Hi. My Name is Adam Lorant. I am what you would call a serial entrepreneur. I love starting companies. I’ve written hundreds of business plans; I’ve started 3 companies and I’ve generated over a billion dollars for investors. I love starting with a blank sheet of paper and dreaming about what the world will be like in 3-5 years and then make that vision a reality. I’m in the process of starting a new company now, and in my spare time I advise companies and do some angel investing. If any of you are planning to start a business, send me a 2-page executive summary and I’m happy to provide feedback. I put a copy of this presentation on the internet, on this web site where you’ll also see a wiki with lots of best-practices that I’ve developed over the years. It’s okay if you don’t remember the URL, I’ll send it to Andy and he can share it with you. What I’d like to do today, is share with you some lessons I’ve learned along the way. I’m going to do it in the format of a Top Ten list and I’m going to do it in a chronological order.
Just to make this more fun, I’m going to use movies as a theme for my presentation to help you remember some of these lessons. How many of you have started a business in the past? In the Present? How many of you want to start a business at some point in the future? Let’s see if there area any movie buffs out there.
PolarBlue Systems is the executive management team’s third startup together . Abatis Systems Corporation, a telecommunications company, was acquired by Redback Networks in 2000; and OctigaBay Systems Corporation, a supercomputer company, was acquired by Cray Inc. in 2004. PolarBlue is an evolutionary progression for us, building on our expertise in networking and supercomputing and applying this knowledge to storage. OctigaBay/Cray Affordable supercomputer. Number 1 supercomputer in Japan. Used by Toyota. Used for forest fire prediction, drug discovery, golf club design. Founded Dec 2001 Funded Dec 2002 with $25M CDN (largest seed financing in Canada) Launched Nov 2003 Acquired April 2004 for $155 million CDN by Cray Inc. 15 Months from funding to acquisition Generated over $0.5M for every business day of the company’s life 66 employees Abatis/RedBack Value-add internet services Founded Feb 1998 Launched Apr 1999 Acquired Sept 2000 for CDN$1.3 Billion by Redback Networks (largest price paid for a private high-tech Canadian Company) 31 Months from start to acquisition Generated over $2M of value for every business day of the company’s life 138 employees
Source: Oliver Twist. I graduated from my undergraduate degree in Electrical Engineering. I started my career in a big bureaucratic company and that’s a good thing because I was completely incompetent at just about everything. I started working at Nortel where I was put on a fast track. I changed jobs every 9 months. Just when I was getting the hang of things, I was moved to another department. I can’t imagine starting my own company back then. Looking back, I can’t imagine joining a small company without some sort of safety net to catch my mistakes. I was young and naïve and I needed to learn on somebody else’s dime. I made tons of mistakes along the way but I learned process, I learned how an organization works. I matured. I made some fantastic contacts – many of whom I keep in touch with today and continue to do business with. It took 5 years, but eventually I learned that I was just a cog in a big machine. I would prepare business plan presentations and pass them along to my boss who would present them to the executive committee. After the meeting, I would hear back if it was approved or not. That was wholly unsatisfying. I realized that I needed to get out of there and spread my wings. So I went back to school to get my MBA.
Source: Karate Kid. So I went back to school to do my MBA. Having gone through Engineering, I knew what it was like to work hard. I was used to working all hours of the day and night so when the artsies complained about having to work late, I laughed. During MBA, I would eat a pack of Oreos or Chocolate Chip cookies every night to keep myself alert and on a sugar high late into the morning. I worked hard. Again, I made lots of friends. Whereas Engineering taught me logic and work ethic, MBA gave me the framework to think about business problems and the structure to solve them. It turns out that Engineering & MBA is a great combination. I carried that work ethic through to my startups. I would consistently get 2-4 hours sleep a night on weeknights and sleep 8-10 hours a night on weekends. I worked 7 days a week. Because that’s what it takes. And don’t let anybody tell you otherwise. To succeed in a startup, that’s what you have to do to stay ahead of your team and ahead of the competition. So many people expect to do well on 9-5. They expect to maintain a balanced lifestyle. I say “HA”. That’s unrealistic. Sure, you can point to a few exceptions to the rule, but the VAST majority of successful startups required huge blood sweat and tears. Whether it’s school, relationships, or work – you get out of it what you put into it. The harder (and smarter) you work at it, the more successful you’ll be.
Source: The Matrix After MBA, I joined a young company in Ottawa called Newbridge Networks. The CEO, Terry Matthews, was a rabid entrepreneur and consummate salesman. His right-hand man was a detail-oriented, number-crunching Austrian who ran the company with incredible rigor and process. My time at Newbridge instilled a tremendous value from continuous improvement as a corporate culture. Plan what you’re going to do; execute the plan; learn from what went well and didn’t go well, and adapt. In my companies, it didn’t matter if it was a development sprint, a product release, a data sheet, a market launch, an investor pitch, a customer presentation, or even this presentation that I’m doing now - anything and everything, we did a post mortem – what went well, what would we do differently next time. Continuous improvement is a very powerful corporate culture. Twice now, I’ve been acquired by big US companies with hundreds of millions of dollars in revenue, traded on public stock exchanges, and I can honestly say that in both cases, our little Canadian startup had more discipline and better processes and procedures than they did. When you’re dating prior to an acquisition – and even post acquisition, this gives you huge credibility.
Source: Avatar I’ve had several mentors at different stages of my career. Starting with a mid-level manager in Nortel who convinced me to get out of development and into business. Later, Terry Matthews and Peter Sommerer at Newbridge who taught me everything I know today and finally, my partners, Paul Terry and John Seminerio have been a wonderful sounding board for me. I’ve also mentored others. Typically it’s over a coffee every month or two. What I find is that entrepreneurs need help with leadership as much as business advice.
Source: Lone Ranger I can’t tell you how many startups I’ve met where the company is run by the entrepreneur/founder/CEO. The person is essentially a loner ranger who is carrying the whole company on his or her shoulders. I haven’t seen a single company where that has been successful. PLEASE. If there’s one thing I’d like you to take away from my talk it’s this. Honestly consider your strengths and your weaknesses and find a business partner who complements your skills. If you’re good at technology, find a partner who’s good at sales & marketing. If you’re a high-level ideas person, find a partner who’s a detailed oriented thinker. If you’re in introvert, find a partner who’s an extrovert. When I started my first company, I did it with my long time friend and colleague Paul Terry. I was the marketing & product management guy – he was the technical guy. Neither one of us had sales skills so we recruited a third partner, John Seminerio to complement our skills. The three of us have been together for close to 18 years. We’ve started 3 companies together and we do our angel investing together. I’m convinced it’s that mutual trust and complementary skills that made us successful. John was a brilliant negotiator. Early on in the life of Abatis, a company offered to acquire us for $20 million. John rejected it. A couple of months later, another company came forward with an offer to buy the company for $120 million and John HUNG UP THE PHONE ON HIM. Paul and I were dumbfounded. What an incredibly stupid thing to do, but John knew they’d be back. Sure enough, a week later, they were on a plane to meet with us with an offer for $600 million and John ended up talking them up to $900 million by the time we signed the deal. If you’re ever looking for a negotiator – John’s you man!
Source: A Few Good Men When you have your partners, each with their own skills, you need to communicate frequently. Every week my two partners and I would sit down to discuss what was going on in the company and the industry at large. We had regular discussions and debates – quite often very vocal. We never attacked the people, it never got personal and we maintained full respect for each other. But through these weekly meetings, we debated, challenged our thinking and constantly tested our business plan in light of company and industry events, we were able to make excellent decisions and move quickly with sound reasoning and little emotion.
Source: The Pirates of Silicon Valley I remember giving a presentation to a customer. I could tell by the glazed look in their eyes that they simply didn’t understand what we were building or why they would want to buy it. After giving the same pitch 5 times to 5 different customers and getting the same glazed response, I figured it must be my problem. There was no WOW. We ended up hiring a consultant to come in to our office and hear our pitch. Within 20 minutes, he told me “Do you have any idea what you have here? You’ve got the answer to the problem that every CEO is losing sleep over. This is brilliant stuff. But you’re pitching it all wrong.” He then spent the rest of the day working with us to completely reworking our strategy. We spent the next month working on the presentation. Yes – a whole month working on a single presentation – 20 slides to be precise. We wrote it, tested it internally, rewrote it, tested it on the board, rewrote it, tested it on customers, rewrote it, tested it on the consultant until finally we nailed it. We went on to win the support of CEOs within 20 minutes of every presentation. We won 5 industry awards, our product launch was covered in 9 languages around the world, we were featured in dozens of articles and were ultimately acquired for over $1 Bn.
Source: Evan Almighty When we started PolarBlue, we didn’t have a business plan. We had a few ideas, we’d research them, talk to some people in the industry, throw some away until we found one that we liked. The only problem was that we needed to raise $35 million to make it work. So, we went to talk to some VCs. One told us that we shouldn’t target businesses, we should target service providers – so we completely changed our business plan to go after service providers. We then went to meet with another VC. They told us we shouldn’t go after service providers, we should go after businesses. One said our idea was too ambitious, another said it lacked technical risk. One said we should go after large businesses, another said we should go after small and medium sized businesses. Forget it. What do they know? They’re just VCs who sit in their offices listening to entrepreneurs pitch them business plans and educate them. Their opinion didn’t count. The only thing that really counted is what do your customers think. It turns out that we had 3 customers who were very excited about what we were doing. They saw the value. They saw that nobody had solved their problem well enough. And they were prepared to work with us to help us design exactly the product that they needed. It doesn’t get any better than that! Our customer was telling us exactly what they wanted and we were designing it. How sweet is that? Now if you’re a VC and an entrepreneur walks in the room and says that you’re doing it all wrong, instead of doing “A” you should be doing “B”, you can tell them that you’re doing “A” because your 3 lead customers are all asking for “A” and they’re prepared to buy the product if we can do what they want us to do.
Source: Jerry Maguire Every decade, there’s been a new theme for startups, and as an entrepreneur, you’ve got to catch the right wave or it’ll wipe you out. In the 1990’s startups were about how you were going to disrupt the status quo. How were you going to build a brand new game-changing product to knock out the big fat goliaths. 2000’s were about how you can build something that was bigger, faster, cheaper than the competition. 2010’s are about Payback. You’ve got to show your customers how you’re going to save them money and how you’re product will pay for itself in less than a year. It’s about Total Cost of Ownership, easy deployment, fast savings for your customer. You’ve got to show your customer the business case to justify them buying your product. It’s about your customer’s Return On Investment. But of course, you might say that Return on investment and the customer payback is a universal truth and I would say that you’re completely right! If you focus on saving your customers money, you will not fall victim to bubbles. Saving your customers money is not a fad or a trend, it is what separates a solid investment from fly-by-night dot com. It’s what separates a cool hobby from a business.
Source: It’s a Wonderful Life Times are always changing and you’ve got to constantly learn and adapt. The funding model has changed a lot over the years and PolarBlue fell victim to that. It used to be that you could raise $10-$20+ million to execute your business plan. Times have changed. Today, businesses are about fast time to market, fast time to profit, low investment to breakeven. In high tech: Business plans today need to be self funded until you have a product and paying customers. You ideally need to get to customer revenue within the first 12 months. Ideally, at this point you have enough cash coming in that you’re covering costs and you’re cash flow positive. Now you’re in control. You can raise angel money. You can raise VC money. And the terms (or conditions) are not too punitive to you, the entrepreneur. You can get angel and VC investors to come to the table to the tune of about $1-3 million. You need to plan to break even and become cashflow positive within 2-3 years.
Source: Invictus So there you have it. If any of you are counting, I’ve thrown in an 11 th point, here. It really sums up all the others in a way: Lead By Example, Work hard, Hire the best, Have good debates, Create a learning culture, Focus on the customer, Look for the WOW. And if you do that, I think you’re chances of building a successful startup will be very promising.
What I Learned (10 in 25)
10 25 Adam Lorant Serial Entrepreneur, Angel Investor [email_address] www.lorant.com Things I Learned in Years
10 Things I Learned From The Movies Adam Lorant Serial Entrepreneur, Angel Investor [email_address] www.lorant.com