Inaki Berenguer, MBA '09

"What to look in an entrepreneur", Neil Sequeira (General Catalyst)

Neil Sequeira, a partner at General Catalyst Parnters, talked to us about characteristics he looks in an entrepreneur:

• SUCCESSFUL BUT STILL HUNGRY
• Diverse in skill sets
• People that can build a team and know how to put together a team
• Nice people ("although difficult to describe, you know who they are")

Noubar Afeyan, Managing Partner at Flagship Ventures, mentioned good characteristics of entrepreneurs last Monday:

• Somebody young and hungry
• Somebody with urgency to deliver
• Somebody that thinks "Why should I wait until tomorrow to do something I could do today"
• Somebody who has tolerance to calculated risk
• Somebody with no fear of unknown

Breakfast with Matt Cutler, co-founder of Visible Measures

We had breakfast with Matt Cutler, serial entrepreneur and co-founder of Visible Measures, at the offices of General Catalyst Partners. Visible Measures provides web video analytics; it was founded in 2005 by MIT students and has received ~$18M in VC financing to date. Neil Sequeira and David Fialkow (both serial entrepreneurs and partners at General Catalyst) also attended the breakfast.

We discussed different topics about entrepreneurship:

• Focus on communication: People do not buy things that they do not understand. Be able to synthesize and explain your idea.
• Very quickly ask for help (and be humble)
• Get mentorship early in your careers: Look for great people in your life to model something after
• Persistance: get used to be rejected
• You need to believe in your idea because you have to convince a lot of people: talent, investors and customers

MIT Sloan Sales Conference

Tomorrow Friday is the MIT Sloan Sales Conference. The list of speakers include Sr VPs of Sales at HP, Novartis, Microsoft, Merck, IBM, or Google.

Sales is one of my weak skills and here at Sloan I am learning that it is a skill that can be learnt. For instance, I am taking Technology Sales, a class taught by Ken Morse (founder of 3Com) and Howard Anderson (founder of The Yankee Group and Battery Ventures) about how to sell, do prospecting, prepare a sales plan, handle objections, closing, etc; one of the most interesting classes I have taken so far.

If you are around and have time to attend the conference, don't miss it!

"Don't hire your friends", Jeremy Allaire (founder of Brightcove)

Jeremy Allaire talked to us about recruiting in startups. Jeremy is the founder and CEO of Brightcove, an Internet TV platform. He was previously an entrepreneur in residence at General Catalyst Partners. Prior to that, he became CTO of Macromedia (he created the Flash platform) when his previous company was acquired by Macromedia in 2001 (Macromedia was later acquired by Adobe for $3.5B).

Brightcove was founded in 2004 and has received ~$100million in financing since then (read NYTimes coverage in 05). The main investors are General Catalyst, Accel, The NYtimes, American Online and IAC.

He talked about building an entrepreneurial organization:

• The first inclination when you start a company is to hire your friends. BAD IDEA! Some friends may become marginalized and some other will outgrow when the company grows
• Try to hire somebody for which the job is not a lateral job but something that challenges him (i.e., it stretches the person)
• If you see somebody in your organization hiring B players, both should go
• Look for interdisciplinary individuals
• Run a meritocracy
• 3 attributes to build a team: smart, nice and hard working individuals
• When to fire? when people do not perform or people have personality conflicts

Meeting with Russell Fradin, CEO of Adify

We visited the offices of Adify and we met with Russell Fradin, CEO and co-founder. He is young, probably my age, but with a lot of experience in Internet startups in the Silicon Valley.

Adify provides an online ad network. He mentioned that in 2005 he identified an opportunity because the situation for advertisers was very inefficient as there are millions of places to advertise. There is a massive fragmentation: users on average visit 23 sites per day. Adify was founded in 2005 and has raised ~$25M from Venrock, US Venture Partners, ABC and Time Warner. It currently employs ~80 people.

We talked about entrepreneurship related to his previous and current experiences:

• He decided to take money at a lower valuation just to work with the right folks (Venrock)
• Look for VCs that are going to be VCs in 15 years
• Adify grew from 30 to 80 employees in 1 year. Not everybody can be good
• Bringing senior people might be difficult. They have their own voice and the existing employees joined because of you, and not because of the new external senior guy
• You cannot fire people because it is difficult to find new people
• It is difficult to predict revenues in new markets. It is like selling a phone. If you are a telecom company and you only sell 10 phones (with free minutes, etc.) you do not know how much people are going to use it. Later on you have demographics, etc.
• In B2B do not charge anything upfront because it would take forever to close deals. Instead charge a percentage of revenues.
• "Pick business/ideas that solve real problems even if the idea is not that sexy"
• "If you want to get to one point, go there now and do not go to another place that will eventually take you there"

Talk of Tim Westergren (founder of Pandora)

Tim Westergren gave us a talk about his company Pandora (the music genome project), an automated music recommendation and Internet radio service. You type a song and it finds the closest in terms of ~400 attributes. For him, each of the 400 attributes is considered a gen.

Pandora employs ~120 people (most of them with musical background) mainly doing taxonomy of songs (equivalent of a MBTI test for music, as he likes to call it). Each song requires between 15 and 45 minutes to classify.

Some interesting facts he gave about radio is that the average American listens to 20 hours of music a week and 17 of them is radio (despite CDs, iPod, etc.).

He mentioned some interesting things about his experience in entrepreneurship:

• When they started (right after the bubble) he asked his employees for a salary deferral; and they spent 2.5 years without a salary!  (later he found that this is illegal in California)
• He pitched his company 348 times to VCs! (he counted them!). A clear sign of commitment, determination, passion, persistance, and perserverance!
• VCs did not like the idea because it is not scalable since it requires human beings classifying song by song (30 minutes per song and they wanted to classify every song!). However, once you have done it, it is a big asset  (it reminds me of Skyhook wireless)
• They have 11 million user after starting in November 2005 (now they have 25K new listeners per day). And they do not do any advertisement! it is all blogs, chats, forums, etc. Thus they have no customer acquisition cost and investors/VCs love it.

I have to say that I am a big fan of Pandora and it really works for me!

Visit to Hubspot

We met Brian Halligan, CEO of Hubspot and MIT Sloan alumni (he says that he majored in beer drinking), during the Mass Tech Trek.

Hubspot provides an inbound marketing system/web marketing software (SW as a service model) for small and midsize businesses. They also provide the free SEO tool Websitegrader.com that measures the marketing effectiveness of a website and provides a marketing report of your URL. Many of my friends have started using it.

Brian started the company in 2006 and they received $5M in July 2007 from General Catalyst Partners. Currently they employ ~30 people and they have nice offices next to my apartment in Kendall Square (MIT).

Some comments he made about entrepreneurship:

• He recommended us not to syndicate VCs since it brings down the valuation. It is better to let them compete
• Number of founders: 1 is a negative signal to investors; 4-5 too much split and decisions take a long time with disruptive ideas
• Business Plan: you loose a lot of time updating it when you start talking to people. So make it simple and easy to update

Louis Gerstner, chairman of The Carlyle Group and former CEO of IBM

I went to see Louis Gerstner, chairman of The Carlyle Group and former CEO of IBM, speak as part of the Dean’s Innovative Leader Series at MIT Sloan.

Lou is one of the most respected business leaders in America. He is former CEO of Nabisco, former CEO of American Express, director at McKinsey and Company (where he spent 11 years after joining in 1965), and HBS graduate. He was chairman of the board of IBM from 1993 until his retirement in 2002 and is credited for transforming the culture at IBM and the historic turnaround that saved the company from ruin in the 1990's. Now he is Chairman of The Carlyle Group, the largest private equity fund in the world (see ranking).

He talked about good practices in business leadership:

• Smile in the elevators. How you look, how you behave and how you related is very important in leadership
• If you make an unpopular decision (e.g., layoffs), you have to spend a lot of time explaining people why you are making it. Take responsabilities, sign memos, explain decisions, etc. You should not make an unpopular decision by making rational decisions closed in your office
• If you have executives that are outperformers but not committed with your values, ideas and culture, then you should let them go
• Seek good advice and give good advice regularly

He is an excellent speaker and he was quite funny too. He talked about his first job after McKinsey in this way: "when I got my FIRST REAL JOB, I was thrilled to be the guy making the final decisions instead of bringing flip charts".

"Why do startups fail?", Chip Hazard (General Partner at IDG Ventures)

We visited the offices of IDG ventures in Boston to meet Chip Hazard, general partner, Stanford and HBS alumni, and former partner at Greylock.

In the past, IDG has backed up companies like Excite or Netscape. The previous week, they had raised an additional $280M fund in Boston and changed the name to Flybridge Capital Partners.

We asked him why startups fail and he gave us 5 different causes:

1. "Quick failures": After 1 year you learn that the tecnnology does not work. That is okay in the VC business because you look back and you think that you would make the same decision.
2. "Market opportunity slow to develop or not so big": You think that there is a market, you get the first customer but it never scales but at the same time it is never so bad to stop and close the company.
3. "Technology takes longer to develop": If it takes extra 18 months you end up with competition
4. "Level of competition": If large and leading firms enter early in the same market you may have problems to compete
5. "Management team does not scale with the business"In order to solve it, you need to look for  an entrepreneur who is a proven leader (e.g., he has grown a company in the past) or founders who are willing to give away leadership.

He also talked about typical questions he asks himself before investing:

• Who are the customers and why they need to buy now? If the customer can delay the purchase one year then it is always a bad sign.
• He uses an internal framework/analytical process to identify what can go wrong with the company. And then, he talks to a lot of people to generate and validate hypothesis.

He also mentioned that for him, "PASSION is a strong believe that you are right and the world is wrong"

Finally he mentioned that he tries to invest only in companies that are less than 2 hours away from Boston because then he has the ability to help the company. Particularly at the beginning, when there are only 5 people with an idea and dream; he needs to meet them frequently to guide and help them.

Meeting with H.P., founder and CEO of Telenav

I visited H.P. Lin, CEO and founder of TeleNav, Stanford PhD and McKinsey&Co alumni. He seemed a very honest leader.

TeleNav provides location-based services (tracking, dispatching and navigation). TeleNav was the first to launch a GPS solution on the mobile phone in North America. They use GPS and cell-ID for indoors. They currently have partnerships with 80% of US carriers (carriers want to control the application and the billing) and it is the most preloaded navigation system on mobile phones.

The company was founded in 1999. The opportunity was that a mobile has its own position using GPS and it can have much more info about the location because it is connected to the base station (updated information related to the location, e.g., see in the map updated information of the movies played in the cinema next to you or even buy a ticket). They do not believe in advertising but subscription model. According to Deloitte, it is the fastest growing company in the Valley.

During the meeting we also talked about entrepreneurship and the story behind Telenav:

• They launched in 1999, which was too early for location based services. They went from 50 employees to 20. Now they are ~350.
• After the bubble, they had a 100% pay cut. But the core team stayed (9 out of 10 people, and the person that left was because he had a family to feed). They were very open about the financial situation.
• In bad times (post bubble), you need to believe and be persistent. If you survive you learn a lot.
• They find difficult go sell to the car industry because it has very long sales cycles.
• When raising money from friends and family, do not do it if they do not have enough money. Only very wealthy individuals.
• For them Android is not a threat but another platform.
• In a startup you cannot do bottom up innovation (~chaotic) like in Google. You need a top down innovation strategy.