pre-revenue state to a projected over $40 million revenue from commercial solar production during 2008. Such rapid market expansion requires scaling of all aspects of the business, including significant increases to their management footprint. Unlike many founders, Ian was ahead of the curve, both in recruiting A-team talent into CEO and CFO positions, but also refining his role into a long term role where he can have the highest value to this growing Canadian success story. Other entrepreneurial founders could do well to learn from people like Ian. Although it’s sometimes hard to “check your ego at the door”, building great companies is all about great teams as imposed to superstar individuals.

Kudos to Ian and the great team at ARISE. We’ll be watching this Canadian-headquartered global success story closely.

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Entrepreneurial Toolkit #5: The Power of Two (or Three)

As an investor, the most important lesson I’ve learned over the years is that great companies are built by great teams. Furthermore, great teams rarely are one superhuman “A” player surrounded by a supporting cast of “B” players. And unlike the Borg Collective which seeks to “… add your biological and technological distinctiveness to our own”, great management teams need to have a set of complementary, yet overlapping, skill sets.

Most of us know the example of how Steve Wozniak the brilliant hardware designer teamed up with the uber-persuasive Steve Jobs to create Apple, an iconic Silicon Valley startup success story. While that partnership didn’t last forever, it’s pretty clear that the fusing of the talents of these two brilliant individuals directly led to Apple’s early success. I encourage you to read more in a “must read” book  I’ve recommended earlier, Founders at Work.

Jim Balsillie

Mike Lazaridis

Here in Waterloo, Research in Motion (RIM) would not be today’s superstar company unless Jim Balsillie joined engineer, founder, Mike Lazaridis. Until Jim joined Mike in the early 1990’s, RIM had long remained a typical engineering oriented company doing about $500 000 annual revenues from 20-odd products. Although Jim could never have built the products, his introduction to the management brought the marketing and financial drive and focus that ultimately led to the Blackberry led success story we know today. Rather than the cult of the individual, once again it is the power of this amazing duo that built RIM.

What is unusual about this case is that both Mike and Jim share the title CEO, billing themselves as co-CEOs. Perhaps more companies should consider this approach?

Reed Hastings

Back in 1995, as MKS was starting to look to the capital markets, one of my personal inspirations, Reed Hastings CEO of Pure Software (and now Netflix), observed that “Pure Software has built a team where any of the senior management team could be CEO”. I certainly took that approach to heart when building MKS’s great team and it has been an important insight ever since.

For example, Chuck Bay, who was Pure’s CFO at the time has subsequently gone on to be CEO Broadbase Software (acquired by KANA) and President and CFO of Spatial Technology. Rob Dickerson, who was VP & GM of Developer Tools for Pure, a key operationally focused executive, subsequently became CEO of Faves and President, CEO of Pacific Edge Software (acuired by Serena Software) and EIR at Ignition Partners. These are just two data points illustrating the calibre of the team Reed built at Pure Software.

At MKS, we managed to build an amazing team, especially in the mid-late 1990’s with superstars like Ruth Songhurst, Eric Palmer, Tobi Moriarty, Michael Day, Frank Pfeiffer and Paul Laufert. It was a great mix, with stars from Canada, US and Germany. As well, almost uniquely, we had a balance of the genders. It is a big disappointment to me that I continue to see how rare that is.

To round out our discussions, anyone wanting a deeper grounding in this important topic should read the book Co-Leaders: The Power of Great Partnerships by David A. Heenan and Warren Bennis, John Wiley & Sons, 1999. With the thesis that great organizations need “more than a visionary CEO”, the bookoutlines the rare, but critical, role building a strong management team takes in building exceptional companies.

To summarize this book, in the authors’ words, “Co-leadership . . . is a tough-minded strategy that will unleash the hidden talent in any enterprise. Above all, co-leadership is inclusive, not exclusive. It celebrates those who do the real work, not just a few charismatic, often isolated, leaders who are regally compensated for articulating the oranizations’ vision”. Although, like many it has taken me years to learn this valuable lesson, I couldn’t say it better myself.

There are lots of detailed case studies, from companies in many industries, with a few key lessons for co-leaders, including:

1. Know thyself
2. Know thy leader (check your ego at the door)
3. Avoid titanic clashes (!)
4. Find out what the enterprise needs and deliver it superbly
5. Lead as well as follow
6. Know when to stay put (control the temptation to star)
7. Know when to walk away (learn when to say no)
8. Define success on your own terms

To reiterate, great companies are almost always built by great teams. As organizations and markets get more complex, I believe co-leadership will become increasingly the norm. For smart and successful people to control their egos takes a lot of maturity. Furthermore, the ideal team depends, in large part, on the stage and growth of the company. As I’ve learned, great teams take a lot of work to build, but can also dissipate over time. Indeed, they are a rare and fragile flower, to be cultivated constantly.

Nonetheless, it is definitely worth any entrepreneur’s full time and attention to unleash the power of the team - whether a gestalt of two, three or even more remarkable individuals.

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Celebrating the Numerically Auspicious Flavius Octavius

Definitely outshining the Olympian brouhaha, today we gathered to celebrate the birthday of hitherto little known Flavius Octavius. We were honoured to have a reading by the eminent historian and raconteur, Peter Scott, who narrated a gripping saga, reflecting his very latest research. An excerpt of that esteemed work by Herr Doctor Professor Scott follows:

Flavius Octavius
Born 641
Cardinal 662
“anti-pope” 669 in Oc, France
Died 721

well known for his bulls, which had many issues
father was an ocarina maker and player
mother, an occultist (also took in laundry)At the time of his papacy there were several antipopes - challengers to the papal authority in Rome - besides Octavius of Oc, there were Sardonicus of Avignon, Herbivorus of Seville and Randy of Burnham on Crouch.

Octavius’ deeds are the stuff of legend.
He is venerated in Oc today as the patron saint of stray cattle. It is said that his bulls often escaped from their enclosure.

On one famous occasion, when a most large and ferocious bull was terrorising the honest citizens of Oc, the saintly Octavius, still in his ceremonial robes, caused his bearers to lower the palanquin in which he was riding. He produced an ocarina from a concealed pocket and, fearlessly facing the raging bull, played an air of such melodic sweetness that the bull became totally incensed. After the merest, most cursory pawing of the earth, it charged the courageous cleric, who turned and fled, His only escape route was down a very narrow alley and Octavius was not a thin, ascetic pope. In fact, he was a substantially built pope (the expression ‘enbonpoint’ comes to mind). However, although he became tightly wedged at the narrowest point of the alley, he continued to play his ocarina. (There is scholarly disagreement concerning whether this was a sign of his courage or the result of all the wind being forced out of his lungs by his confinement.) The bull, his enthusiasm for goring portly popes no wit diminished, pursued Octavius until he too, became wedged. Thanks to a subtle discrepancy in their respective girths, the bull was brought to a halt within snorting distance of the pontiff.

This stalemate was maintained until the pope’s own Corsican Guards were able free each of the wedged, although to do so, they had to wait for the better part of five days until, first the bull, and then the pope had lost sufficient avoirdupois to allow for the careful application of ropes and wedges.

On the eighth of August every year, Oquians re-enact this famous legend with the famous ‘Spectacle du Taureau.’ Be the weather cool or hot, young and old alike don heavily padded suits under clerical robes and parade at noon in the streets, all playing the well-rehearsed ‘Melodie du taureau‘ on their ocarinas. At an unspecified moment a bull is released, and, like the Bulls of Palmplona, it pursues the crowd. But do not be alarmed, gentle listeners, this bull has been so well fattened that it can barely manage a slow, swaying trot.

The same bull makes a second appearance in the town later that evening garnished with Dijon mustard, flavoured with garlic and various ‘herbes de Provence’ and accompanied with Oc’s special edition red wine, ‘Ruelle Entroite du Pape’.

I hope that this little historical excursion has not intruded upon your enjoyment of tonight’s celebration, and that you will be truly edified by the shining example of courage of Pope Flavius Octavius of Oc, who, on this day, 1300 years ago, triumphed in a tight spot.

Now, everyone please exchange the traditional Oquian greeting, Merde des Taureaux!”

Peter Scott, Elora, 8 August, 2008

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Brands, Trust and The Fine Print

In today’s mail I received a tantalizing offer from Bell Canada Long Distance. It promised the ability to “Call the world without limits” by delivering “Unlimited World Long Distance Plan $29.95/mo.” With calls to over 50 countries plus Canada and USA included, on the face of it, that’s a pretty attractive offer.

But, I’ve learned that, when dealing with the telecoms industry whether landline or wireless, it pays to read the fine print. And, sure enough, in very small type at that bottom it says “excludes calls to mobile phones and wireless devices.” Sadly, when I call overseas, where mobile penetration is generally at or even above 100 mobiles for 100 population, over 95% of my calls are to mobile phones. So, far from being unlimited, this plan is really a bit of a “bait and switch” which might well increase my calling costs. In the monthly billing cycle, the arrival of the first bill post sign up would almost certainly make any customer’s blood boil. At a macro level, I’m really curious as to what such deceptive marketing campaigns say about customer relations and basic trust in the 21st century?

Also this week, Canadian Minister of Industry, Jim Prentice, dialled up his earlier suggestion to mobile operators Bell and Telus to reconsider their ill-conceived plan to charge customers for incoming SMS text messages, including SPAM. Minister Prentice, after meeting Bell CEO George Cope, publicly raised the spectre of increased wireless regulation in Canada as a way to increase pressure for the pair to see common sense. Clearly, for companies that act in the public interest, using the police-like powers of regulation to curb those who stray from this idea must strike a delicate balance. Again, is this a trust issue? Are Bell and Telus exhibiting corporate greed or simply strategic incompetence?

Speaking of trust, a week ago a good friend lent me a fascinating book called 24 Days, by Rebecca Smith and John R. Emshwiller, Harper Collins, 2003. The co-authors, two Wall Street Journal Reporters, lay out a factual and totally rivetting chronicle of how the once “great” company called Enron went from being on top of the world into a death spiral in little more than three weeks. To quote the authors, “so much of Enron’s energies were devoted … to exploiting accounting rules to make profits out of thin air. So much brainpower went into temporary gains rather than into building projects with lasting value. By any means, was the Enron way. … Service to its customers and clients, didn’t enter into it.” Having once run a public company where we took our fiduciary and regulatory duties to our shareholders and the public markets seriously, the sheer magnitude of the greedy cleverness of the malfeasance at Enron boggles the mind. Again, why have the fundamental ethical standards of human trust in the corporate world sunk so low? While it is easy to build a house of cards, without long term trust, I firmly believe it is impossible to build any entity (corporate or otherwise) with lasting, long term value.

Trust issues aren’t confined to the US and Canada. In Germany, T-Mobile has been advertising their new iPhone mobile data plans as “open internet access with unlimited data” (”Freier Internetzugang mit unbegrenzter Datenflatrate”) For the details, see a fascinating post from TMCnet. Indeed, customers were finding to their dismay that this open internet access specifically disallowed such basi