Haas School of Business

Risk Takers

Some of the Haas Alumni Network's top entrepreneurs and venture capitalists share their challenges, insights, and advice on navigating the risks inherent in starting a new business.

By Kim Girard and Bill Snyder | Illustrations By Thomas Porostocky

Dot-com Lessons


dotcomKevin Brown, MBA 96, is CEO of Redwood City, Calif.-based Coraid, which develops data storage products for large businesses and made the Wall Street Journal's 2012 "Next Big Thing List." Brown was also instrumental in developing three other tech companies: Kidaro; Decru; and Inktomi.

Most difficult entrepreneurship challenge:
At Inktomi we had developed our core technology for Web search, but we realized that the market for online advertising had not developed enough to support the company and attract additional investors. We pivoted--hard. Leveraging our technology, we developed a second application that focused on data caching and content delivery over the Internet. It was a risky decision, but it paid off. We grew to over $200 million in revenue in a few years.

Decision you regret most:
Inktomi went public in 1998, a frothy time. Our stock price shot up well past what fundamentals could support. We felt pressure to expand; we added units; we acquired others as we tried to live up to Wall Street expectations. We overextended. We shouldn't have tried to grow that fast.

Common mistake of entrepreneurs:
People tend to not raise enough money early enough. If you don't, you don't have a margin for the unexpected. If you get in trouble that way, it becomes harder to raise additional capital later on.


Taking on Big Guys


bigguysEric Keller, MBA 77, COO of Kleiner Perkins Caufield & Byers, is a board member of Shutterfly and the former CEO of Movaris, which provided software for CFOs to manage governance, risk, and compliance.

Movaris challenge:
We had to prove ourselves in the marketplace. I went on sales calls. Customers' IT departments had a strong desire for a single software solution, like Oracle or SAP. The uphill battle was in convincing them to use another tool. The bar was high. We had to come in and say, "I can help you solve this much faster and do things you simply can't do with your enterprise software system."

Common mistake of entrepreneurs:
The biggest challenge for young companies is getting the team right. One of my partners says great teams can take mediocre ideas and make them great. Mediocre teams will struggle even with great ideas and great products.

Is the business plan dead?
I wouldn't write a big business plan. The key is whether potential investors will believe in you and your idea and that you have some traction. You definitely want to have your story together, something that's compelling, but investors are looking for people who are young and innovative, not detailed business plans.


Mother Knows Best


motherknowsbestNick Triantos, BCEMBA 07, a former software engineer at Apple and venture investor, is CEO of ionGrid, which provides a platform to securely download and share work-related documents on iPads.

Big pivot:
We presented to banks and to the White House, and it became very clear that we had to change direction. The skill set was around collaboration, but now we're focused on security. Pivoting the customer messaging was the hardest.

When to seek VC funding:
Taking VC money is a necessary evil. You do it when your conviction about what you're building is strong enough--and to accelerate your path. A lot of people get money to figure out what they're going to do. But the best money goes to people who show a clear path and way to exit. There's a big difference between raising money to survive and raising money to grow.

Landing a VC meeting:
Don't go to the top for your first meeting. Go to your girlfriend, roommate, or mom. Let them tell you, "I don't understand what the heck you are talking about." If Mom doesn't understand why your company matters, the VC won't either.

Final word:
A lot of investors have told us we should go do this or that. I don't listen to any investors. I listen to customers.


Contrarian with Kids


contrarianRebecca Lynn, MBA/JD 08, is a partner at Morgenthaler Ventures and previously worked in product development at Procter & Gamble and marketing at online credit card company NextCard.

Getting started in venture capital:
I wasn't looking for a career in venture capital. I met (Morgenthaler partner) Gary Little while I was at Haas, and he asked me if I wanted to come on at Morgenthaler for the summer. I knew the venture world from NextCard, but I didn't know much about what it was like to be in venture. But I loved working with entrepreneurs. When I graduated, they asked me to come on full time.

Most successful investment:
My first investment, Lending Club, in Q1 of 2009. We provided credit to borrowers when credit was tight. The company has continued to grow, and today it has $1 billion in loans. Doing a credit deal during the credit crisis is a little crazy, but I thought it presented an enormous opportunity.

Work-life balance:
I recently hosted an event for women in venture in Silicon Valley and created a group of female executives on the Peninsula. We talk about work-life balance. I always say I don't have a wife--I have a super-supportive husband. But at the end of the day the kids still want mommy.


Dating Pivot


datingpivotAlex Mehr, a former scientist at the NASA Ames Research Center, took a break from earning his Berkeley MBA to co-found and serve as co-CEO of Zoosk, a social network for dating in more than 70 countries.

Most difficult entrepreneurship challenge:
Every day I think about how I can recruit the smartest people. Instead of hiring too many, we are very selective. We've found that the most effective way to do this is to have our current engineers refer people they know. We incentivize them to do this.

Big pivot:
When we started, the company that became Zoosk had nothing to do with dating. It was about market research. We developed a multimedia polling widget that could be embedded in a blog or Facebook page. We got some traction, and then as a test we made a Facebook app, sort of a poll that asked if people are "hot or not hot." It got a huge number of hits right away, and we realized that social dating was a big need, a potential market.

Advice for budding entrepreneurs:
Not everyone can be an entrepreneur. However, it benefits everyone to try and see if it is you. Try it for a limited time and see if it works.


Don't Fall in Love


dontfallinloveNick Sturiale, MBA 00, a general partner in Ignition Partners, started his career with Sevin Rosen Funds and later joined The Carlyle Group as co-head of its Silicon Valley office.

Advice for budding entrepreneurs:
The whole exercise is to create a learning engine--learning what creates a market and what creates a team that can service a market.

VC mistakes:
Sometimes I let my relationships with people blind me to the reality of their companies. Sometimes I fall in love with a CEO or tech founder, but the market is not buying what they're selling. Admitting that is a very painful moment.

Hottest industries:
Big Data is hot because it creates a previously untapped source of insight into running a business. Managing and protecting intellectual property when everyone is using mobile technology is another. There are security, legal, and compliance issues to manage.

Is the business plan dead?
It's not dead but gravely injured. The notion of taking months and months to write a document gets trumped by running experiments with slimmed down versions of the idea. It is about testing early iterations of the idea and seeing if the market likes it before developing a finished plan.


The Chicken or the Egg?


chickeneggTed Sorom, MBA 08, is founder and CEO of Rixty, a payment system for online gamers. Rixty's investors include Haas alumni Noah Doyle and Jed Katz, both MBA 96.

Most difficult entrepreneurship challenge:
It was the classic chicken and the egg. We needed retail distribution to get gaming companies to work with us, but the gaming companies expected us to already have retail distribution. We solved it by going to the gaming companies and telling them we were in discussions with Coinstar (a company that lets consumers trade change for online gaming vouchers), and told Coinstar we were talking to the gaming companies.

Big pivot:
When we started, we were aiming at a teenage market, which had no other way to pay for games. Because we asked for birthdates when customers signed up, we soon realized that many were adults. So we made sure that our marketing did not turn off people in the 18- to 35-year-old market.

Getting access to VCs:
People think you can walk into a VC's office and ask for $5 million because you have a good idea. But you have to have users and a real product. In the Valley, it's all about the network. You have to have a warm introduction. Take advantage of the Haas network; I never would have gotten off the ground without it.


Do Your Homework


doyourhomeworkNoah Doyle and Jed Katz, both MBA 96, are managing partners at Javelin Venture Partners. Doyle co-founded MyPoints and directed the enterprise product line of Google Earth and Maps. Katz founded Rent.net and Move.com and worked as a venture capitalist with DFJ Gotham Ventures in New York.

Getting access to VCs:
JK: Use your network. It's easy to find someone who knows us and can make a warm introduction. Be sure your pitch has a clear executive summary and don't try and tell us how much money we'll make.
ND: Do your homework; see what we've done and find the connections.

Common mistake of entrepreneurs:
ND: Underestimating the cash they'll need and overestimating the ease of growing a business.
JK: Hiring B players.

Hottest industries:
JK: Big Data. There's enormous demand for applications that help firms get the most out of their data stores. We're also investing in security and education software.
ND: There are also opportunities in signal processing to enable programmable magnets.

Is the business plan dead?
JK: The business plan as we learned it 15 years ago is dead. You still need an outline and a strategy. You need a vision of where your company can go.


Medicine in the Cloud


medicineonthecloud

Elise Singer, MBA 10, a geriatrician and family doctor, is the founder of Share the Visit, a videoconferencing care coordination platform in the cloud that allows physicians, patients, and family to communicate and collaborate.

Aha moment:
My father was sick but lived far away. I was finding out critical information after the fact. The reality hit me in the face: In today's health care system, you are just not involved if you aren't there. I was already using Skype to talk to my in-laws in Venezuela and WebEx for work. I thought, "I can't do anything like this now to communicate with my Dad's doctor at a time when it matters most. I can solve this problem."

Advice for budding entrepreneurs:
Do not hesitate to try out your idea. What you learn by doing is hard to describe, it's so dramatic. Get validation with customers. The more you talk about your idea the better.

Common mistake of entrepreneurs:
Not effectively using their time. Taking meetings simply to network is a big time sink. If I sit down for an hour to work it's actually moving things forward. Have clear boundaries: Between 5:30 and 8 p.m., unless I am in a meeting or travelling, I am with my family. Then I go back to work.

 

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