Tag Archives: Founder

What makes a good technology company? A mastery of fear and envy.

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I’ve just read an article which nicely describes a feature of entrepreneurship and innovation that is not often discussed. You may read it in French as I have translated it in the French part of my blog, Qu’est-ce qui fait d’une entreprise de technologie un succès? Un mélange de peur et d’envie or you can go on the web site where the article was published, Is Elon Musk the Bill Gates of Green?. It is really its subtitle which is I think striking: What makes a good technology company? A mastery of fear and envy.

For those who would not know, Elon Musk is the head of Tesla Motors, a start-up I wrote about in a recent post, Tesla Motors and Paypal a tale of two founders. Indeed the initial love story between the founders did not end well.

So I think you should read Is Elon Musk the Bill Gates of Green?

A Swiss in Silicon Valley

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Here is my fifth contribution to Créateurs, the Geneva newsletter, where I have been asked to write short articles about famous success stories. After Synopsys, women and high-tech entrepreneurship, Adobe and Genentech, here is an short article about a Swiss founder in Silicon Valley.

Do you know Edouard Bugnion? I am not sure that Switzerland knows about its child, who grew up in Geneva and Neuchâtel before graduating from ETHZ (Zürich) in 1994 and moving to California where he obtained his MS from the University of Stanford in 1996. Yet he is the co-founder of VMware and Nuova Systems, two recent success stories from Silicon Valley.


Edouard Bugnion with the author in the middle of « cubicles » at Nuova in May 2006 (Picture: Mehdi Aminian).

As I was preparing a short trip to San Francisco, I had been advised to meet this Swiss citizen that I had never heard of. The meeting was planned in his office which we found thanks to a quickly printed logo posted on his door: Nuova Systems. The place was gigantic for a start-up which was less than one-year old. But Nuova was hiring fast. I should add that Cisco would soon invest $50M in the start-up. Why so much money? Because the founders of Nuova were exceptional: Mario Mazzola had just left Cisco and had also been the founder of Crescendo, the first start-up acquired by Cisco (in 1991). Edouard was one of the five co-founders of VMware in 1998, which was bought in 2004 by BMC for $625M. VMware was so successful with its virtualization tools that BMC gave back its independence to the company which is today quoted on Nasdaq (its market capitalization was above $10B at the end of 2009) and has more than 6’000 employees and $1.8B in sales. Nuova has been acquired by Cisco in 2008 for $600M.

When I told my surprise in front such a big office space, Edouard told me the story that when VMware had grown to a workforce which forced the company to move, the company proposed to lease its old offices to a small new start-up. Its founders looked at the place and declined: “Too small!” The start-up was unknown and its founders were very young people. Edouard was as surprised then as I was when we met. Was it ambition? Was it arrogance? The start-up was Google and its two founders, Page and Brin, were, without any doubt, visionaries


Nuova’s front door logo in May 2006.

Edouard might be qualified as a school dropout. Even with his diplomas from ETHZ and Stanford, he quit the Stanford PhD program in 1998 to launch VMware with his professor. With $20M of venture-capital, they could grow the company until its acquisition six years later. In 2000, he gave an interview to SwissInfo. With 120 employees, VMware was only two years old. “In Switzerland, young entrepreneurs do not dare dreaming about such a scenario. If you have a good idea, you can find a few million and your product can reach the market for better or worse.” Such is the quote from the author of the interview, Pierre Godet, who, then, says his concern about this brain drain. Bugnion is more optimistic: “Swiss people in Silicon Valley develop a very unique experience, as well as a network. Then, most of them come back to Switzerland at some point in their professional life.” It is one of the theses in my book. It may be a good idea to go and work in the Bay Area, a region where anything is fast, very fast, where ambition can be expressed and where failure is tolerated. I hope that someday, Edouard will come back to Switzerland to tell his story himself and share his experience and know-how…

Tesla Motors and Paypal, a tale of two founders

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Tesla Motors recently filed to go public. Behind the success story is a strange tale of founders. You should read first the Wikipedia page about Tesla. You will see that there are five founders. Because there’s been a litigation and a judge decision, it shows that defining a founder is not so easy. My definition of founders would be limited to Martin Eberhard and Marc Tarpenning, but because their initial business angel has become the CEO, it is more complex according to the judge.

What is even more interesting is that Elon Musk, the BA and CEO, was a founder of Paypal, or more precisely of one of the two start-ups which merged to give Paypal (X.com and Confinity). Then he was fired or left Paypal, similarly to what Musk did to Eberhard and Tarppening. Amazing, no?

So I provide here two cap tables! The Tesla one first and the Paypal one follows. I hope you will appreciate the information and you can react about founders, investors and the sometimes sad stories behind the scene of success stories…

First the Tesla equity tables and investors. Click on the pictures to read them!

The reason why there are green cells is because the company is not public yet. So the IPO date and price per share are fictitious. I do not know how much the founders exactly have but there was apparently about 8M founders’ shares. Now the company has raised a lot of money:

Finally, here is how the share dilution occured:

Am I doing here a Freudian analysis? Whatever is the Paypal stories through the X.com and confinity merger:

The equity table

and the investors

The beauty of all this is that behind the numbers, their complexity, there are many untold stories about founders, business angels, investors and success. React…

A123, Boston and Atlas

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I just met this morning Fred Destin in the beautiful Rolex Learning Center at EPFL. We both have a passion for entrepreneurs and architecture!

Fred told me he liked my equity tables and pies (check skype, mysql, Kelkoo, Synopsys, Genentech, Adobe, or the general one.

So as a small gift to Fred who is moving to the Atlas office in Boston this summer, here is the equity case of A123 Systems, an MIT spin-off which went public last September.

I am aware the pictures are not very nice but you can enlarge them and ask me for the excel file…

Lessons from entrepreneurs: not intuitive!

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One of my favorite entrepreneurial web site, the Stanford Technology Ventures Program, just published its new batch of short videos.

The lessons are quite interesting as I found them not intuitive and quite uncommon:
– you do not have to work too much
– you should do what you love
– there are not rules.

So here is the first one: Great Ideas Derive from Well-Rested Minds. “Being a workaholic is no guarantee of success. David Heinemeier Hansson points out that 37signals’ main product, Basecamp, was created on 10 hours a week of development for a total of six months. When you’re overworked, you can’t think creatively.”

What about next: Do What You Like to Get Where You Want. “John Melo, CEO of Amyris Biotechnologies, enjoyed building oscilloscopes, circuits and transistors – and yet he was a college dropout. In this clip, Melo comments on his non-linear career path and how his passion, personal interest, and sense of independence have propelled him from one episodic position to another. He states that he first looked for opportunities to do the things he loved to do, and then focused on the places he wanted to be.”

Finally, Entrepreneurs Have No Rules. It also says: “Never give up the title of CEO… In many cases, it is the founder who is able to provide the vision to effectively direct product development.”

Founder without experience, lonely founder

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Two recent posts address the topic of the Founder. Kevin Vogelsand describes his experience as an entrepreneur without experience On Founding a Company Fresh Out of College. Olivier Ezratty is interested in the lonely founder in the cas difficile de l’entrepreneur isolé. Both topics are important and I submit to your thoughts the following table that I had publkished in my book:

Ezratty also deals with equity sharing between founders, something I had stuided in a aborde aussi le sujet important du partage d’equity entre fondateurs que j’avais abordé dans un past post. In that post is mentioned an article I did not know by Paul Graham:
The Equity Equation.

Women and High-Tech Entrepreneurship.

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Here is my third contribution to Créateurs, the Geneva newsletter, where I have been asked to write short articles about famous success stories. After Adobe and Genentech, here are some thoughts about women and high-tech entrepreneurship.

Women Entrepreneurs? Carol Bartz, Sandy Kurtzig…

… but also Ann Winblad, Catarina Fake, Kim Polese, Candice Carpenter, Mena Trott.
The list may go on but would not be much longer. Why so few women in high-tech entrepreneurship? And even worse, why are they so little known? The answer is simple: the situation is just an illustration of their position in science, in high-level positions in companies or in society more generally. A few anecdotes will show however that they have nothing to prove their male counterparts.

Sandy Kurtzig is a school dropout. She stopped the PhD program she was following at Stanford University and joined General Electric. She discovered there that computer science must help in improving manufacturing (such as in inventory management or logistics) and left again to found Ask Computer in 1972 with $2’000 from her own savings. “No venture capitalist would have given me money in the beginning. First software was seen of no value and then I was a woman.” She declined an acquisition offer from Hewlett-Packard in 1976 and in 1981 Ask Computer went public on Nasdaq. (The reader should remember that Apple had gone public in December 1980 and Logitech was founded in January 1981.) When she left Ask in 1989, the company had $189M in sales. Her advice to entrepreneurs? Believe in yourself, hire the right people and share success. Do not be afraid of making mistakes.

Carol Bartz also began her career in a big company: 3M is the inventor of the famous post-it. She heard there: “you are a woman, what are you doing here?” She left the company when he understood she would not be promoted because she was a woman. A few years later, she moved to Silicon Valley. “Even in this region, being a woman is belonging to a minority.” Her comment will not prevent her from becoming CEO of Autodesk in 1992. (Autodesk is the world leader for 3D software for architecture and mechanical design with $2B in sales in 2008.) That same year, in 1992, she was diagnosed with cancer. She will have chemotherapy while managing her company. She succeeded twice. “With private life and work, you do not have time to wonder if you are all right or not.” Work was a distraction and the leadership she showed was a strong motivation for her colleagues.

She is also fighting for the position of women in science: “I sincerely believe that women are dissuaded [from doing science]. They are told it is not important. Another female entrepreneur, Ann Winblad adds: “The daughter of a friend of mine is worried about appearing too nerdy if she invests in science. However some of the successful women – myself, Carol Bartz – all of us were math whizzes and we really had fun teenage lives as well as adult lives and have been very successful. The problem is that we need role models like Steve Jobs with this inspirational product, the iPod. Something is getting lost in the message because not many say I want to be like them.”

In January 2009, Carol Bartz became Yahoo’s CEO. The task may not be easy. Should we listen to Caratina Fake, founder of Flickr: « There is a lot of institutionalized sexism working against women in business and I think that people aren’t even aware that it’s there. » This post is unfortunately too short to celebrate women as entrepreneurs- Those who succeeded had to be exceptional and those who try also, without any doubt. The barriers entrepreneurs face are amplified for women. I will just conclude by copying the poet in saying that, in the start-up world maybe “Women are the Future of Men”.

To know more:
Carol Bartz in “Betting It All” by Michael Malone (Wiley, 2002).
Sandy Kurtzig in “In the Company of Giants” by R. Dev Jager and R. Ortiz (McGraw Hill, 1997)

Next article: A European in Silicon Valley, Aart de Geus.

Bob Swanson & Herbert Boyer: Genentech

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Here is my second contribution to Créateurs, the Geneva newsletter, where I have been asked to write short articles about famous success stories. I began last quarter with Adobe and its founders John Warnock and Charles Geschke, here is now Bob Swanson, Herbert Boyer, founders of Genentech.

Bob Swanson and Herbert Boyer: Genentech

In the start-up world, biotechnologies do not seem to belong to the same world: they seem to always be reserved to high-caliber scientists not to say Nobel prize winners that investors would back with their money. So… where is the entrepreneur?

The story about the Genentech beginnings is probably the best illustration that a visionary entrepreneur is also necessary in biotechnologies. Much more than just a start-up, it is an entire industry that Bob Swanson founded.

The legend says that Bob Swanson, a 29-year old venture capitalist, met Herbert Boyer, a professor at the University of California in San Francisco (UCSF). The money of Bob and the ideas of Herbert made possible the creation of Genentech in 1976, followed by its IPO in 1980. The story deserves however a little more attention. Bob Swanson was not really an investor. He is an entrepreneur. he has been hired by Kleiner and Perkins (KP) who had understood that the real value of a venture capital firm is to create company and not only to fund them. They understood this after the success of Tandem and Jimmy Treybig whom they financed from day 1 in 1974. (See KP first fund).

Bob Swanson is fascinated by the potential of biology and genetics. (He has a BS in chemistry from MIT and an MBA). After helping KP for one their portfolio company, he leaves the fund to dedicate himself to his new passion. He meets many professors in the Bay Area but all of them explain him that their work is about science, leading edge science for sure and very far from commercial applications.

Herbert Boyer is not a typical professor. Together with Stanley Cohen, he is the inventor of a patented technology, which was not common in the academic world of the seventies. Known as the Cohen-Boyer patent, it describes how to manipulate the DNA and it is so fundamental that any new technology in the field needs to use this patent, which means obtaining a license on the technology and paying royalties to its owners, Stanford University and UCSF. In total, more than $250M was generated in royalties over 20 years.

The beginnings of Genentech are a combination of history and legend. Swanson calls Boyer who tells him he is very busy but he agrees on a 10-minute talk on a Friday afternoon. Swanson is obsessed about one single thing: the applications of research. Boyer replies that there is certainly some potential but it will require another 10 years of research. “Why, why, why?” Swanson does not stop saying to the point that Boyer finally concludes “why not? May be it can be faster.” The 10-minute talk has become a 3-hour discussion. Genentech is born, at least in two minds full of beer!

They still have to convince the skeptics. Among them, the potential investors. A week later, Tom Perkins meets with the two men and he remembers: “the technical risks were huge. I was very skeptical. I did not know anything in biology.” Kleiner is however very impressed by the energy of Swanson and the expertise of Boyer. He decides to try, step by step in order to diminish the risks and minimize the initial investment. Kleiner invests $100’000 which will last nine months.

The rest is History. Genentech synthesizes insulin in 1978 and growth hormone in 1979. Genentech also raised $10M with private investors before going public on Nasdaq in 1980. For the first time, a biotech company goes public with no revenue and its first product is not approved yet (it will be in 1985 only). In 1990, Roche and Genentech will sign a strategic partnership which makes the Swiss company its major shareholder. In 2009, Roche acquired all the remaining shares of Genentech.

Swanson was not an investor, but a visionary entrepreneur. Boyer was not a professor in his ivory tower. They were also lucky to have the best of mentors, Tom Kleiner. A lot of energy and passion, great ideas, some money. It is an almost accidental meeting which is responsible for the growth of a industry worth tens of billions of dollars.

Icing on the cake, the Genentech capitalization table at its IPO:

Pour en savoir plus:

Internet Archive:
http://www.archive.org/search.php?query=genentech

The Genentech web site:
http://www.gene.com

Next quarter: Women entrepreneurs, Carol Batz and Sandy Kurtzig

A success story: Adobe Systems – John Warnock and Charles Geschke

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Créateurs, a local newsletter asked me to  write short articles about famous success stories. I decided to begin with Adobe and its founders John Warnock and Charles Geschke. You will find the full text below as well as the usual data I like to give about start-ups: the capitalisation table of the company at its IPO and how shareholding evolved from foundation to public offering. Here is the article you may found in french in the Newsletter.

John Warnock and Charles Geschke: Adobe

Start-ups are very often associated to their founders. Entrepreneurs such as Steve Jobs or Bill Gates are obviously linked to the company they created. John Warnock and Charles Geschke may be less famous but their story is as fascinating.

Without the profile of the atypical entrepreneur (they are not “school dropouts” who launched their venture in their twenties), Warnock and Geschke founded Adobe Systems in 1982 when they were more than 40-year-old. Adobe is famous for some of the most popular software worldwide such as Acrobat and Photoshop.

From the printer to the printing protocol
It all began in the 70’s, at the renowned Palo Alto Research Park of Xerox, the vendor of copy machines. The two engineers are more and more frustrated. Xerox may have enabled the development of the computer mouse, word processing, email or Ethernet, but it has been incapable of transforming them in commercial products. Warnock and Geschke cannot convince their management of the potential of their research. “Part of it was fear and misunderstanding” but they also admit that “in fairness to the management, I think we as researchers were a little naïve about what it would take to get these things from conceptual operating prototypes all the way to full-production, supportable products. But we sort of hoped that they would hire the people who could do that.”

They left Xerox in 1982 and raised $2.5M to develop their project: high quality printers and a system which connect them to computer networks. When they met potential customers (Apple, Dec), they discovered that nobody is really interested. Steve Jobs explains to them that he needs their printer protocol, Postscript, for the Macintosh he is developing. They immediately change their business plan. Adobe became a software company with the success we all know.

Some good advice
Their vision of what is an entrepreneur is enlightening. It was more an accident than a destiny. But today their advice is worth reading.

You should always be flexible. You should try and explore many solutions, test them with customers and abandon the wrong ones very fast. They have the same views on the personality of entrepreneurs: “99% of founders fail because they cannot change and want to control too much”.

Passion, risk taking and self-confidence seem to be the critical strengths of entrepreneurs combined with intelligence and hard work. “But this is not sufficient. Luck also plays a major role.

When their age and experience is mentioned, Geschke adds that “I don’t think there’s any mystery in running a business. I think it helped that we were in our 40s, that we had worked for a variety of organizations. We had worked in other companies, but tried to leave their bad ideas as proprietary to them. We tried to pick the best things that we saw.” What is essential is to have a vision of what you want to do. “I am not a hunter, never have fired a gun, but I’m told that if you want to shoot a duck, you have to shoot where the duck is going to be, not where the duck is. It’s the same with introducing technology: if you’re only focused on the
market today, by the time you introduce your solution to that problem, there’ll probably be several others already entrenched.”

The ingredients of success
From the initial frustration which is at the origin of their departure from Xerox to the success of Adobe, the lessons are many. Never be a one-product company; technology cannot be simply transferred, you need to add brain power, hire good professionals; and as founders, you need to have “the intellectual capability, inherent honesty, ethical behavior and principles by which we lead [your] personal and business lives.”

In a few sentences, the ingredients of success are numerous, complex as well as simple and probably common to all great entrepreneurs.

To know more about Adobe:
The Revolutionaries: www.thetech.org/exhibits/online/revolution
Adobe Systems, Computer History Museum: www.computerhistory.org
Founders at Work, J. Livingston, Apress (2007)
In the company of Giants, R. Jager and R. Ortiz, Mcgraw-Hill (1997)

Next Article: Bob Swanson: Genentech

Now the cap. table in 1986

and the shareholding structure from 1982 to 1986:

Sharing the Wealth in a Technology Startup: How Much Stock is Enough?

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An interesting post from the interesting web site Xconomy.

Robert Beyster gives his views about how much stock a founder should keep and his answer is….

“8 to 10 percent of their company”.

This is quite an unusal piece of advice as most accounts on the topic try to maximize the stake. Beyster focuses on value creation and incentives to all parties.

This is consistent with what I teach about equity (see the post equity split in start-ups dated October 30, 2008).