Wavefront CEO and President James Maynard, no stranger to start-ups, was interviewed by Backbone Magazine (read by over 300,000 people) for the “What it takes to run a successful start-up” article in their April/May 2012 issue.
Maynard spoke about the importance of funding and trajectory for hardware firms. “If you’re talking about chips, you’d better have $50 million. And if you’re looking at a device, it’ll be tough to do that without a couple of million in the bank,” said Maynard.
At Sun Microsystems Maynard established Sapient Technologies Group – a successful business strategy consulting firm for early to mid-stage technology companies. He then founded VST Canada (Canada’s largest digital narrow-casting network) and Fuelcast Media Networks before taking the helm of Wavefront.
How to run a successful startup
Have a vision, be stubborn, embrace failure
April 24, 2012
Apparently, a predilection for crushing depression is a must-have. “I’ve spoken to lots of CEOs who will say they’re at a meeting, but who instead will be lying in bed at 2 pm on a Tuesday afternoon, completely paralyzed,” said Herold, adding that “normal people” don’t have those feelings. “It can last for hours, or days, or a week.”
These downs are counterbalanced by crazy fast-paced ups, during which entrepreneurs believe they can accomplish anything, and so do the people who follow them. The key, he said: make spending decisions when you’re depressed. It makes you more cautious. Avoid largess when you’re energized.
Building a team
Having a pet neurotic won’t be enough to make a good team, however. A well-rounded selection of individuals is vital to any good start-up, said Boris Wertz, another former COO. He cut his teeth with AbeBooks, and is now an angel investor and co-founder of Vancouver-based incubator GrowLab.
“The first thing I see is a solid technical product team,” he said. Start-ups need a founding team that knows how to build stuff. “It’s going to be tough if you don’t do that.”
A stitch in time saves nine, agreed Ryan Holmes, CEO of Vancouver-based social media darling HootSuite, which provides tools to manage Twitter, Facebook and other accounts. “Many firms start and then they refactor the code, and then do it all again six months in,” he explained. “Because we had great engineering chops, we haven’t had to refactor.”
Holmes looks for people first and roles second. If necessary, he will build the appropriate role around a person he simply can’t afford to pass up, just to bring him or her into the company.
Choosing your model
HootSuite is an Internet-based business, selling software-as-a-service products on a freemium model. People use the product for free, choosing to pay when they come to rely on it enough to be tempted by extra functionality.
Not surprisingly for someone who recently landed $3 million in Series-C funding, Holmes views the freemium/SaaS combination as the best Internet start-up model ever. It’s proving to be a great way to get into corporate accounts, because increasingly, companies are devolving IT procurement decisions to line-of-business managers. This model lets them try before they buy, and then procure IT at minimal cost.
“We’re seeing companies like Evernote use freemium as the way to get into the enterprise,” said Holmes, adding that 20 per cent of his enterprise clients started out using the free version of his product.
New Internet-based ventures can also test market assumptions readily, which is a key characteristic of the successful start-up, said Danny Robinson, who founded Bootup Labs, a West Coast seed accelerator for tech firms.
Talking to your customers―or your potential customers―is a smart move for the would-be entrepreneur. Blogging and tweeting about your idea before it is launched can be a useful way to test reactions. And don’t be paranoid about having your ideas stolen, he said.
“The people interested in listening are other entrepreneurs with their own ideas,” Robinson said. “The people waiting to steal an idea are only going to steal an idea that is already proven.” That’s why people laughed at Andrew Mason when he frequented coffee bars talking about the idea for Groupon.
Start-ups can extend this idea of testing market assumptions into the launch phase. Distributing a product or service on a small scale can generate useful market intelligence, without the investment needed to scale the idea. If a small group of friends, family and mavens do not like your product, they will often tell you why, giving you the feedback that you need to change it.
If this test group does like your product or service, then it will evangelize it for you, Holmes said. This is why he advises against advertising for start-ups. Why artificially pump your product, he asks, when you can start small and see if the customers promote the product themselves, validating your idea in the process?
This concept of starting small and feeling your way is even more important when it comes to product and service quality. Just because you can gain 500 customers quickly doesn’t mean that you should.
Tyler Lessard, chief marketing officer of mobile security firm Fixmo, advises companies to focus on their core idea and develop their intellectual property. “Mature it and build a reputation on that,” he said. Those who grow too quickly risk sacrificing product or service quality.
Fixmo is an example of a company that courted the U.S. market to help it grow. The company worked with the National Security Agency on technology to help make the already-secure BlackBerry platform even more watertight, and eventually ended up turning that into a product. It now counts the NSA among its most significant customers, which isn’t bad for a firm from Toronto.
Fixmo CEO Rick Segal is a U.S. citizen who spent time in the Air Force, and also worked in Seattle as the director of technical services in the Internet group at Microsoft. His U.S. credentials helped Fixmo gain a foothold there and land $23 million in Series-C funding from American backers late last year.
Jonas Brandon views this as the hallmark of a successful start-up. He is the co-founder of Startup North, a Toronto-based entrepreneurial network that connects company founders with funders. Unsurprisingly for someone who also founded Miami-based private equity firm Pelagia Group, he said ignoring a market to the south that is 10 times larger than ours will eventually cripple a start-up.
Brandon cites Vidyard, a Kitchener, Ont.-based video analytics firm that raised $1.65 million in funding last November through U.S. investment sources, including seminal San Francisco incubator YCombinator. AeroFS, a file synchronization firm started by University of Toronto graduates, is now also nestling under Ycombinator’s wing.
“Had they stayed here, they may not have secured that initial funding and trajectory,” Brandon points out.
Hardware vs. software
Funding and trajectory are two words that matter, particularly to hardware firms. Internet companies’ talk of lean operation and rapid product prototyping is very well, but manufacturers are a little different, said James Maynard, president of Wavefront, an accelerator hub for wireless hardware start-ups in Vancouver.
“If you’re talking about chips, you’d better have $50 million. And if you’re looking at a device, it’ll be tough to do that without a couple of million in the bank,” said Maynard, who also consulted with early-stage businesses at global services firm Sapient. That makes the market for hardware more difficult, and can make product cycles longer.
But it doesn’t make it impossible, said Steve Carkner. He was employee number 12 at Research In Motion and took RIM from a firm offering technology services for manufacturers to a product-manufacturing giant in its own right, helping the firm sell off its little-remembered film editing business in the process. Now, he is hoping to repeat RIM’s success with Panacis, a company he founded that sells small-footprint, high-energy density power systems to the U.S. military, among others.
Hardware companies may often need more money for manufacturing and product certification tasks, but you can also look for shorter-term cash as you build out your IP. Panacis always imagined itself as a manufacturer, but began as a services firm.
Carkner also has an interesting take on a key question: how will a start-up know when it has succeeded? When does it stop being a start-up and start being a grown-up company?
The 10-year-old company still considers itself to be a start-up, having progressed from services into product manufacturing and explored different markets to find a niche. After toying with specialist medical applications such as batteries for artificial hearts, it settled on a larger number of markets, including industrial, telecoms and defence. “We have only really been a mission-critical battery company for a year,” he said.
Startup North’s Brandon focuses the lens more sharply. “Once you’ve pinned down your model for scalability, then you’re in an industry,” he said. “A major question mark has been removed.”
Go your own way
But entrepreneurs shouldn’t forget their own criteria when shooting for success. In perhaps the most refreshing comment of all, Herold argues that growth and grandiose exit strategies aren’t everything. He lectures heavily in India, where the endgames are often very different.
“They don’t build companies to sell them,” he said. “They build companies to pass on a legacy to their children or grandchildren. Most CEOs over there are building between four and seven companies. Why are we not doing that?”
When Steve Jobs started Apple, he wanted to make money, but he also wanted something far more personal: to deliver simple, usable and beautiful technology to people so that they could make great things. His biography makes it clear that it was his vision, rather than the money, that drove him. As you get your business cards mocked up and pore over break-even projections, make sure you ask yourself that all-important question: what is driving you?
Five pro startup tips
|1||Start with the problem, not the solution|
“Most guys think about an interesting technology idea and try to turn it into a solution. People don’t think about the value of their problems.”
– James Maynard, Wavefront
|2||Ignore your critics|
“When RIM was young and we went up against Motorola and Ericsson, we truly believed that we could do anything.”
– Steve Carkner, Panacis
“Put it out to a small audience. Put it out organically. If you start to see viral behaviour then you’re on the right path.”
– Ryan Holmes, HootSuite
|4||Learn from failure|
“Go for it, stumble and get back up, try again and learn. At the end of the day, if you don’t try, you are definitely not going to win.”
– Danny Robinson, Bootup Labs
|5||Choose your investors wisely|
“An investment opportunity isn’t just about getting money to hire people. It’s about getting partners on-board to help grow and be successful.”
– Tyler Lessard, Fixmo