Tag Archives: Founder

When Peter Thiel & Friends talk about Start-ups – part 3: company culture, founders, team, investors

Part 3 of my series of comments about Thiel’s class notes at Stanford mainly cover his Class 5-8. But first I should add that Thiel invited a “honor class” of innovators during his 19 classes. Quite fascinating!

1st row: Stephen Cohen, co-founder and Executive VP of Palantir Technologies,
Max Levchin, co-founder PayPal and Slide,
Roelof Botha, partner at Sequoia Capital and former CFO of PayPal,
2nd row: Paul Graham, partner and co-founder of Y Combinator,
Bruce Gibney, partner at Founders Fund,
Marc Andreessen, general partner Andreessen Horowitz,
3rd row: Reid Hoffman, co-founder of LinkedIn,
Danielle Fong, Co-founder and Chief Scientist of LightSail Energy,
Jon Hollander, Business Development at RoboteX,
4th row: Greg Smirin, COO of The Climate Corporation,
Scott Nolan, Principal at Founders Fund and former aerospace engineer at SpaceX,
(Elon Musk was going to come, but he was busy launching rockets),
5th row: Brian Slingerland. Co-Founder, President & COO at Stem CentRx,
Balaji S. Srinivasan, CTO of Counsyl,
Brian Frezza, Co-founder, Emerald Therapeutics,
6th row: D. Scott Brown, co-founder of Vicarious,
Eric Jonas, CEO of Prior Knowledge,
Bob McGrew, Director of Eng, Palantir,
7th row: Sonia Arrison, Associate Founder of Singularity University,
Michael Vassar, the Singularity Institute for the study of Artificial Intelligence (SIAI),
Aubrey de Grey, Chief Science Officer at the SENS Foundation.

Thiel covered how to build a company from the ideas and vision of founders, through hiring and sometimes funding from investors. But he began with a critical though fuzzy concept, the company culture: “A robust company culture is one in which people have something in common that distinguishes them quite sharply from rest of the world.”

He mentions also some important dimensions of the culture:
– Consultant-nihilism or Cultish Dogmatism: “You want to be somewhere in the middle of that spectrum. To the extent you gravitate towards an extreme, you probably want to be closer to being a cult than being an army of consultants.” which could be why Thiel said earlier,
pre-money valuation = ($1M*n_engineers) – ($500k*n_MBAs).
– To Fight or Not To Fight (i.e. Nerds or Athletes or again Zero-sum and Non zero-sum). “So you have to strike the right balance between nerds and athletes. Neither extreme is optimal. Consider a 2 x 2 matrix. On the y-axis you have zero-sum people and non zero-sum people. On the x-axis you have warring, competitive environments and then you have peaceful, monopoly/capitalist environments. The optimal spot on the matrix is monopoly capitalism with some tailored combination of zero-sum and non zero-sum oriented people. You want to pick an environment where you don’t have to fight. But you should bring along some good fighters to protect your non zero-sum people and mission, just in case.”
I was just told this is crytic… I agree… another reason to read Thiel directly!

“Foundings are obviously temporal. But how long they last can be a hard question. The typical narrative contemplates a founding, first hires, and a first capital raise. But there’s an argument that the founding lasts a lot longer than that. The idea of going from 0 to 1—the idea of technology—parallels founding moments. The 1 to n of globalization, by contrast, parallels post-founding execution. It may be that the founding lasts so long as a company’s technical innovation continues. Founders should arguably stay in charge as long as the paradigm remains 0 to 1. Once the paradigm shifts to 1 to n, the founding is over. At that point, executives should execute.”

Max Levchin: The notion that diversity in an early team is important or good is completely wrong. You should try to make the early team as non-diverse as possible. There are a few reasons for this. The most salient is that, as a startup, you’re underfunded and undermanned. It’s a big disadvantage; not only are you probably getting into trouble, but you don’t even know what trouble that may be. Speed is your only weapon. All you have is speed. […] How to hire? A specific application of this is the anti-fashion bias. You shouldn’t judge people by the stylishness of their clothing; quality people often do not have quality clothing. Which leads to a general observation: Great engineers don’t wear designer jeans. So if you’re interviewing an engineer, look at his jeans. There are always exceptions, of course. But it’s a surprisingly good heuristic. […] PayPal also had a hard time hiring women. An outsider might think that the PayPal guys bought into the stereotype that women don’t do CS. But that’s not true at all. The truth is that PayPal had trouble hiring women because PayPal was just a bunch of nerds! They never talked to women. So how were they supposed to interact with and hire them?

“No CEO should be paid more than $150k per year” (in Silicon Valley)
“Another important insight is that people must either be fully in the company or not in it at all.”

Dilution and funding
Building a valuable company is a long journey. A key question to keep your eye on as a founder is dilution. The Google founders had 15.6% of the company at IPO. Steve Jobs had 13.5% of Apple when it went public in the early ‘80s. Mark Pincus had 16% of Zynga at IPO. If you have north of 10% after many rounds of financing, that’s generally a very good outcome. Dilution is relentless. The alternative is that you don’t let anyone else in. It’s worth remembering that many successful businesses are built like this. Craigslist would be worth something like $5bn if it were run more like a company than a commune. GoDaddy never took funding. Trilogy in the late 1990s had no outside investors. Microsoft very nearly joined this club; it took one small venture investment just before its IPO. When Microsoft went public, Bill Gates still owned an astounding 49.2% of the company. So the question to think about with VCs isn’t all that different than questions about co-founders and employees. Who are the best people? Who do you want—or need—on board?

The VC model in a nutshell: a power law. “To a first approximation, a VC portfolio will only make money if your best company investment ends up being worth more than your whole fund. (And the investment in the second best company is about as valuable as number three through the rest.)”

I have not yet read the following classes…

Swiss Founder’s Dilemmas

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Following my recent post about Wasserman’s book, The Founder’s Dilemmas, let me react about recent (and less recent) events related to Swiss start-ups and founders. Do we have here the same dilemmas Americans face, that is building a company which is either control-oriented or wealth-oriented? If you do not know what I mean, read the blog or let me just add that there is this binary model of either slowly creating value with your customers and partners with not much investor money or taking the risk of fast growth with investors, in anticipation of customer demand.

The ultimate example of this in Wasserman’s book is Evan Williams who founded Blogger, Oddeo and then Twitter, with diverse strategies. Paul Graham addresses the issue often (for example in Startup = Growth or in How to Make Wealth) and for a young entrepreneur, getting a million can be very important. At the macro-economic level, there is also a debate which I honestly never really understood. I think an ecosystem is (or should be) interested in fast growing companies, and slow growth should be less of a focus, not because it would not be important, but because it has always existed and will continue to exist with or without public support… However, because there are many SMEs in Switzerland, the support to small firms seems to be important. So is the situation very different from what I know in the USA? Let me try a simple description.

Sensirion is a very succesful Swiss start-up which is a good illustration of the debate. In an article written in 2008, its co-founder, Felix Mayer wrote about “How to finance the Growth? Being somewhere in the middle between the “US American” who is shooting for the moon and the Swiss who develops his technology on the cash flow of a one man company we did not choose the classical venture capital path to finance the first growth phase of the company but were able to find a private investor. In Switzerland, if you look for private investors, you may find experienced entrepreneurs who are willing to invest into a promising business. They are also known as “business angels”. It took quite a while to get from a prototype to a product family or from 1 to 10 to 100 as described before. You need knowledgeable and patient partners to survive this phase with many ups and downs. Usually, it takes longer than you expect. Nevertheless, at the end of the day, you have to get to the point where you generate growth by your own cash flow, which Sensirion reached 6 years after its incorporation. Since then, we generate enough cash flow to finance our yearly growth of around 30%-40%. In order to manage this growth we are of course continuously looking for excellent people!”

Is Sensirion a different model? I went to the Swiss register of commerce and looked at Sensirion financing (the Canton of Zurich is offering very detailed information). It was not an easy exercice and I am not sure about the accuracy (You will see the figures differ slightly!). I tried also to show the dilution of founders over time:

and here is Sensirion employee growth since its inception

Sensirion is clearly a success story, but is it that different from the US model? There might be no VC, but the private investor(s) have put a total of CHF13M with a valuation of CHF190M at the last round. The growth was as fast as many VC-backed start-ups, so I am not sure the investors were more patient and the exit might be less of a priority. This is very similar to many US start-ups… But Sensirion is often mentioned as an example that start-ups would not need venture capital (hence investors). There is not that much difference between a private investor and a VC (or is there?)

Now it is true that many of the Top 100 Swiss Start-ups raise very little money with business angels In the order of CHF1-2M. Recently EPFL’s Jilion has been acquired by Dailymotion for an undisclosed amount and the local press mentions Jilion had raised about one million. Optotune in Zurich is a similar model with 200’000 raised according to the register of commerce. Techcrunch was concerned recently about BugBuster (small) CHF1M A round. Dacuda raised about one million too at a CHF7M valuation. LiberoVision raised CHF200k with Swisscom at a CHF2.5M value before being bought for about CHF8M (it might have been more with upsides). Netbreeze was acquired by Microsoft after raising about CHF5M from one group of investors which owned 80% of the company. Wuala was acquired by LaCie 2 years after its creation and it was totally self-funded. And the list is nearly endless.

But there are also fast growing companies. Covagen, GlyxoVaxyn, GetYourGuide, InSphero, Molecular Partners, Nexthink, TypeSafe, UrTurn have raised a lot of money with VCs. And people who would say Switerland is about health related firms will see it is more diverse…

Company	Field	Money raised	Latest valuation	Investors
Covagen	Biotech	56M	NA	Gimv, Ventech, Rotschild
GetYourGuide	Internet	16M	50M	Highland
GlycoVaxyn	Biotech	50M	37M	Sofinnova, Index, Rotschild
InSphero	Biotech	4M	16M	Redalpine, ZKB
Molecular Partners	Biotech	56M	115M	Index, BB Biotech
Nexthink	Software	15M	NA	VI, Auriga
Sensirion	Electronics	13M	190M	Undisclosed
TypeSafe	Software	16M	NA	Greylock
UrTurn	Internet	12M	36M	Balderton

And of course, the founders have been diluted. I will not specifically show the dilution in each company but anonymously illustrate this with the data I could found online (non confidential data).

Company	Founders	Seed	A	B & Later	ESOP
1	9%		26%	65%
2	30%		33%	31%	6%
3	34%		32%	33%
4	40%	7%	12%	41%
5	43%		47%	10%
6	35%	11%	27%	28%

I am not sure, with all this data, that Switzerland is qualitatively that different… I will finish with an interview of Daniel Borel, the co-founder of Logitech: “The only answer that I may provide is the cultural difference between the USA and Switzerland. When we founded Logitech, as Swiss entrepreneurs, we had to enter very soon the international scene. The technology was Swiss but the USA, and later the world, defined our market, whereas production quickly moved to Asia. I would not like to look too affirmative because many things change and many good things are done in Switzerland. But I feel that in the USA, people are more opened. When you receive funds from venture capitalists, you automatically accept an external shareholder who will help you in managing your company and who may even fire you. In Switzerland is not very well accepted. One prefers a small pie that is fully controled to a big pie that one only controls at 10%, and this may be a limiting factor”

Click on picture to enlarge

The Founder’s Dilemmas – The Answer is “It depends!”

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The Founder’s Dilemmas is at the same time a fascinating and frustrating book. Fascinating because it’s providing very seldom seen (and mostly unknown) data about founders and high-tech start-ups. Frustrating because it is also seldom providing answers to the dilemmas founders may face. It took me the full reading of the book to finally understand that the answer Wasserman provides is that there is no best solution for a founder facing a problem, but that if he knows all possible situations, he might better decide based on his own motivation and … personality. So she or he might decide, not on rational criteria but more because of his personal inclinations!

The best illustration of this is Evan Williams who was a founder of Blogger, and then of Odeo (and then after the book was designed of Twitter). Williams had a very different behavior with the two start-ups. He was “control-oriented” with Blogger, hiring people in his close network, taking friends and family (and close network) money only and keeping management control to the point of firing everyone including his former co-founder and girlfriend. With Odeo, he had initially a “wealth-oriented” attitude, taking VC money and having a different hiring strategy. His inclination made him however buy back his investor’s stake, as he needed to control his start-up again.

Wasserman shows that the “3Rs” (Relationships, Roles & Rewards) are key features for decisions about the key dilemmas founders may experience. These dilemmas are classified according to the chapters of the book: Career, Solo-vs.-Team, Weak vs. Network, Positions, Compensations, Hiring, Investors, and Succession. Wasserman explains (or better-said describes) the various dilemmas founders face when taking decisions and shows that their decisions are very often dependent upon their motivation. Do they want to be Kings (power or control-oriented) or Rich (wealth oriented)? He does it with anecdotes (not so good and quite well-known) and with statistics (very good and not so well-known)

In summary I saw it more as a book for academics than for entrepreneurs and founders who apparently will not take better decisions after reading this book as they will be driven by their motivations, not their experience! At least they will be aware of it. It may be another illustration that youth and enthusiasm are as important as experience and rational behaviors!

One interesting puzzle Wasserman addresses is why individuals decide to become entrepreneurs, often thinking that they will become wealthy whereas this is entirely wrong. This has to do with control vs. wealth. You will need to read Wasserman if you want to know more.

Here are some more notes taken when reading. The next table is probably an essential part of the control-vs.-wealth dilemma.

Table 1.2 (& 11.1) – Wealth-versus-Control Dilemmas

Wasserman has many more interesting data and let me show a small sample:
– There are no real pattern in becoming a founder (age, experience, childhood influences, personality, family status, economic status), however early influences and natural motivations seem to be important.
– About age, he has seen a wide variation with an average of 14 years of work experience before becoming a founder (higher in life sciences). There is a specific group of founders with 0-4 years of experience.
– The main motivations are either control or wealth, but having an impact counts.
– Wasserman shows strong differences related to gender correlated with age. This is a must read but too long to be explained here…or are they, let me try [pages 33-35]

Tables 2 – Motivations of male and female entrepreneurs

– Ethnic homogeneity occurred 46 times more often than not (and still 27 times more often to control for family ties). And it diminishes conflicts risks, they are therefore more stable.

Size of founders’ teams

Founding with friends…
– 40% of teams had prior professional relationships and 17% family ties.
– Each such relationship added a 30% likelihood of founder departure.
– As a summary

“A friendship built on business can be glorious, while a business built on friendship can be murder.” [Page 104]

Jobs and Wozniak is a good example: they did not clarify crucial issues and “he got paid one amount, he told me he got paid another. He wasn’t honest with me, and I was hurt… But you know… he was my best friend, and I feel extremely linked to him.” They eventually parted ways. [page 109]

About decision making: “Two people at the wheel is the worst way to drive. You end up going straight when either a right or a left would be better.” A reason why being three might be good.

Equity sharing

Woman compensation
There is a much greater gap in the preponderance of women than in their compensation. Only 10% were C- or VP-level (17% in life sciences) and 3% and 7% were respectively CEO. But the compensation was 5% below.

Investors

On BAs vs. VCs, Wasserman shows the usual dilemmas. Dick Costolo about too many BAs: “It was a recipe for disaster. I had 13 people who, now that they had $20’000 invested, wanted to call me and ask about […], taking 45 minutes of the CEO’s time when he should be running the business.”

Succession of CEO

Conclusion

Wasserman strangely mentions here: “What is entrepreneurship? A widely used definition is a process by which individuals pursue opportunities without regard to the resources they currently control”. It sound even romantic, but it has a dark side: founders are 60 times more likely to be resource-constrained than have all the resources they need. Lack of resources lies behind all the dilemmas described. [Page 333]

Founders who had kept control held equity stakes which were [half] as valuable as those held by founders who had given up both CEO position and board control.

There are hybrid paths, compromises between control and wealth, using “second-tier” solutions (hiring, investors) but Wasserman shows it is even riskier. Consistent decisions give a higher likeliness of desired output (either control or wealth).
So the answer to dilemmas is “it depends.” Be knowledgeable about options and consistent in your choices!

Wasserman opens new directions for research:
– Who are these special animals which obtain both control and wealth (Gates, Ellison, Jobs 2.0…)
– Serial entrepreneurs: they receive larger equity stakes, remain CEOs longer, negotiate better investment terms and might be more successful. Are they?!! (cf Serial entrepreneurs: are they better?)
– How often is a control-oriented founder able to sell a start-up for which he owns 100%, for $5M and how often is a wealthe-oriented founder able to sell for $100M a company of which he owns 5%…
– Wasserman is aware all this is specific to high-tech and the USA. What about outside these boundaries?

“Any honest model of a complex human phenomenon has to acknowledge many unknowns”

I plan to come back on the Founder’s Dilemmans with a look at recent Swiss start-ups situation…

Why was Netscape a weird example (to me) of Equity Sharing between Founders

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Marc Andreessen and Jim Clark, the founders of Netscape

You may not know I owe a lot to Nesheim’s High Tech Start Up, which cap. tables I took inspiration from. If you do not know Nesheim’s, let me just quote Steve Blank’s in his bibliography for 4 steps to the Epiphany: “High Tech Start Up is the gold standard of the nuts and bolts of all the financing stages from venture capital to IPOs”.

There was one such cap. table which was striking to me and I never mentioned it until now. Here it is now scanned from Nesheim’s book. I did not ask for authorization but I hope not to get in trouble!

Click on picture to enlarge

Do you see why I found it striking? If not have a look again. If not again, follow me for a few minutes. I decided to look for Netscape IPO prospectus, which I could find in two formats, an html IPO prospectus on the Internet archive as well as a pdf S-1 filing document. They give slightly different data, but I could build my own table as follows.

Click on picture to enlarge

And now? Well I had never understood why the two founders, James Clark and Marc Andreessen could have such a different amount of equity. How could it be a 10x difference even if James Clark was a more experienced entrepreneur (he was a former Stanford professor and co-founder of Silicon Graphics) and Marc Andreessen had no experience but was the author of Mosaic, the predecessor of Netscape as a browser. (Netscape is a sad illustration of bad relationships between a university – the University of Illinois – where a technology was developed and entrepreneurs, but this is another story.)

Well I found the answer thanks to the two documents: Jim Clark was
– first, a co-founder and both founders had 720’000 founders’ shares and
– second, a business angel: he invested $3M in the series A and then $1.1M in the series B. He got the equivalent of 9M commmon shares for his investment.

This comforts me in the general explanation I usually give about sharing equity between founders and then investors, managers, employees as you may see in Equity split in start-ups or on Slideshare. First founders split equity based on their non-cash contributions, then investments are taken into account.

After Neolane and Criteo, Supercell is the new European Success story

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I had heard about Supercell first last year, then again two weeks ago, and then again yesterday. Each time, it’s when I interacted with Finnish people, who were right to be proud of their new jewel! Supercell is the latest Finnish, therefore European success story. I had mentioned Neolane (because of its $600M acquisition by Adobe) then Criteo (which just filed to go public on Nasdaq) earlier this year, both are French and software companies. Supercell is the third high-profile start-up making the news in 2013. It is developing games just like Rovio or Mojang, two other Scandinavian start-ups.

Supercell has a meteoritic history: founded in 2010, it raised $12M in 2011, $120M 6 months ago and Softbank just acquired the majority of the company this month for $1.5B. More with my usual cap. table below. (In fact the reason I was told about the Softbank deal is because my Finnish friend had liked my new update of cap. tables data on Slideshare!)

Supercell is not so much interesting for the transactions than for its unusual (for Europe) history. It was founded by serial Finnish entrepreneurs. They have an interesting organization: people work in small teams, typically 5 people, called cells therefore the name Supercell. (This reminds me of similar structures at Apple and Google). They are very demanding with the game quality so that they launch a very small number of their developments. They celebrate failure (a stopped development) with Champagne where as they celebrate a launch with beer!

They revenues and profits are also meteoritic; just have a look at the revenue table below. Interestinggly enough Mojang is similar. “The success has turned Mojang into an overnight sensation in a matter of a few years, pulling in $90 million in profit last year on $235 million in revenue.”

Deezer, a new French success story?

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I do not often talk about french start-ups, but after my recent blog on Parrot, it would be a mistake not to mention Deezer’s latest financing round. If you do not know Deezer’s music service, just try it!

Deezer has been founded by two young French entrepreneurs (28 and 32 at the time of foundation), its seed investor was Xavier Niel, the famous founder of Free, and was backed by AGF Private Equity, DotCorp (the holding of the Pixmania founders) as well as Orange. It made a lot of buzz yesterday when it announced its new huge round with Access Industries, the owner of Warner Music. The beauty of private companies in France is that, though they are not public, you can find information of their shareholders thanks to Infogreffe, the French register of commerce. It will only cost you a few Euros. So… here is the cap. table I could build from the info I grabbed. Not fully accurate probably. I do not have the CEO or COO shares. And Access may buy more shares from existing shareholders (which may explain why the news mentions a $130M round and not €70M I have in the table).

Not a success story yet, but promising for sure!

Click on table to enlarge

Serial entrepreneurs: are they better?

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Are serial entrepreneurs better than novices? This is a classical topic in entrepreneurship and it seems to me that urban legend says yes! There has been academic research going that way, with one major argument being that experience matters. However, I just finished my own analysis which I presented at the BCERC conference in Fort Worth (Texas). It is based on my previous work related to Stanford related start-ups: Stanford University and High-Tech Entrepreneurship: An Empirical Study (you can have a look here at the presentation and the article). The article on serial is available on the SSRN network and you can have a look at the presentation in pdf below.

click on picture to view the pdf slides

And the conclusion? I do not find evidence that novice entrepreneurs would be less performant. It is a “work in progress” but if you have a look at the slides, you might see it in particular on slides 7, 9 or even 20. Slide 7 shows average performances according to experience. Slide 9 (q-q graphs) sshows something else: serial founders would do worse with time. Finally slide 20 that serial successful in the past have a new success rate of about 28-29 % which is similar to novices (the novice figure is not on the slide), whereas serial who failed before have a lower success rate. As if talent mattered more than experience…

The New Facebook Legacy

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Facebook will not only produce new millionaires with its IPO next Thursday; it has already created a new generation of entrepreneurs and start-ups. The New York Times just published an article A Circle of Tech: Collect Payout, Do a Start-Up and a related video Facebook’s Network of Tech Tycoons which illustrates the fact.

A few Facebook alumni entrepreneurs

I had already showed the power of networks when I commented Once you’re lucky, Twice you’re good a book subtitled The Rebirth of Silicon Valley and the Rise of Web 2.0. You can check again the web of people connected ten years ago or so. I had done the same with the older and now mature EDA industry. This new NYT article shows new connections illustrated by the new figure below:

Let me just quote the article: “The history of Silicon Valley has always been one generation of companies gives birth to great companies that follow”…”This is the story line of Silicon Valley, from Apple to Netscape to PayPal and now, to Facebook.” … and finally, “the social fabric of Silicon Valley is a dense set of overlapping spider webs, meaning everyone is connected.”

In my article on the web2.0, I had also shown the value creation. There had been $800M of VC money invested for a $17B value creation (mostly paper value). The new table below adds another $100M of VC money, and the value creation is now… $113B!!

Edouard Bugnion at EPFL: back to Switzerland!

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If you do not know Edouard Bugnion, you can read the article I had published in 2010, a Swiss in Silicon Valley. Edouard was at EPFL last week and gave a great technical talk about VMWare and virtualization, in fact a summary of his PhD thesis. The full text comes below.

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

For the anecdote, you can notice than Ed began his PhD in 1994 and will only finish it in 2012! As Martin Vetterli, dean of Computer Science at EPFL, said “at least he is finishing it, contrarily to the Yahoo or Google founders!”. The reason why it took Ed so much time is that he co-founded VMWare and Nuova in between… I have such a friend from Stanford who was doing his MS / early PhD in 1990-92 and obtained finally his diploma in 2004. He also had his start-up journey in the middle. (Faster though, Michael!) This back and forth adventures are not very common in Europe…

I noticed 2 other great lessons from Ed’s talk:
– as mentioned below “Virtual machines quickly lost popularity with the increased sophistication of operating systems” and it did not prevent VM to become a great market through VMWare success. Market dynamics are never simple and great opportunities may come from less explored areas of technology.
– Ed also explained that they did not or could not partner with established players (microprocessors or OS vendors) for various reasons. You can imagine the big players did not care, or would not change / adapt their (strategic) products or features. So when Ed was asked if this was not risky, he answered, risk is (sometimes) good.

Once again, this proves first that SV success comes also from immigrants and second, we need these people and their experience back! Hopefully we will have him at our ventureideas conferences. Invitation launched!

EPFL IC Seminar : “Using Virtual Machines in Modern Computing Environments with Limited Architectural Support”
By Edouard Bugnion, Stanford University

Abstract
Virtualization has gone through a full “popularity cycle”. Originally conceived in the mainframe era, virtual machines provided an efficient, isolated, and compatible duplicate of the hardware of the underlying machine. Virtual machines quickly lost popularity with the increased sophistication of operating systems, and subsequent processor architectures were designed without consideration for virtualization.

In this talk, I propose to use virtual machines to address limitations of commodity operating systems on modern architectures, even in the absence of architectural support for virtualization in the hardware. The primary technical contributions of the work were developed as part of two systems, each built for platforms with limited architectural support for virtualization. First, Disco ran commodity operating systems on scalable MIPS multiprocessors. Disco enabled virtual machines to form a virtual cluster that could transparently share the resources of the underlying multiprocessor. Second, VMware Workstation is a successful commercial product that allows multiple, unmodified operating systems to run concurrently on the same x86 system, allowing users to decouple their guest operating systems from the underlying hardware. VMware Workstation was the first 32-bit virtual machine monitor for the x86 architecture, and demonstrated that the x86 architecture was indeed virtualizable, despite a lack of architectural support.

Today, and in part because of the impact of Disco and VMware, virtual machines once again play a foundational role in Information Technology, and current-generation hardware provides architectural support for virtualization, similar to what already existed decades ago on mainframes.

Biography
Edouard Bugnion started his Ph.D. at Stanford in 1994, and is expecting to finish it this month. In the meantime, he co-founded two successful companies: VMware and Nuova Systems (acquired by Cisco). At VMware from 1998 until 2005, he served multiple roles including CTO. At Nuova/Cisco from 2005 until 2011, he built the core software team and became the VP/CTO of Cisco’s Server, Access, and Virtualization Technology Group, a group that brought to market Cisco’s Unified Computing System platform for virtualized datacenters.

His research interests include computer systems, datacenter and cloud networking, as well as technology entrepreneurship. For their work, Bugnion and his colleagues have received the ACM Software System Award (for VMware) and the ACM SIGOPS Hall of Fame Award (for Disco). Edouard was raised in Neuchatel, Geneva, and graduated from ETHZ.

Biotech IPOs, not so different

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I just read Biotech IPOs Start to Show Some Modest Signs of Life from Xconomy. It’s an interesting article because it focuses on Biotech, a field that many people consider as very different from other high-tech start-ups such as Internet, Software or IT in general. The general idea is that it takes much longer to succeed in biotech. You should read the article if biotech is of interest for you and I will not comment it more than mentioning that the good news is that there have been recent biotech filings and IPOs, the less good news being that the market capitalizations are not huge.

What I am more interested in is updating my regular analysis of start-up data (I have now 131 start-ups; see my latest analysis in March 2012 for example with 116 companies) and see how biotech behaves. Here is the synthesis (if you are interested the detailed list is provided at the end).

So what do I see as specific to biotech start-ups? First it does not take them longer to go public. 8 years vs. an average of 7 years. The difference is not in the exit time. They raise $98M on average, but this does not look so special either. But, and here is the but, their sales are only $11M when they go public. So, it takes them much longer to reach revenues. But it does not prevent them from going public (or even be acquired when they begin to have good results in clinical trials).

Another specific element is about founders. The founders’ average age is 41 (similar to medtech and semiconductor) whereas it is 35 on average. Why is that? because many founders are established, recognized university professors. Often times, they do not work full-time in the start-up but have a role of chief scientist. Indeed, the ownership of founders in the start-up is smaller than average (8% vs. 15%).

I should also add that the founders/employee shares ownership is much smaller too (25% vs. 40%) and the reasons are manyfold:
– founders have fewer shares as I just mentioned
– investors have more equity (50% vs. 45%)
– IPO shares are higher (25% vs. 16%). This comes from the fact (I think) that in order to raise the same amount of money, it is more dilutive for a company with less revenue…
– I did not mention another statistical element, which is they have fewer employees. The detailed table below imples about 100 employees (and you may see many of them have even less than 50 or 20 employees). This induces a smaller amount of stock options… (On average my 130 companies have 500 employees when they go public).

I thought this data was of some interest. Please react or comment!

Appendix: detailed data (notice that I am missing the Amgen data)

click on table to enlarge

Company	Founders	Seed	A	B & Later	ESOP
1	9%		26%	65%
2	30%		33%	31%	6%
3	34%		32%	33%
4	40%	7%	12%	41%
5	43%		47%	10%
6	35%	11%	27%	28%

Company	Founders	Seed	A	B & Later	ESOP
1	9%		26%	65%
2	30%		33%	31%	6%
3	34%		32%	33%
4	40%	7%	12%	41%
5	43%		47%	10%
6	35%	11%	27%	28%

Company	Founders	Seed	A	B & Later	ESOP
1	9%		26%	65%
2	30%		33%	31%	6%
3	34%		32%	33%
4	40%	7%	12%	41%
5	43%		47%	10%
6	35%	11%	27%	28%