There are many issues facing entrepreneurs in the Silicon Valley today. I've been living and breathing these issues ever since I founded my new company here in the late spring of 2004. To talk about all of them in one blog posting would be too lofty a goal, so in this posting, I'm just going to focus on what I consider to be the top two issues based on my experiences. I'll ruminate on the rest of them in future postings, as they come to mind or happen to me in real time. That's what's so great about blogging - I can write as little or as much as I want, whenever I want. The freedom to do so is liberating and quite energizing, I must say......
Sorry for going off-tangent, getting back to the issues facing entrepreneurs in the Silicon Valley today, I would have to say that money is hands-down the single most important issue. So Issue One is Money, or really, the lack thereof. All the entrepreneurs I meet don't have enough of it, and all of them are trying to find creative ways to get more of it. I'm not talking about finding investment money, because each entrepreneur has their own "special" approach for getting funding, either from family & friends, angel investors, or from the last resort, vulture capitalists.... I mean venture capitalists. I'm referring to money from deal flow, money for work performed or expected to be performed. I've talked to entrepreneurs at conferences and seminars, at networking events, at private lunches and dinners, at CEO forums, and in business meetings and phone calls, and the one thread that never fails to pop up in the same vein is the paucity, scarcity, and downright absence of money. I've had clients say to me "Zero budget, Jeff. Can we pay you after we've made our money?". This, after I'd worked on their account for six weeks. And I've heard clients offer "Money is tight. We'd like to pay you with a percentage stake in our company." That's great, but you can't put butter on it and stick it in a sandwich to feed your kids, can you? One of the best ones I've heard is "We'll give you a success fee." Okay, I'm game. From my Junior Birdman Decoder Ring that I pulled out of my kid's cereal box one day, I've learned that "success fee" is the 21st century way of saying "commission". Isn't that what vacuum cleaner salesman and used car dealers work from, a commission? I never heard of engineering professionals working solely on commissions, have you? Commissions are great, when added on top of other compensation like salaries, bonuses, or consulting rates, but commissions-only compensation make monthly cash-flow difficult in my business niche environment, where sales lead times are often six-to-twelve months. So money has got to be the number issue facing entrepreneurs in Silicon Valley today. Lack of it, and how to get more. Lesson learned? Always ask if there is a budget before spending any time with a prospective client! Don't invest too much of your valuable time with someone who has no intention of compensating you for it until too far out in the future.....
In my estimation, the second most important issue facing entrepreneurs in Silicon Valley today is gathering momentum for their start-up company. Going from a stand-still to 100mph in nothing flat is quite a feat, and you have to have the panache of a leader and the stomach for it. So Issue Two is Gathering Momentum. One minute, your company doesn't exist, and the next minute, you breathe life into it, and you naturally need to spread the word about it. First of all, how do you get people to take you and your business idea seriously? With hundreds of new companies coming on line, how do you make yours stand out above the crowd? How do you gather enough momentum to make your website attract eyeballs? With money in short supply, how can you get some visibility, ally yourself with strategic partners that won't ask for your first-born, and build deal flow to create a consistently recurring revenue stream? All good questions, I would venture you'd agree with me here. So what are the answers? Well, in my experience, I've found that gathering momentum is a function of the business relationships you build and the quality of the people you surround yourself with. As an entrepreneur and the CEO of my own company, I make the decisions about who I'd like to hire, about whether or not to join boards or associations, and even whether or not to go to certain conferences, seminars, or networking events. Early on, I found out about a business incubator and venture accelerator called TEN - The Enterprise Network of Silicon Valley. After meeting with their CEO, I was convinced he had the integrity and ethics for the kind of business relationships I find successful. I subsequently established business relationships with him and his staff, and even joined TEN. This has proven to be a good decision, resulting in solid business relationships with even more future potential. I also established business relationships with other CEOs and entrepreneurs in Silicon Valley that met my high standards of ethics, integrity, and relevance. I don't suffer fools gladly, and I give short shrift to "flies" masquerading as entrepreneurs just waiting to take advantage of neophytes. Then, too, instead of going out and incurring debt by hiring too many people and leasing plush office space before we had real revenue, I decided to bring on board a leadership team of three people to help me in their areas of expertise. Namely, product marketing & sales, business law, and web marketing technologies. I've known these folks for many years, and I trust them implicitly to do the right things for my company. So I've surrounded myself with three people who's opinions I respect and who aren't afraid to give me bad news when necessary. Lesson learned? Creating a compelling website, talking about your company to everyone you see all the time, and proactively spending 110% of your time doggedly pursuing clients and customers - all these are extremely important and contribute to gathering momentum. But IMHO, the business relationships you establish and the quality of the people you surround yourself with are the key for gathering momentum for your start-up company.
Sunday, December 19, 2004
Saturday, December 11, 2004
Starting out as an Entrepreneur in the Silicon Valley
If you've read previous postings in this blog, then you know by now that I spent 19 years working for AT&T Bell Labs, NEC, Sony, and Microsoft, and a couple of startups, where I developed hardware platforms and software systems such as the NEC PowerMate personal computers, the Sony VAIO laptop and desktop computers, and Microsoft interactive television middleware. As a developer, I have a passion for engineering prototypes and developing systems. With this in mind, I founded TransformTec in the late spring of 2004. I saw an opportunity in my years at large corporations and small startups to capitalize on the fact that sometimes, really good ideas never make it to market. Some of these innovative ideas are emergent, while others are almost ready to launch. But in all cases, the idea generators cannot or will not bring these to market. I founded TransformTec to convert these intellectual property assets into cash. TransformTec is a product development company and a technology broker. We've identified 41 acquiring companies in the telecommunications, multimedia, and consumer electronics space to which we want to market and sell. We analyze these acquiring companies’ strategic product roadmap needs, and fulfill them with client’s prototypes. In essence, TransformTec is all about converting intellectual property into cash.
That’s the summary of why I decided to become an entrepreneur. But if you’ll bear with me, I can tell you a little more below. Let me tell you 4 things about TransformTec. The leadership team we currently have in place, what TransformTec is, our paths to cash, and making money – what I like to refer to as “the TransformTec pipeline”.
From the get-go, I knew I could do all the engineering tasks myself - like architecture, design, development, and program management, at least in the beginning. But for the nascent company to be successful, I also figured I needed a web presence, some marketing savvy, and some legal guidance. First I brought Dennis Mesina onboard, he and I go way back, he’s been practicing law in the Bay Area for almost 20 years. Then I brought on board Jim Warholic, whose knowledge of crafting effective websites, and search engine secrets, has proven very helpful. Next I brought Chris Sanders onboard, who I’ve known for about 10 years (including at NEC and Sony), and his marketing and sales skills are invaluable. I am confident being associated with these great talents as we bring TransformTec to the next level.
I can think of no better way to describe my company than by simplifying its fundamental premise: Monetize intellectual property. At TransformTec, this is done in two ways: (1) by working with idea generators to develop their idea into a prototype and then selling that IP asset to an acquiring company, or else (2) by brokering a fully cooked idea between an idea generator and an acquiring company. For my company, there are two paths to cash. But in both cases, we need to understand the customers’ needs - in this context that’s the forty-one acquiring companies we are targeting. We need to engage with them and figure out how to take some technology under development over here, to fill a niche in their strategic product roadmap over there. One path to cash is through developing products with idea generators, and the other is through brokering technology. Then it’s simply a process of designing and developing a solution for the acquiring companies - preferably something that we’ve been working on with one of our idea generator clients! Regarding brokering technology, the path to cash there is through (1) cataloging intellectual property assets, (2) creating premium search services, and (3) offering topic sponsorships.
Finally, I’d like to explain the cash cow I’m building, My exit strategy is not to IPO or get merged or acquired. My exit strategy is to create a viable enterprise and lead that enterprise into the future, generating strong cash flow for stakeholders. I will stuff the TransformTec pipeline with projects every year. Projects go in on one end, and revenue comes out of the other end. Sounds pretty easy, doesn't it? Well, it is simple, but let me tell you, its definitely not easy! I intend to take on two projects the first year, with no sales activities or revenue generated. In the second year, I’ll sell off the first two project’s prototypes and intellectual property assets while simultaneously developing five more projects, and qualifying ten projects for year three. Ramping up staffing as needed and as appropriate is a skill refined from years of developing products. Conservatively guestimating each project to average $2.5m in revenues, by the time we get to year five I am projecting $50m in annual revenues. I expect to sustain twenty projects a year, with $50m in annual revenues, into perpetuity. Hence, a cash cow.
I’m very passionate about my work. Already in the past seven months I've learned so many new things as an entrepreneur in the Silicon Valley, things I never could have learned before. If any of this is interesting to you, I’d like to hear your comments. I would be interested in your feedback on my entrepreneurial ideas and my product development and technology broker company. I invite you to send us email at info@TransformTec.com. There are many issues facing entrepreneurs in the Silicon Valley today. I've been living and breathing them ever since I founded my new company here.....
That’s the summary of why I decided to become an entrepreneur. But if you’ll bear with me, I can tell you a little more below. Let me tell you 4 things about TransformTec. The leadership team we currently have in place, what TransformTec is, our paths to cash, and making money – what I like to refer to as “the TransformTec pipeline”.
From the get-go, I knew I could do all the engineering tasks myself - like architecture, design, development, and program management, at least in the beginning. But for the nascent company to be successful, I also figured I needed a web presence, some marketing savvy, and some legal guidance. First I brought Dennis Mesina onboard, he and I go way back, he’s been practicing law in the Bay Area for almost 20 years. Then I brought on board Jim Warholic, whose knowledge of crafting effective websites, and search engine secrets, has proven very helpful. Next I brought Chris Sanders onboard, who I’ve known for about 10 years (including at NEC and Sony), and his marketing and sales skills are invaluable. I am confident being associated with these great talents as we bring TransformTec to the next level.
I can think of no better way to describe my company than by simplifying its fundamental premise: Monetize intellectual property. At TransformTec, this is done in two ways: (1) by working with idea generators to develop their idea into a prototype and then selling that IP asset to an acquiring company, or else (2) by brokering a fully cooked idea between an idea generator and an acquiring company. For my company, there are two paths to cash. But in both cases, we need to understand the customers’ needs - in this context that’s the forty-one acquiring companies we are targeting. We need to engage with them and figure out how to take some technology under development over here, to fill a niche in their strategic product roadmap over there. One path to cash is through developing products with idea generators, and the other is through brokering technology. Then it’s simply a process of designing and developing a solution for the acquiring companies - preferably something that we’ve been working on with one of our idea generator clients! Regarding brokering technology, the path to cash there is through (1) cataloging intellectual property assets, (2) creating premium search services, and (3) offering topic sponsorships.
Finally, I’d like to explain the cash cow I’m building, My exit strategy is not to IPO or get merged or acquired. My exit strategy is to create a viable enterprise and lead that enterprise into the future, generating strong cash flow for stakeholders. I will stuff the TransformTec pipeline with projects every year. Projects go in on one end, and revenue comes out of the other end. Sounds pretty easy, doesn't it? Well, it is simple, but let me tell you, its definitely not easy! I intend to take on two projects the first year, with no sales activities or revenue generated. In the second year, I’ll sell off the first two project’s prototypes and intellectual property assets while simultaneously developing five more projects, and qualifying ten projects for year three. Ramping up staffing as needed and as appropriate is a skill refined from years of developing products. Conservatively guestimating each project to average $2.5m in revenues, by the time we get to year five I am projecting $50m in annual revenues. I expect to sustain twenty projects a year, with $50m in annual revenues, into perpetuity. Hence, a cash cow.
I’m very passionate about my work. Already in the past seven months I've learned so many new things as an entrepreneur in the Silicon Valley, things I never could have learned before. If any of this is interesting to you, I’d like to hear your comments. I would be interested in your feedback on my entrepreneurial ideas and my product development and technology broker company. I invite you to send us email at info@TransformTec.com. There are many issues facing entrepreneurs in the Silicon Valley today. I've been living and breathing them ever since I founded my new company here.....
Friday, December 10, 2004
Interlude and Transition #2
After four years of working at Microsoft, the challenges were fewer and the excitement grew dim. I soon found myself yearning for new challenges and exciting new technologies. But where does one go after Microsoft? Is there life after Microsoft? After working for four years with some of the best minds in the software industry, what does one do for an encore?
As I engaged in this navel gazing exercise of introspection, I came to the realization that no existing technology company could meet my high standards of excellence, commitment, and perseverance. So I began to formulate an idea for starting my own company. On my own time, during weekends and evenings, I started a thought process that eventually led to the founding of my own company. I first talked it over with my wife of 22 years, and got her buy-in and support. Next I spoke with my 3 kids - two teenagers and a tweener. They encouraged me, gave me their blessings, and were just great about the whole thing. Then I started socializing my ideas for a new company with long-time friends who were uninvolved in my profession. Getting positive feedback, I wrestled with whether or not I should stay at Microsoft until my new company got off the ground, or else break off the ties that bind and start afresh. This was the most difficult decision-making process yet, because at its most elemental form, this decision involved the security and well-being of my family......
When I think of a safety net, I often conjure up images of trapeze artists in a three-ring circus, doing amazing feats of agility and gravity-defying stunts to thrill and amaze a captivated audience. Although most don't notice it, there is usually some webbing device, referred to as a safety net, underneath the area where the trapeze artists are working, so in case they fall they don't actually plummet to a horrifying death in front of unsuspecting little children munching on popcorn and candy cotton. If they fall, they are safely cocooned into the webbing device, and emerge unscathed, ready to get back up there and join their fellow trapeze artists. So the safety net serves the dual purpose of saving the trapeze artist from a gruesome mangled death, as well as not creating a traumatic event in the minds of the viewers. Very smart, that.
Not to mix my metaphors too much, but there is also this concept of free-falling when parachute jumping. In this context, free-falling refers to the brief moments in time between leaping from the aircraft and pulling the ripcord to release the parachute. It's an exhilerating sensation...... To keep your orientation, you must remember the colors blue, green, and brown. Blue for sky, green for ocean, and brown for land. By remembering these colors, even in a moment of distraction or panic, you can always orient yourself correctly to land upright on land. Which of course is much better than landing upside down in water...... Anyway, before you pull your ripcord to open the parachute, you are free-falling towards earth at an alarmingly fast speed, which causes the sensation of exhileration. Its an exquisite feeling, a thrilling adrenaline rush of euphoria and pseudo-panic. Once you pull the ripcord and the parachute opens, you feel safer as you slowly float down to dry land. Your pulse returns to normal, you feel almost calm, compared to the previous sensation of free-falling......
As I mentioned before going off on a tangent about safety nets and free-falling, the most difficult decision-making process yet was whether or not to start my company before or after quitting Microsoft, because at its most elemental form, this decision involved the security and well-being of my family...... Do I free-fall without a safety net, or do I take the safe route and start my company in my spare time? What a fateful decision to grapple with! Greater minds than mine have struggled with this dilema, no doubt, and I'm sure each person decides what's true for themselves in their own circumstances.....
In my case, I decided I could not do anything half-baked. I could not start my company in my spare time. I had to work on it full-time. For I do things full-bore. When I decide to do something, I throw my passion, commitment, and energy into it completely. Was it risky? Sure! Was I apprehensive? You bet! Did my colleagues at Microsoft encourage me to stay? Of course! But in the final analysis, I listened to my deepest inner self. I went with my gut. I gave myself over to that undefinable construct of positive energy, threw caution to the winds, and just did it.....
I believed in myself. I thought to myself, "I can do this thing!" And so, I began free-falling without a safety net. I quit Microsoft, and founded TransformTec, a product development company and technology broker dedicated to converting intellectual property into cash. After 19 years of working at AT&T Bell Labs, NEC, Sony, Microsoft, and a couple of start-ups along the way, I took a leap of faith and jumped in feet first..... and became an entrepreneur - the founder, President, and CEO of TransformTec, Inc.
As I engaged in this navel gazing exercise of introspection, I came to the realization that no existing technology company could meet my high standards of excellence, commitment, and perseverance. So I began to formulate an idea for starting my own company. On my own time, during weekends and evenings, I started a thought process that eventually led to the founding of my own company. I first talked it over with my wife of 22 years, and got her buy-in and support. Next I spoke with my 3 kids - two teenagers and a tweener. They encouraged me, gave me their blessings, and were just great about the whole thing. Then I started socializing my ideas for a new company with long-time friends who were uninvolved in my profession. Getting positive feedback, I wrestled with whether or not I should stay at Microsoft until my new company got off the ground, or else break off the ties that bind and start afresh. This was the most difficult decision-making process yet, because at its most elemental form, this decision involved the security and well-being of my family......
When I think of a safety net, I often conjure up images of trapeze artists in a three-ring circus, doing amazing feats of agility and gravity-defying stunts to thrill and amaze a captivated audience. Although most don't notice it, there is usually some webbing device, referred to as a safety net, underneath the area where the trapeze artists are working, so in case they fall they don't actually plummet to a horrifying death in front of unsuspecting little children munching on popcorn and candy cotton. If they fall, they are safely cocooned into the webbing device, and emerge unscathed, ready to get back up there and join their fellow trapeze artists. So the safety net serves the dual purpose of saving the trapeze artist from a gruesome mangled death, as well as not creating a traumatic event in the minds of the viewers. Very smart, that.
Not to mix my metaphors too much, but there is also this concept of free-falling when parachute jumping. In this context, free-falling refers to the brief moments in time between leaping from the aircraft and pulling the ripcord to release the parachute. It's an exhilerating sensation...... To keep your orientation, you must remember the colors blue, green, and brown. Blue for sky, green for ocean, and brown for land. By remembering these colors, even in a moment of distraction or panic, you can always orient yourself correctly to land upright on land. Which of course is much better than landing upside down in water...... Anyway, before you pull your ripcord to open the parachute, you are free-falling towards earth at an alarmingly fast speed, which causes the sensation of exhileration. Its an exquisite feeling, a thrilling adrenaline rush of euphoria and pseudo-panic. Once you pull the ripcord and the parachute opens, you feel safer as you slowly float down to dry land. Your pulse returns to normal, you feel almost calm, compared to the previous sensation of free-falling......
As I mentioned before going off on a tangent about safety nets and free-falling, the most difficult decision-making process yet was whether or not to start my company before or after quitting Microsoft, because at its most elemental form, this decision involved the security and well-being of my family...... Do I free-fall without a safety net, or do I take the safe route and start my company in my spare time? What a fateful decision to grapple with! Greater minds than mine have struggled with this dilema, no doubt, and I'm sure each person decides what's true for themselves in their own circumstances.....
In my case, I decided I could not do anything half-baked. I could not start my company in my spare time. I had to work on it full-time. For I do things full-bore. When I decide to do something, I throw my passion, commitment, and energy into it completely. Was it risky? Sure! Was I apprehensive? You bet! Did my colleagues at Microsoft encourage me to stay? Of course! But in the final analysis, I listened to my deepest inner self. I went with my gut. I gave myself over to that undefinable construct of positive energy, threw caution to the winds, and just did it.....
I believed in myself. I thought to myself, "I can do this thing!" And so, I began free-falling without a safety net. I quit Microsoft, and founded TransformTec, a product development company and technology broker dedicated to converting intellectual property into cash. After 19 years of working at AT&T Bell Labs, NEC, Sony, Microsoft, and a couple of start-ups along the way, I took a leap of faith and jumped in feet first..... and became an entrepreneur - the founder, President, and CEO of TransformTec, Inc.
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