Tag: Bob MetCalfe (Page 1 of 3)

HomeAway’s Brian Sharples’ Entrepreneurial Journey

Reporter with Silicon Hills News

Brian Sharples, courtesy photo from HomeAway

Brian Sharples, courtesy photo from HomeAway

As a serial entrepreneur, Brian Sharples, co-founder of HomeAway, has learned many lessons on his entrepreneurial journey.

He recounted several of them with Bob Metcalfe, professor of innovation at the University of Texas last week. Metcalfe interviewed Sharples, CEO of HomeAway at the Longhorn Startup Demo Day.

HomeAway has 1,900 employees worldwide, including about 1,000 in Austin in five locations. The company lists more than 1 million vacation rental homes in 190 countries. It went public in 2011 and has a market capitalization of $2.8 billion and its stock, listed as AWAY on the Nasdaq Stock Exchange, currently trades for around $30.50 a share.

The Early Years

First off, Metcalfe asked Sharples if he had a lemonade stand or paper route and to talk about his early entrepreneurial roots.

Sharples said he had done all of those things. And his entrepreneurial instincts came from his dad, who was an entrepreneur, electrical engineer and a pioneer in analog to digital conversion. He invented a digital panel meter. His invention is in the Smithsonian.

“He worked for himself, he didn’t have bosses, he had employees,” Sharples said.

Sharples grew up in an entrepreneurial environment in a suburb of Boston called Braintree. His family had a vacation house in Maine. He ended up attending Colby College in Maine and later got accepted to Stanford’s business school.

Grappling with Failure

Bob Metcalfe and Brian Sharples at Longhorn Demo Day

Bob Metcalfe and Brian Sharples at Longhorn Demo Day

Metcalfe asked Sharples about his biggest entrepreneurial failure.

Sharples, at 27, raised $1 million from Kohlberg Kravis Roberts
Venture Capital Fund to create a marketplace for selling used autos. He rented out Candlestick Park in San Francisco and built a huge auto sales event for thousands of people.

“It was like a rock concert for buying cars,” Sharples said.

He bet all of his money on that first event. On a Saturday, they opened the doors and by 11 a.m. a freak storm with 85 mile per hour winds blew in and destroyed the place.

“It turned from a beautiful event one minute to how do we make sure no one gets killed,” Sharples said. “People got hurt but no one got seriously injured.”

Eventually, Sharples created iMotors, a derivative of that business, and ultimately raised $120 million and was doing $25 million in revenue by 1999. But when the dot com crash happened they couldn’t sustain the business. They ended up selling the assets for $85 million to AutoNation.

Moving to Austin

So Sharples decided to get out of the auto business. He moved to Austin and got involved with IntelliQuest, an 11-employee company providing Dell with market research information. Sharples got to know the founder really well. He ended up cutting a deal where Austin Ventures and Sharples each took a third of the company. They took the company public in 1996 and Sharples ran it for four years.

“One of the things I learned from that experience is it’s really nice to have a partner,” Sharples said.

In entrepreneurship, a lot of people associate that with being the lone wolf, Sharples said. But it’s a lot more powerful if you have a partner, he said. So when Sharples decided to launch HomeAway he wanted a partner and Austin Ventures introduced him to Carl Shepherd, a merger and acquisition expert who became co-founder of HomeAway.

In 2005, Sharples and Shepherd created HomeAway, then known as WVR, a global vacation home business. The idea was to create the Expedia of vacation rentals and to acquire great businesses around the world. Raised $405 million and did 22 acquisitions in total, Sharples said.

“HomeAway took a great deal of money to create,” Sharples said. And to get that kind of money, an entrepreneur has to have a track record of success and returning money to investors, he said.

The IntelliQuest Initial Public Offering and later sale to WPP Group made about a 25 times return on Austin Ventures investment, Sharples said.

“Once you’ve succeeded like that for investors, investors like to back people who have done it before,” he said.

Founding HomeAway

Austin Ventures agreed to back HomeAway for $50 million initially and they issued a press release saying they had given Sharples $50 million for a new venture. That check made people listen to them, Sharples said.

Sharples and Shepherd hired McGarrah Jessee, an Austin-based Ad Agency, to come up with the name HomeAway. The owner of the website domain name ended up being an RV park owner in the United Kingdom. They were able to negotiate with him and buy it, Sharples said.

Originally Sharples thought they would buy vacation properties around the world and rent them to club members. But through his research, he found there were 7 million homes alone in Europe for rent. It was a much bigger market. So they decided to build a platform and make the properties available to book online.

Before doing the platform, Sharples and Shepherd spent four months doing research on the project. They found out Expedia paid $73 million for a company that had the same model as HomeAway and a year later it was gone. So he met with Rich Barton, the CEO of Expedia, in Seattle and he took them through the entire deal. Expedia tried to turn the business into a hotel business. The homeowners viewed their homes as their personal property and they wanted to talk to people and they didn’t want to do everything online. The conversation was critical.

Within the next two years, everyone in the HomeAway marketplace will become online bookable, Sharples said. The marketplace has changed. It wouldn’t have worked ten years ago, or even five years ago, but it works now, he said.

Thinking About Worst Case Scenarios

Bob Metcalfe at Longhorn Startup Demo Day

Bob Metcalfe at Longhorn Startup Demo Day

Metcalfe pointed out that the Longhorn Startup class instructors teach their students to fail fast. But Sharples, he said, studies others who have failed and seeks to avoid the failure altogether.

Because of his first failure in the auto business, Sharples said he became paranoid and studied all the things that could go wrong in his next ventures.

He advised other startup entrepreneurs to study others, study worst case scenarios and think about risk.

“People spend so much time in their pitches on how everything could go right, they need to devote a little more time and scenario planning on how they could go wrong,” Sharples said.

For example, HomeAway bought Vacationhomes.com in the U.S. for $40 million just to prevent a competitor from buying it, Sharples said.

“We don’t just study failures of other companies, which we did in the early days, but we calculate all the ways we could fail and we try to prevent them,” Sharples said.

Sharples favorite recruiting question is to ask job candidates to talk about something they’ve failed about in their life. And the second question he asks is what did they learn from it.

He also looks for humility in his employees.

“I just don’t have the patience for ego,” Sharples said. “I think it sets up a horrible dynamic within a company when people are operating for personal gain or personal showboating. I’m all for being super competitive. But within a team, you can’t be super competitive. Building a company is a team sport.”

The introduction song for Sharples when he entered the stage was Rusted Root’s “Send Me on My Way,” which he says they may use in their next commercial campaign because it sounds like HomeAway.

20X2 During Austin Startup Week: What Were They Thinking?

Reporter with Silicon Hills News

20X2 - "What were you thinking?" event at Austin Startup Week, Photo by Susan Lahey

20X2 – “What were you thinking?” event at Austin Startup Week, Photo by Susan Lahey

There were artists and musicians, comedians and luminaries of the Austin tech scene including Bob Metcalfe—representing gravitas in his suit and tie—Hugh Forrest, Bijoy Goswami, and entrepreneurs Eric Bandholz and Josh Kerr as well as Valerie Cason, ATC’s director of sales and marketing.

They were charged with getting up in front of a crowd in the dark bar to answer the question: “What Were You Thinking?”

But instead of 20 origin stories, as might have been expected, they told stories about wandering into a gay biker bar, stories about comedian Katie Pengra biting her grandmother’s fake breast, comedian Ralph Hardesty’s take on gay life in Alabama and a showering rain of f-bombs.

20X2 is an event launched at SXSW in 2001 that brings together people of all creative stripes and asks them one question. In this case: “What were you thinking?”

Participants have two minutes to answer the question. Founded by Kevin Newsum with Jeff Rider and Mark Couvillian, it landed at Elysium bar for Austin Startup Week.

Steve Basile, publican of B.D. Rileys, told the story of working for Tivoli as a “tech guy,” then quitting when IBM bought it, joining a startup that had five business plans in a year, then leaving it all to return to New York when his father got sick. A friend who had started an Irish pub asked him to help with marketing and paid him in Guinness.

“I’m thinking that if you move in the direction of something you truly love, you don’t have to think about anything else.”

Goswami gave a litany of what a lot of other great thinkers were thinking, from Galileo to Jobs, including the conversation in which Steve Wozniak warned that Apple Records was the name of the Beatles’ label and Jobs retorted that it didn’t matter because “We’ll never be in music.”

Valerie Cason, ATC’s director of sales and marketing, photo by Susan Lahey

Valerie Cason, ATC’s director of sales and marketing, photo by Susan Lahey

Cason told the story of her startup ZeneScene, being invited to join the SXSW Startup Bus and falling in love with the Austin tech scene, and staying in love with the Austin tech scene through the demise of her company.

Writer Erin Passons shared what many people are thinking—Mopac or I-35? Though, she said, “Mopac is a hinderance,” she said, “On Mopac, if you’re in a fender bender, you don’t have to worry about getting murdered” because the other car will likely be driven by a soccer mom or Matthew McConaughey. Whereas I-35 is “a cesspool of disaster and disgustingness.” It’s pavements are made up of missing person’s bones, heroine needles, and the skeleton of the Lindbergh baby.

Josh Kerr at 20X2, photo by Andy Aguiluz

Josh Kerr at 20X2, photo by Andy Aguiluz

Kerr, Written founder, was thinking that if he launched his company, Zosh, at DEMO and beat the crap out of a fax machine on stage to demonstrate that the app replaced the fax machine, he would make the crowd go wild and win the biggest prize. He was not doing the math that would have prepared him for the fact that the youth baseball bat he bought lacked the mass to smash a fax machine. He expected pieces to go flying. The bat bounced off the machine. So he picked up the fax machine and smashed it on the ground. Parts went flying, the crowd went wild, and he won the biggest prize.

Bandholz, founder of Beardbrand, said he was thinking about the money “which makes you do wicked, evil things, awful things, you can buy anything you want and save more money than most people make in a year.” The bearded entrepreneur explained how he’d bent his whole life to the founding of the company, showing a picture of himself, clean-shaving, vaguely resembling Opie Taylor, and saying “When I worked for a bank, I looked like this.”

Singer, songwriter Mike Wiebe got the whole crowd singing choruses of: “What was I thinking? Must have been stoned. Rushing into shit like this is was why I’m going die alone….”

Hugh Forrest, was not thinking in January 2000, when a stranger sent him an email proposing an SXSW event in which 20 people would speak for two minutes, that this would become a huge event. He was not thinking it would travel to Chicago and London and hundreds of tech celebrities would get involved and it would cover questions ranging from “Where am I?” to “What’s the big idea?” But since that has happened for 20X2, he said, he’s thinking that “The community has the best ideas for cool SXSW content and maybe this is one more opportunity to demonstrate the power of the community.”

Bob Metcalfe was thinking, after a gin and tonic, while he watched f-bombs falling and body parts and various sexual references punctuating most presentations: “The next two minutes are dedicated to the idea that you f’ing care what I was thinking.”

He reviewed the landmarks that happened the year he invented the Ethernet—the opening of the World Trade Center, Nixon’s confession to covering up Watergate, the invention of gene splicing and the Bic lighter and cell phones. “Today,” he said, with wifi “There are a billion new ports of Ethernet and I get less than a dollar for each one….

Then he told the story of the club to which he is a member, the club of people who invented things that plug into computers, like the USB, HDMI and so on. This club meets regularly but then the inventor of the USB died. The other club members served as pallbearers and lowered the coffin into the grave.

“Then,” Metcalfe said, “we lifted it up again, turned it 180 degrees….”

Bob Metcalfe Tells Startups to Build Their Networks to Succeed

photoBob Metcalfe, professor of Innovation at the University of Texas, spent some time talking with Jason Seats, managing director of Techstars, during a virtual fireside chat at Foundercon in Austin recently.

Metcalfe has held many careers including educator, publisher and columnist, venture capitalist, inventor of Ethernet and founder of 3Com. He has spent the past three years in Austin at UT and has pledged to make this area a “better Silicon Valley.” He works closely with startups as one of the instructors at the Longhorn Startup program at UT, which teaches undergraduates how to form and run a startup successfully.

In this Techstars video, Metcalfe tells the Techstars founders and staff “You are my favorite people. You are entrepreneurs.”

His advice to startup entrepreneurs is to build their networks to cultivate the success of their startups.

“Building your networks is the most important thing you can do to ensuring the success of your company, your customer networks, your networks of possible employees, your supply networks, your investor networks” Metcalfe said.

“One of the mistakes you can make is to not grok what it means to build a network,” Metcalfe said.

The important thing is that a rolodex must contain trusted sources, Metcalfe said. Entrepreneurs’ networks must be built by exchanging value with those people, he said.

“The first thing that can happen to a network is that you fail to build one,” Metcalfe said.

“The second thing that can go wrong is that your network can be junk,” Metcalfe said. “Some correlation of Metcalfe’s law is that a junky network isn’t worth shit.”

Build your networks and take care of the people in them, he said.

Louise Epstein Named New Managing Director of the Innovation Center at UT

Louise Epstein, Managing Director of the UT Innovation Center, photo courtesy of UT

Louise Epstein, Managing Director of the UT Innovation Center, photo courtesy of UT

The University of Texas at Austin’s Cockrell School of Engineering has named Louise Epstein as the managing director of its Innovation Center.

In the newly created job, Epstein will focus on entrepreneurial endeavors including managing the Longhorn Startup Program, which helps student and faculty led startups. She will also work closely with Bob Metcalfe, faculty director of the center and program manager of Longhorn Startup and Ben Dyer, entrepreneur in residence at UT.

“From entrepreneur to elected official, Louise brings a broad range of experience to the Innovation Center. Her commitment to the university and her initiative, focus and determination make her an excellent addition to the Cockrell School,” Metcalfe said in a statement. “She will surely inspire students and faculty, and I know she will provide strong leadership in taking the center to the next level.”

Epstein’s background is in investment banking and she founded Charge-Off Clearinghouse, a distressed debt company. Epstein also served on the Austin City Council. She also graduated from UT Austin and has served as an entrepreneur-in-residence at the McCombs School of Business and as a fellow at the IC2 Institute.

For more on Epstein and her new job, please read this UT report.

The Largest FounderCon Ever is Being Held in Austin This Week

Brad Feld, co-founder of Techstars with Jason Seats, managing director of Techstars Austin, photo by Laura Lo

Brad Feld, co-founder of Techstars with Jason Seats, managing director of Techstars Austin, photo by Laura Lo

A sea of green shirts will be seen around Austin this week.

First off, Techstars Austin held its Demo Day featuring 11 companies pitching their ventures at the Austin Music Hall on Wednesday.

Now, Techstars FounderCon is underway, which is the annual gathering of Techstars alumni companies from around the world. This is the largest Foundercon ever, said Jason Seats, managing director of Techstars Austin.

This week, 354 founders, 179 Techstars companies and 60 Techstars staff including three of its founders, Brad Feld, David Cohen and David Brown, will meet today and Friday. The meetings, which are closed to press and the public, feature a series of talks and discussions including a fireside chat with Seats interviewing Bob Metcalfe, professor of innovation at UT, inventor of Ethernet and co-founder of 3Com.

Techstars is hosting a party tonight at Mohawk starting at 7 p.m. and a special Austin Open Coffee meetup at Capital Factory beginning at 8 a.m. on Friday.

Hatching Thunder Lizards from Radioactive Eggs in Austin

Founder of Silicon Hills News

Godzilla Movie Photo: Classic Media

Godzilla Movie Photo: Classic Media

Can Austin produce a thunder lizard, a $100 billion tech startup?

Mike Maples Jr., managing partner of Floodgate Ventures in Palo Alto, thinks so. He wants Austin to hatch what he calls a thunder lizard in the next 10 years.

Bob Metcalfe, professor of innovation at the University of Texas at Austin, creator of Ethernet and founder of 3Com, quizzed Maples about thunder lizards and Austin’s entrepreneurial ecosystem, during a fireside chat at the Austin Chamber of Commerce’s A-List awards event Wednesday night.

“The metaphor comes from Godzilla,” Maples said. “Godzilla was half radioactive from atomic eggs and swam across the ocean and emerged with an attitude and began destroying things breathing fire on things, swiping buildings, eating on cars and trains like they were sausage links and that always just struck me as the right metaphor for a startup.”

“A startup that is great should try to be a thunder lizard,” Maples said. “It should be an attacker, not a defender. It should be adaptive.’’

Google and Microsoft are thunder lizards and Twitter is a thunder lizard in the making, Maples said.

Metcalfe asked him if there are any thunder lizards in Austin.

Maples said at times Dell has encroached on that title, but he said there’s an opportunity for more here.

What does Austin have to do to get more? Metcalfe asked.

“I’ve surveyed the infrastructure pretty systematically and I think we’re doing really well – we’re firing on all cylinders as I’m fond of saying,” Metcalfe said. “So what do we have to do differently to get some thunder lizards?”

First, Austin needs to believe it can happen, Maples said. He first mentioned the idea of creating a thunder lizard a year ago at the Austin Technology Council’s CEO summit.

“My manifesto is Austin creates a $100 billion exit in the next 10 years,” Maples said. “Some people would say $100 billion you’re smoking weed, that’s crazy.”

But Google is worth more than $300 billion, Maples said. Facebook is worth more than $150 billion, he said. Cisco and Microsoft and Apple, were worth more than $500 billion each at one time, he said.

“A lot of people I talk to in Austin don’t really believe it can happen yet,” Maples said. “In order to have $100 billion outcome, you have to be willing to try to go after the exponential game-changing ideas. And we need to have a community that supports that. We need to have a community that doesn’t call those people crazy and whacky and stupid but sort of roots them on and cheers them on.”

Silicon Valley knows it can do it because it has Google, a thunder lizard, but Austin doesn’t have one, apparently, Metcalfe said.

“So how do we get to believe we can?” Metcalfe asked.

Maples said he doesn’t have the answer. But he looks for change events that are even bigger than the company, Maples said. For example, Microsoft was started in the era of the microprocessor and Bill Gates envisioned that hardware would be a commodity and software would be the rare, valuable resource, Maples said.

“Most of the startups I’ve seen that have that potential to be super huge they find some tectonic shift in the technology landscape that’s bigger than any one company,” Maples said.

Then the entrepreneur has some proprietary insight and then they go build a company around that, he said.

Maples invested early in Twitter and it’s evolving to become a thunder lizard. Some of the ideas sound kind of crazy early on, Maples said.

The founders of Twitter were either going to call it Voicemail 2.0 or Twitter, Maples said. The founders explained that Twitter didn’t have a roadmap or revenue model but that it was a micro-blogging service that let people say what they were doing in 140 characters or less. Yet Jack Dorsey and Evan Williams were able to explain the potential that blogging and self-expression is a big idea and that they expected millions of people to use the platform.

To create a thunder lizard, an entrepreneur has to have “a non-consensus but correct view of technology transformation,” Maples said.

IMG_3058Maples looks for an “entrepreneur who is such an authentic match to a technology change it’s almost like they couldn’t do any business but that business. Too many people when they start a company are just doing a startup. They are not doing the kind of startup that could be their life’s work.”

For example, Ethernet was Metcalfe’s life work so it made sense for him to found 3Com, Maples said. He was moved to start something because he had fundamental insight the rest of the world didn’t see, he said.

“I used to say the answer is Ethernet, what is the question?” Metcalfe said.

Metcalfe asked Maples if Austin’s thunder lizard might crop up out of the new Dell Medical School at UT.

The potential areas of “atomic eggs” or radioactive eggs to hatch the thunder lizards in Austin are from the new medical center or from Google’s super fast Internet broadband network, Maples said.

One area that could possibly create a thunder lizard is in the area of genetic engineering, Maples said.

The question is when will someone drop out of UT to create the next thunder lizard, he said.

Metcalfe said he didn’t encourage people to drop out of UT and that he finished his undergraduate degree at MIT and graduate degree at Harvard and was still able to create a game changing technology and company.

Going back to the topic of thunder lizards, again Metcalfe asked how does Austin encourage them.

“In Austin, we continue to up our game, we continue to add fuel to the fire, we keep adding cinders to the fire,” Maples said. “I would like to see the belief we can create a $100 billion outcome become more mainstream. I would like to see us do things as a community to encourage that outcome.”

Maples said he will come to Austin more often to work with Metcalfe on incubating “radio active eggs.”

The talk ended with Maples, who got choked up recalling being in high school and reading about Metcalfe and his Ethernet invention, told Metcalfe he just wanted to thank him.

“Well you’re welcome,” Metcalfe said. “And that’s sort of the difference between you and me because I can’t remember when I was in high school.”

Bob Metcalfe, professor of innovation at UT, Ethernet inventor and 3Com founder with Mike Maples Jr., managing partner of Floodgate Ventures. Photo courtesy of Bob Metcalfe.

Bob Metcalfe, professor of innovation at UT, Ethernet inventor and 3Com founder with Mike Maples Jr., managing partner of Floodgate Ventures. Photo courtesy of Bob Metcalfe.

Circuit of the Americas is One of Austin’s Biggest Startups

Founder of Silicon Hills News

Greg Fenves, Provost of UT, Bob Metcalfe, professor of Innovation at UT, Joshua Baer, founder of Capital Factory and Longhorn Startup Labs instructor, Bobby Epstein, founder of COTA and Ben Dyer, EIR at UT and instructor at Longhorn Startup Lab.

Greg Fenves, Provost of UT, Bob Metcalfe, professor of Innovation at UT, Joshua Baer, founder of Capital Factory and Longhorn Startup Labs instructor, Bobby Epstein, founder of COTA and Ben Dyer, EIR at UT and instructor at Longhorn Startup Lab.

Don’t put too much pressure on picking a particular career in college, said Bobby Epstein, founder of the Circuit of the Americas.

“You might pivot a couple of times,” he said.

Epstein gave that advice at Longhorn Startup Lab’s Demo Day Thursday night to hundreds of people at the Lady Bird Johnson Auditorium. Bob Metcalfe, professor of innovation at UT, interviewed Epstein, who runs COTA, a Formula One racetrack and one of the largest startups in the Austin area. He quizzed Epstein about his entrepreneurial background and asked him what advice he would give to aspiring student entrepreneurs.

“The best advice you can give anyone as an entrepreneur is to be prepared to work 70 hours to 80 hours a week,” Epstein said.

It’s ok to risk everything, Epstein said. “But don’t risk more than that.”

Too many people start undercapitalized businesses.

“It’s great to be ambitious and start a business but don’t risk everything you have to start something that’s undercapitalized because that’s potentially a formula for failure,” Epstein said. “Don’t think that when you get to that next point the next dollar is going to be there. I think that’s really important before you spend it all.”

Epstein, a UT graduate, was born in New Jersey, but grew up in Dallas and spent time in Indianapolis. His father was an engineer, inventor, and entrepreneur and worked at Bell Labs.

He didn’t have a lemonade stand but he did host a carnival in his backyard. And he ran a DJ business in high school.

Epstein attended UT in 1983 and graduated with a degree in Liberal Arts. When Metcalfe asked him if he knew Michael Dell, who founded his company at UT in 1984, Epstein said no.

“He was a year ahead of you,” Metcalfe said.

“In many ways,” Epstein said.

Epstein didn’t start a company in college. But he did drop out of medical school. He ended up working on Wall Street on a bond-trading floor doing research. He created predictive and regression models on trading patterns.

“It was supposed to be a summer job,” Epstein said. He liked the job and he worked a lot of hours. He decided not to go to medical school and he continued working in the bond trading industry. He ended up working on mortgage derivatives and in 1992 he founded a broker dealer. He sold that business with 100 employees in 1995. He founded a new business, Prophet Capital Asset Management, and moved it to Austin in 1997 and has had 19 years of steady growth. His hedge funds manage more than $2 billion, according to a Forbes article.

“So this business was so successful that you were able to consider founding and financing COTA,” Metcalfe asked.

“Yes,” Epstein said.

“Can you tell us how that happened?” Metcalfe asked.

BmB4luTCIAAaq-7He met a guy who wanted to bring Formula One to Austin and Epstein thought that was a terrible idea. But he had a piece of property he bought in 2005 in Southeast Travis County that Epstein planned for houses. Instead, he pivoted. He turned what would have been a residential development into a racetrack. Today, that piece of property is about 20 percent of the land that COTA sits on. The 3.4 mile racetrack is on a 350 acre development. It also includes an amphitheater, which can accommodate up to 14,000 people.

The Circuit of the Americas got its primary funding from San Antonio Billionaire Billy Joe “Red” McCombs along with Epstein’s contributions. The state of Texas, through its Major Events Trust Fund, also pledged millions to the project.

Since COTA has been in business for a year and a half, it has had an economic impact of $1 billion, Epstein said. It has also raised the global profile of Austin, he said. And it has created lots of jobs, he said. COTA has 100 year-round employees and thousands that come in to work for events. The project costs $400 million in construction, the two Formula 1 races have generated $250 million to $300 million each in economic impact and the track has hosted more than 1.4 million people, Epstein said. And 250,000 have come in from outside Texas.

“A billion dollars in revenue in a year and half. Doesn’t that make you the biggest startup in Austin?” Metcalfe asked.

“It’s not all our revenue,” Epstein said. “That’s the only thing. We have two revenue streams. One revenue stream that goes to everyone else and one revenue stream that goes to COTA.”

“Let’s call it gross revenue,” Metcalfe said.

COTA does encourage people to come in from out of state and spend money, Epstein said.

“We get the people with the biggest pockets and have them come here and empty them out…if they have a great time they’ll come back,” Epstein said.

COTA isn’t yet profitable but it has helped the local economy tremendously, he said.

The racetrack is betting on other events such as the X-Games and concerts at its amphitheater, which will host a Jimmy Buffet concert next month, to push it into profitability.

BmB4rRICEAAZGxAMetcalfe also asked Epstein about all the technology used in the cars and said that’s one more reason COTA is a high tech startup. The criteria for a fast car, according to a Ferrari car designer, are a fast engine, aerodynamic design and high-tech wheels, Metcalfe said. He didn’t mention the driver, he said. He asked if there would a driverless robotic car race or an electric car race.

Epstein said he didn’t think the drivers were expendable. They have tested driverless cars on the track though, he said. And they have raced electric and solar vehicles there also.

Bubbles, Unicorns, Outliers and Innovation in Silicon Valley and Austin

Founder of Silicon Hills News

IMG_2628When the Facebooks and Twitters of the world are soaring everyone thinks of Silicon Valley as a glorious place, said Bill Gurley, general partner of Benchmark Capital.
“But when that changes people go away very, very fast,” Gurley said. “They scatter like the lights coming on in a room.”
He tells people they should be investing in Silicon Valley when no one else is. That’s how they get phenomenal returns, Gurley said. They also need to develop long-term relationships, he said.
“I think it’s important for people to understand how cyclical things are,” Gurley said.
He spoke Thursday afternoon on a panel of experts discussing trends and emerging technologies during the second annual University of Texas in Silicon Valley event at the Sharon Heights Golf and Country Club on Sand Hill Road in Menlo Park.
Another panelist, Mike Maples Jr., partner in Floodgate Ventures, thinks this decade is going to be as pivotal in innovation as the 1970s were. In the 2000s, the cost of starting a company collapsed, he said. That created an opening for a new class of venture firms, he said.
“Innovation is becoming democratized,” Maples said.
Bob Metcalfe, professor of innovation at the University of Texas at Austin and the inventor of the Ethernet, is worried there’s a bubble in the startup world going on now.
“I do think one of the reasons the business is cyclical is because we take on risk very marginally and there’s a lot of mimicry,” Gurley said.
IMG_2629For example, in 2012, Workday went public and immediately started trading at 15 times forward revenue even though half the revenue is services and they’re burning $30 million to $40 million a year, Gurley said.
That triggers a discussion in every software as a service boardroom around Silicon Valley about whether the companies are pushing hard enough and going far enough, Gurley said. “So you go raise more money and you build up the sales and marketing line items and you burn more.”
“And so the collective burn of the SAS companies in Silicon Valley must be in the billions right now if you could add them all up,” Gurley said. “Another way to think about this, which I wrote about recently, is the number of people employed in Silicon Valley in money losing companies is at an all time high now.”
The last time it was that high was in 1999, Gurley said.
“There is inherent risk in that,” Gurley said. “If we hit any kind of speed bump you won’t be able to get those companies into a position where they can be sustainable without very catastrophic events.”
Twitter is an example of this trend. It’s unprofitable.
“No one is sacrificing growth for profitability right now,” Gurley said. The markets are rewarding companies for that, he said.

Centers of Innovation

Silicon Valley, Austin and Israel have been so successful as tech centers because they have a fundamentally different belief system in place, said Greg Horowitt, co-founder and managing director of T2 Venture Capital and the author of “The Rainforest: the Secret to Building the Next Silicon Valley.”
One of the beliefs is in the concept of paying it forward, Horowitt said.
“The fact is we have to take care of each other,” he said. “There has to be a sense of yes it’s important to compete, but you also have to collaborate.”
There has to be a sense of a paradox of innovation, Horowitt said. That is only accepted once it’s imitated, he said. It’s hard to spot innovation because there’s no pattern recognition when something is completely new, he said. The bubbles happen when entrepreneurs get caught up in the imitation, he said.
“And so what we have to do is we have to be able to support the crazies,” Horowitt said. “We have to allow them to experiment and be creative. We have to allow people to fail and take the risks and we don’t punish them for doing that.”
The most successful tech centers have created systems in which knowledge and ideas flow freely, Horowitt said. He cited, as an example, author Matt Ridley’s book: Rational Optimism in which Ridley defines innovation as ideas having sex.
“When I read that I knew my job is to promote promiscuity,” he said.

Cultivating risk-tasking environments

The kind of environment that promotes risk-taking leads to rewards, Maples said. At Stanford University, the roots came from the gold rush, Maples said. Its professors encourage students to drop out and try out their ideas, he said.
“The thing I’ve seen in Silicon Valley is why don’t you just try it,” Maples said. “That’s the kind of atmosphere that is going to cause you to find the next rock of gold or create the next Google.”
In Silicon Valley, there is a tiny fraction of outliers who pursue counter-intuitive exponential ideas, Maples said. “Most of them fail. But when they work, they are spectacular. The crazy exponential idea out here gets encouraged and has an outlet. The crazy exponential idea in Austin, which I hope will change someday, but it tends to have mentors, advisors and people around it that say you’re trying to be a vitamin not a pain killer. You’re not solving the customer problem.”
Innovators in Silicon Valley like Sergey Brin and Larry Page, co-founders of Google, and Elon Musk, founder of Tesla and SpaceX, don’t think that way, Maples said.
“That’s the X factor that Silicon Valley has,” he said.
Part of that is volume, Gurley said.
“Every smart and dumb version of every idea gets tried,” Maples said.

In search of Unicorns and Thunder Lizards

The size of undergraduate ideas is very small at the University of Texas at Austin, Metcalfe said.
“We’ve got to do a Unicorn in Austin pretty soon,” Metcalfe said. “That’s in my performance appraisal. I have to deliver some Unicorns.”
Unicorns are startups that hit $1 billion in valuation. Maples calls them Thunder Lizards.
Austin also needs more catalysts to help grow its ecosystem. Dell hasn’t created as many startups in Austin as some of the successful technology companies in Silicon Valley, according to the panelists.
The research university, in this case the University of Texas at Austin, is the driver in the innovation ecosystem, Metcalfe said.
There’s a bubble in social, mobile and cloud, Metcalfe said.
But Maples thinks more opportunity lies in the mobile industry because young people rely on their mobile phones more than cars. His 19-year-old daughter doesn’t have a driver’s license. He investigated and found out many teenagers no longer get their driver’s license. They rely on their phone for freedom that cars once provided, he said. So he thinks there’s a lot more opportunity developing for social, mobile and local apps for the mobile phone.
He thinks there are going to be companies worth more than $100 billion that put mobile first.
Gurley said a lot more of the population is becoming urban.
The democratization of innovation will lead to more diverse tech entrepreneurs creating companies regardless of their geography, Maples said.
In Austin, the new Dell Medical School will spark more innovation and startups in the life sciences and biotechnology industries, said Metcalfe. He often tells his students: “The world’s most important problems will not be solved by yet another website.”

Fourteen Startups Pitch at UT Longhorn Startup Demo Day

Mark Cuban with the Longhorn Startup team of Pinecone

Mark Cuban with the Longhorn Startup team of Pinecone

Founder of Silicon Hills News

The fifth Longhorn Startup Demo Day at the University of Texas drew the largest crowd ever.
Close to 1,000 people registered to attend the event and most of them showed up despite the cold front and blustery weather that blew into Austin on Thursday.
The evening featured two accomplished entrepreneurs, Cotter Cunningham, founder of RetailMeNot and Mark Cuban, co-founder of Broadcast.com. The evening also spotlighted pitches from 14 student run startups.
Cunningham with RetailMeNot.com, the world’s largest online coupon site, kicked off the evening with a talk about his entrepreneurial hits and misses and lessons he has learned.
At 46, Cunningham left his job as COO of Bankrate in Palm Beach and founded Divorce360.com. He invested $1 million and raised another $1 million from Austin Ventures. The site failed but Cunningham learned from the experience. He founded a new company in Austin, which came to be known as RetailMeNot.
Following Cunningham’s talk, 14 undergraduate teams pitched their ventures.
This class had the most diversity of any Longhorn Startup class, said Bob Metcalfe, professor of innovation at UT and one of the instructors. It featured a hardware startup – a 3D Printing service: Sinigma, a medical device maker: Austin Thermal, a battery charger embedded in a shoe: Everywhere Energy, mobile apps and some websites, he said.
“What always amazes me is how much the presentations improve in the last two days,” Metcalfe said. “It has happened all five times.”
“We had lots of great companies,” said Joshua Baer, instructor with Longhorn Startup, serial entrepreneur and co-founder of Capital Factory.
Baer and Metcalfe teach the class along with Ben Dyer, founder of Peachtree Software and now Entrepreneur in Residence at UT. Dozens of mentors in the Austin startup community also volunteer to help the students.
This time, the pitches featured four biomedical companies and a partnership with the Texas Medical Accelerator, Baer said.

Mark Cuban with the MicroMulsion team

Mark Cuban with the MicroMulsion team

The students gave great pitches, which impressed Cuban, who said he would consider investing in half of them.
Baer had a favorite too. He liked MSpaces, a hospitality startup that signs long term leases for apartments in Austin in desirable locations. Then MSpaces furnishes them with second-hand furniture and local artwork, and then posts them on AirBnB as short-term corporate and vacation rentals.
Hunter Monk, the company’s founder, said it’s seeking to be like “Uber for AirBnB.” He rents the apartments out at competitive rates from $60 to $139. His apartments generate $10,000 in revenue monthly and $3,600 in profits, Monk said. He’s essentially running a hotel business without having to own any brick and mortar buildings.
Another company, Suit of Clubs, a management platform for student organizations, has merged with InterviewStreet, a Y-Combinator company, said Siya Raj Purohit, its founder. She has taken the class twice. She graduates Friday with a double major in computer engineering and economics. She plans to work with InterviewStreet for a few months and then she’ll join Udacity, an education and technology startup based in Mountain View.
“I have always liked business,” Purohit said. “But this class solidified that. This class has had the greatest impact on my educational experience here. “
Siya Raj Purohit, founder of Suit of Clubs

Siya Raj Purohit, founder of Suit of Clubs

The best part was learning directly from successful entrepreneurs, she said.
“Every week we got to hear from a different entrepreneur,” she said. The professors, Metcalfe, Baer and Dyer, also shared their experiences and provided excellent advice, she said.
The team behind BluSense, an networking app that maps attendees at a convention, also took the class last semester. The startups can take the class again to further develop their ideas, which often results in a pivot or change of course. Last semester, Forrest Dukes with BluSense pitched a wristband with built-in sensors to allow people to network at conferences. Now the device is an app.
Following the event, Cuban visited with many of the startups. He stayed until after 11 p.m. to give them advice. He also took pictures with each team. And he even met the team behind The Zebra, a car insurance aggregation site, which Cuban has invested in but he had not met the team until Thursday night.
In a brief interview, he praised programs like Longhorn Startup and said that anytime startups can get advice from experienced entrepreneurs it’s a good program.
Asked about his failures, Cuban said he had a lot. He tried to market powdered milk. He ran a bar, which went out of business in college.
When asked if Dancing with the Stars was a failure, Cuban said absolutely not.
“That’s hard work,” he said.
Cuban and his professional dancing partner, Kym Johnson, got eliminated from Dancing with the Stars during its fifth season in 2007. Cuban, who is highly competitive, did not like to lose.
The Austin Thermal team of Zi-on Cheung, Ashvin Bashyam and Emmanuel Nunez (photo courtesy of Austin Thermal)

The Austin Thermal team of Zi-on Cheung, Ashvin Bashyam and Emmanuel Nunez (photo courtesy of Austin Thermal)

Following the pitches at Longhorn Startup Demo Day, one of the first startups Cuban spoke with was the three-person medical device team of Austin Thermal made up of Ashvin Bashyam, Emmanuel Nunez and Zi-on Cheung. They created Hot IV, a medical device that warms intravenous fluid before it is injected it into the body. Hot IV is targeted at hypothermia recovery and prevention, Bashyam said. Their initial market is trauma victims and the military, he said. They already have a working alpha prototype, intellectual property, and Food and Drug Administration clearance on a previous version of the device. Cuban liked the idea and told them to email him.
Cuban also met with MicroMulsion, which is creating micro gels for cell cultures. The product has lots of applications in biomedical research, said Anirudh Sharma, one of the four-team members. They all wore white lab coats.
“He wants to give us money,” Sharma said. “We weren’t expecting this. We don’t even have business cards.”
The company, like a few others, doesn’t even have a website yet.
Cuban spent a lot of time answering questions from the Pinecone team. They developed project management software for onboarding new employees.
“It’s a good idea,” Cuban said. “But you’ve got to find that sweet spot.”
One member of the team asked Cuban if he had heard of other startups with the same idea.
“I don’t know of any but I haven’t researched it,” he said.
Selling the product to small businesses to integrate their applications is a huge market but it’s a grind, Cuban said.

The other startups pitching included:

Everywhere Energy – a battery charger embedded in the sole of a shoe – sole charger that can provide up to two hours of charging energy for a cell phone or other device.

Sinigma – a 3-D printing service that can print in five different colors targeted at consumers.

UpNext – a mobile app to replace pagers in restaurants. The idea is to give the user more flexibility on long waits.

Basedrive – onsite data storage for businesses.

Recommenu – a mobile app that provides restaurants with feedback on their food.

SocialToast – a mobile app to help people find their friends at bars.

Aurality Studios – a software program for disabled people to interact with everyday technologies.

DayOf – a mobile app that curates daily events.

Billionaire Mark Cuban likes to “Party Like a Rock Star” and Invest in Startups

Josh Baer, Bob Metcalfe, instructors with Longhorn Startup and Mark Cuban

Josh Baer, Bob Metcalfe, instructors with Longhorn Startup and Mark Cuban

Founder of Silicon Hills News

Since selling Broadcast.com to Yahoo for $5.7 billion in 1999, Billionaire Mark Cuban has invested in 80 startups.
But his entrepreneurial ventures began as a kid growing up in Pittsburgh.
“As long as I can remember I was an entrepreneur,” Cuban said.
At the age of nine and ten, Cuban packaged baseball cards and sold them to his friends.
At 12, he wanted new basketball shoes. His dad told him that his tennis shoes were just fine and when he had a job he could buy any kind of shoes he wanted. A family friend had some garbage bags he wanted to get rid of and offered them to Cuban. So Cuban sold them door-to-door to earn enough money to buy the basketball shoes.
Cuban recounted the story Thursday night before a packed audience of more than 800 people at the University of Texas Longhorn Startup’s Demo Day. The semester-long course for undergraduates at UT aims to teach them entrepreneurial skills and how to found a startup. One of its instructors, Bob Metcalfe, professor of innovation at UT, Ethernet inventor and co-founder of 3Com, interviewed Cuban at the Lady Bird Johnson Auditorium following pitches by 14 student-run startups.
During the hour-long talk, Cuban provided insights into his entrepreneurial journey and lessons learned along the way.
Early on, if it wasn’t garbage bags, it would have been something else, Cuban said.
At 16, Cuban’s mom introduced him to stamp collecting. He consumed information about stamps. At stamp shows, Cuban would buy a stamp from one dealer for 50 cents and walk down to the other side of the show and sell it for $50. Selling stamps helped him pay for school.

Cuban’s College Years

He left Mt. Lebanon High School early because he couldn’t take business classes. He went to the University of Pittsburgh and took classes. He earned enough credits to finish high school. He ended up transferring to the Kelley School of Business. He researched and discovered it was one of the top ten business schools in the country and it had the lowest tuition. At Indiana University in Bloomington, Cuban earned his undergraduate degree in business. He also did a year and a half of his MBA.
“I wanted to take all the hardest classes that I could my freshman and sophomore years and I promised myself I wouldn’t drink and then my junior and senior years when I was 21 I would take all the easy classes and party like a maniac,” Cuban said. “And that’s what I did.”
He also ran a bar in college, which went out of business.
After he left college, Cuban worked for nine months for Mellon Bank in Pittsburgh. He learned how to program there in Fortran. But he didn’t like banking much so he moved to Dallas.

Moving to Dallas

When Metcalfe asked him why, Cuban said “For fun, sun, money and women.”
He had friends who moved to Dallas. He liked the tropical climate. He lived in the village with six guys in a three-bedroom apartment and he slept on the floor.
“I loved every minute of it,” Cuban said.
He worked as a bartender at night. He bought a Texas Instruments 99/4A computer and taught himself to program. He really liked it. Then he got a job at Your Business Software, a retail store, selling Peachtree software and different applications. He did that for nine months and then he got fired. That’s when he started his own PC and software consulting business called MicroSolutions. They set up PCs and software for businesses and set up local area networks.

The crowd clamoring to get a picture with Mark Cuban and Bob Metcalfe at the end of Longhorn Startup Demo Day

The crowd clamoring to get a picture with Mark Cuban and Bob Metcalfe at the end of Longhorn Startup Demo Day

At the same time Cuban ran MicroSolutions, a kid in Austin was launching a PC business, Metcalfe said. He asked Cuban if he ever ran into him.
That prompted Cuban to talk about the importance of history in understanding the world today.
“One of the things kids are missing today is a sense of history,” Cuban said. They Google something and if it doesn’t come up in Google, it didn’t happen. But there’s a ton of stuff that isn’t in Google, Cuban said. What kids don’t know is if the companies went out of business, their servers aren’t online anymore and they can’t find out about them. Entrepreneurs need to dig deeper to find information on people who have tried an idea and failed at it so they don’t repeat those same mistakes, he said.
Yet one of the most brilliant things Cuban learned from was this kid in Austin who would post the price of generic computer parts in PC Week Magazine. Cuban drove down to Austin and bought a bunch of computer parts directly from him. When he got back to Dallas, Cuban wrote him a letter.
“Michael, if you keep this up, things will go really well for you,” Cuban said. That kid, of course, was Billionaire Michael Dell. Today, they still crack up about it, Cuban said.
“How did you decide to sell your company to CompuServe?” Metcalfe asked.
“They offered, and I said yes,” Cuban said.
He wanted to retire by the time he was 35. MicroSolutions had $30 million a year in revenue and was very profitable, Cuban said. He sold the company to CompuServe for $6 million. After that he worked for them for a little bit. But then he got a lifetime pass on American Airlines, he retired and “partied like a rock star.”

The founding of AudioNet, later to be renamed Broadcast.com

Cuban and his friend Todd Wagner started AudioNet so they could listen to Indiana basketball games on the Internet. They started the company in the second bedroom of Cuban’s house.
Cuban had a $39 Video Cassette Recorder that recorded for eight hours. He would record radio stations and then import that programming into his computer and eventually post it to the Internet. They had 600 to 700 radio stations that they would post online. The company had tens of thousands of hours of audio content online and more than one million visitors daily coming to the site to listen to it.
Cuban and Wagner started AudioNet in 1995, the same year that Netscape went public. They sold it four years later to Yahoo for $5.7 billion in stock.
In 2000, Cuban spent $285 million of his fortune to buy the Dallas Mavericks National Basketball Association team from Ross Perot Jr.
Cuban always loved basketball. He didn’t play in high school though. He said he was five foot eight and weighed 240 pounds in high school. Today, he’s six foot three and weighs 205 pounds.
The Mavs are a different type of entity, Cuban said. The team is unlike any business he has ever run. Even though he writes the checks, the team belongs to the community, he said. In 2011, the Dallas Mavericks became NBA champions. To turn the team around, Cuban focused on putting players in a position to succeed.
In addition to owning the Dallas Mavericks, Cuban also stars on the popular television show Shark Tank on ABC which features entrepreneurs pitching venture capitalists with the hopes of landing an investment.
“It’s a lot of work,” Cuban said.
The so-called “Sharks,” successful businessmen and women who invest their own money, don’t know anything about the people who pitch to them, Cuban said. What takes just 10 minutes of TV time, though, can take two and half-hours of interrogation off camera, Cuban said.
The investors, or Sharks, are allowed to do due-diligence after they invest in the companies. In fact, one time Cuban made an investment in a woman’s company but her husband didn’t believe in paying taxes and hadn’t ever paid them, Cuban said. So he was able to get out of that deal.
Out of the 80 startups Cuban has invested in, 28 came from Shark Tank pitches.

Mark Cuban and the rest of the cast of Shark Tank, photo courtesy of Shark Tank

Mark Cuban and the rest of the cast of Shark Tank, photo courtesy of Shark Tank

“Shark Tank has really ignited the entrepreneurial fire in a lot people,” Cuban said. “It’s really inspired a lot of people to start their own businesses.”
Out of his 28 investments, Cuban has had one company fail and another that should shut down, he said. But the others are either dragging along or doing very well, he said.
“Shark Tank is the most successful one hour selling platform in the world,” Cuban said. Lani Lazzari, owner of Simple Sugars, sold nearly $1 million worth of her body scrub products after being featured on the show for 10 minutes, Cuban said. He invested $100,000 for a 33 percent stake in her company. She recently turned down a buyout offer. She wants to get to $30 million in annual revenue, he said.
Now is an amazing time to start a business, Cuban said. With a laptop, phone, Internet connection and Amazon account, people can create any kind of business, Cuban said.

Entrepreneurs only fail because of lack of effort and brains

“The one thing in our lives every entrepreneur can control is effort,” Cuban said. Companies don’t fail for lack of anything but lack of effort and brains, he said.
The biggest error companies pitching to Cuban make is that they don’t have any sense of history, he said. Some entrepreneurs also underestimate the amount of effort it takes to turn their ideas into reality.
“It takes time, it’s a grind,” Cuban said. “There are no shortcuts. You’ve got to grind and grind.”

Mark Cuban meets the team behind The Zebra, an Austin startup he invested in but has never met in person until Longhorn Startup Demo Day.

Mark Cuban meets the team behind The Zebra, an Austin startup he invested in but has never met in person until Longhorn Startup Demo Day.

Entrepreneurs need to learn from what’s been done before, Cuban said. He likes to retweet articles on business failures so people can learn from them. That information becomes more valuable because it’s harder to find, Cuban said.

The luckiest guy in the world

An audience member asked Cuban what he regrets not doing.
“It’s turned out pretty well – nothing,” Cuban said. “Someone’s got to be the luckiest guy in the world and luck has played a big part in the level of my success. And I’m just glad it’s me.”
To pitch Cuban, send him an email to MCuban@gmail.com. He reads the first paragraph and if he’s interested, he’ll read more and send the entrepreneur some follow up questions. If he likes the answers, then he might invest. He has invested $10 million in startups he discovered through email pitches and with $6 million worth of those investments he has never even met the entrepreneur, Cuban said.

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