Tag: Brett Hurt

Rod Canion Recounts How Compaq Fought IBM and Won

Founder of Silicon Hills News

BiAY_NfCYAAsek-A true life David vs. Goliath story played out in the early days of the PC industry-pitting upstart Compaq Computer against industry behemoth IBM Corp.

Rod Canion, co-founder of Compaq, recounted the tale during a conversation Wednesday night with Brett Hurt, Entrepreneur in Residence at the University of Texas. The Longhorn Entrepreneurship Agency sponsored the event as part of its UTEWeek.

In the early days of the PC industry, PCs became open architecture machines because IBM, the number one computer company in the world, put a skunkworks team in Boca Raton, Florida and ordered them to create an IBM PC in one year.

That IBM team created the first IBM PC, which debuted in 1981 based on open architecture including Intel’s microchips and Microsoft’s DOS operating system.

“The point is everything that went into the original IBM PCs was off the shelf,” Canion said.

IBM expected they would sell thousands, Canion said. They sold millions and became the leader in the PC industry.

“The PC, as a product in business, was just starting to catch on,” Canion said.

The must-have software application of the day was VisiCalc, the first spreadsheet that created the driving force that caused PCs to permeate businesses in a short amount of time, he said.

Around that time, Canion and his co-founders left Texas Instruments looking for a product to start a company with because they knew the PC industry would explode creating great opportunity. They wanted to create a rugged, portable PC.

“But it almost died before it started because I had enough experience to know we couldn’t get software adapted to it,” Canion said. He knew VisiCorp would never provide its software to a startup.

That’s when Canion came up with the idea of creating a portable computer that would run software written for the IBM PC. They would create compatible software. In 1982, they put together a four page business plan and a few weeks later they landed venture capital from Kleiner Perkins, Silicon Valley’s premier VC firm.

“In about five weeks, from the conception of the idea to when we started the company, we were off and running,” Canion said.

They thought they would be able to buy an operating system from Microsoft to run on the computer. They found out that was wrong. They figured out a way to take what Microsoft did have and fix the incompatibilities in 12 months so they could run IBM’s software, Canion said.

The sewing-machine sized Compaq portable was the first 100 percent IBM-compatible PC and the first portable one.

BiAg9TnCUAA7u2yIn January of 1983, when Compaq Computer shipped its first PCs, they essentially ran all of the IBM PC software, Canion said. Then the company licensed its modified version of MS-DOS back to Microsoft for it to sell to all of the rest of the industry.

“That’s the point where the industry standard really began,” Canion said.

That’s when a large number of computer companies began to run all the same software, Canion said. By 1987, IBM, Compaq and about a dozen other strong brands in the compatible arena accounted for 75 percent of the PC industry. Apple had been relegated to a niche.

“This powerful industry standard had really taken hold,” Canion said.

IBM didn’t like the idea. They came out with a proprietary product, PS2 and they offered their competitors the ability to buy a license by paying 5 percent of royalties. Dell and others began to buy licenses from IBM to the PS2. But Compaq didn’t give up.

Nine months later, they came up a competitive advanced architecture to IBM that would run all of the old software. Canion said they knew if it was IBM vs. Compaq they would still lose.

“IBM’s brand was too strong,” he said.

Instead, Compaq put together an alliance with Microsoft, Intel and HP to compete against IBM. Compaq was going to give its technology to all of the other companies. Eventually, they got seven other companies to sign on and became known as the gang of nine. By September, they held a press conference, and by then they had gotten 80 companies behind the new standard, essentially the whole industry everyone but IBM and Apple behind the Open standard, Canion said.

Four years later, Compaq passed IBM to become the industry leader in PC sales. But more importantly, the company got an open architecture PC standard adopted that led to lower prices and more consumer choice, Canion said.

A few years later, Compaq passed the $1 billion mark in annual revenue, the first company to hit that milestone so quickly.

Canion provides more details on Compaq’s challenge to IBM in his new book “Open: How Compaq Ended IBM’s PC Domination and Helped Invent Modern Computing.” He signed copies of the book following his talk.

Persistence and Confidence Key to RetailMeNot’s Cotter Cunningham’s Success

Founder of Silicon Hills News

IMG_1723It’s not a good idea to quit a good job and launch a divorce startup while happily married, said Cotter Cunningham.
“The day you quit your job to go home and tell your wife you’re starting a divorce site is not the best day of your life,” Cunningham said.
At 46, Cunningham left his job as the COO of Bankrate in Palm Beach and wrote a $1 million check to launch Divorce360.com. He also raised $1 million from Austin Ventures. The investment was a good chunk of his net worth.
“It failed miserably,” Cunningham said.
The first year, the startup spent $400,000 and made $19, Cunningham said. The second year, it spent $1.5 million and made $300,000, he said.
“I feel like we failed because of the business model,” he said.
Cunningham recounted his entrepreneurial journey Tuesday evening during an interview with Brett Hurt, co-founder of Bazaarvoice and entrepreneur in residence at UT during a talk sponsored by the Herb Kelleher Center for Entrepreneurship at UT.
Today, Cunningham is the founder, president and CEO of RetailMeNot, the world’s largest online coupon and deals marketplace. The company, founded in 2009, has 300 employees with its headquarters in Austin and offices in the United Kingdom, Germany and France. The company has raised approximately $300 million from investors including Austin Ventures, Norwest Venture Partners, Adams Street Partners, Institutional Venture Partners, JP Morgan and Google Ventures.
Hurt asked Cunningham how he became an entrepreneur. Cunningham and his brother grew up in Helena, Arkansas and later Memphis, after his parents divorced. His dad was speaker of the house in Arkansas and liked to debate politics around the dinner table. Cunningham liked growing up in a small town where everyone knew his name and the kids had a lot of freedom.
“I was driving at 14,” he said. “My dad threw me the keys and said have fun.”
When Hurt asked Cunningham what advice he would give to students, Cunningham advised them to be confident and persistent.
“I think to succeed as an entrepreneur, you have to have a strong amount of confidence in yourself, bordering on arrogance,” Cunningham said. “Persistence has worked for me. It was not something I was born with. I had to develop it as a skill.”
Cunningham said he didn’t have a great academic record. When he graduated from Memphis State, he landed a $14,000 a year job working for Arkansas Gov. Bill Clinton. He then went on to get his MBA from Vanderbilt University.
“I have always persisted,” Cunningham said. “I didn’t give up.”
That’s where passion comes into play, Hurt said. It drives entrepreneurs to keep going in the face of adversity.
“You almost can’t be persistent if you don’t like what you do,” Cunningham said.
Cunningham joked that he was the antithesis of Hurt, who he joked grew up with an entrepreneurial pacifier from birth.
After Divorce360 failed, Cunningham moved to Austin with his family and worked with Austin Ventures to start something new. He met a guy at a cocktail party who was going through a divorce and he found out he owned an online coupon site. The site generated $3 million a year in revenue.
“It was insanely profitable,” Cunningham said.
That sparked him to start Whale Shark Media, later renamed RetailMeNot. With the backing of Austin Ventures, Cunningham cold-called 100 online coupon sites. He interviewed 60 of them. He ended up buying three of them. Together, they had $10 million in revenue. He hired 30 people. He found out that RetailMeNot, the biggest competitor, based in Melbourne, Australia, was for sale. He got on a plane a few days later and flew to Australia to meet with the founders.
“We pursued them for nine months,” he said.
Part of the courtship involved eating kangaroo meat, something that Cunningham did not enjoy. But it helped him close the deal.
The lesson for the students, said Hurt, is that to be successful, “you have to eat kangaroo meat.”
Through all of the acquisitions, RetailMeNot has been able to maintain its corporate culture by treating employees the right way, Cunningham said. It got 60 employees through the acquisitions.
“We believe people work hard for us, so we need to work hard for them,” he said.

An Evening With Josh Baer: On Obama, Lionel Ritchie, and Not Getting Everything Right

Reporter with Silicon Hills News

Brett Hurt, UT Entrepreneur in Residence, interviewing Josh Baer, co-founder of Capital Factory, serial entrepreneur and angel investor.

Brett Hurt, UT Entrepreneur in Residence, interviewing Josh Baer, co-founder of Capital Factory, serial entrepreneur and angel investor.

Josh Baer is living something of a charmed life right now. When ACL was rained out last Sunday, he managed to get Lionel Ritchie to give a private performance for 50 people at the home of a friend. His brainchild, Capital Factory, was visited by President Barack Obama this year and recognized as a model for economic development. He’s got a Tesla. He’s met Bill Gates, among a string of other VIPs. So it’s kind of comforting for beginning entrepreneurs to know that his experience with startups, like so many people’s, was: “You’re always thinking it’s about to fail, until it all works.”
Baer’s close friend and entrepreneur-in-residence at the McCombs School of Business at UT, Brett Hurt, interviewed Baer Tuesday night for the Herb Kelleher Entrepreneur-in-Residence speaker series.

Falling Into a $10 Million Business

Baer said he grew up surrounded by entrepreneurial people and always meant to be an entrepreneur but he sort of “fell into” opportunities, rather than being driven toward a particular business. As a student at Carnegie Mellon University in the early days of the internet, he started answering questions about servers, programming and emails on newsgroups and chats and started getting hired for a little programming, mostly being paid in pizza. But then someone asked him to host their email account on his server because the customer didn’t have time to mess with his own server breaking down all the time. That was the beginning of his own email hosting business.
Baer hired his frat brothers, “which was not necessarily a strategy I would recommend” to do the parts of the business he didn’t know how to do or have time to do. And eventually it grew to revenues of thousands per month, then hundreds of thousands per year.
The growth made him the richest college kid around, but it also scared him. For a few months, he asked if he could use his mentor’s business as an umbrella for which he would pay a percentage of income. But then, Baer said, he realized he wasn’t getting any benefit out of the arrangement and he needed to just step up and create his own business infrastructure. He incorporated, got an accountant and a lawyer.
And then he did what so many budding entrepreneurs do, he screwed up. He was fudging the line between contractors and employees, not paying much attention to the rules various state labor departments and IRS have concerning that line. His advisors told him he needed to hire his contractors on as employees and start paying taxes. But he didn’t.
“Wait,” Hurt interrupted the story. “Is anyone from the IRS here?”
“It’s okay,” Baer said, “the government’s shut down.”
“Oh yeah,” Hurt assented and encouraged him to continue.
The IRS wasn’t shut down at the time, though, and Baer got a letter that he owed $100,000 in back taxes for his employees.
“I was embarrassed and scared,” Baer said. “I’d never been in trouble with the IRS. I didn’t realize it was a totally workable situation. For a week or two I was really stressing it. I felt terrible. It affects you physically. I was depressed. I wasn’t eating. It really hits you then that there are people depending on you and you failed. That was a really dark time for me…it turned out to be nothing. It was totally negotiable. We got on a payment plan and had it paid off in a few months.”

Trilogy and Capital Factory

Baer continued working on his email company, SKYLIST, even after he was hired as a software developer for Trilogy. At Trilogy, he co-founded e-commerce software maker IveBeenGood.com in three months and sold it a year later for $20 million. In 2006, ten years after he founded it, he sold SKYLIST for $10 million.
The first year after the sale was fine, he said. It was all about integrating the company with it’s acquirer. He was busy and had a role. The second year he had very little to do and even though he was living a “dream existence” his inactivity was driving him crazy.
“Selling your company is a tough choice,” he said. “It was my baby, I’d been working on it for 10 years and then you decide to lose control…selling your first company is the most emotional, hardest part.”
It was when his two-year contract was up and the housing market was starting to collapse that he decided to take the fortune he’d just made and put it into an incubator.
“It was the rising tide effect,” he said. “I thought ‘Other people aren’t starting companies right now, there’s less competition.’ Combine that with the fact that Y-combinator and Techstars had just started. I’d been through Trilogy University and it was really fun. I thought: It looks like starting an incubator is the most fun thing I could do.”
It’s been epic for Baer. Last spring, he got an email that “a senior administration official is thinking of making a trip down here” and was visited by three “people in suits,” Baer said.
“Two of them were definitely secret service,” he said. “They started planning things, ‘We need to shut down that whole street….’ They kept referring to ‘him.’ Then I was pretty sure it was the president even though they hadn’t said so. I didn’t get confirmation until a week before. They came in and put in phone lines and they were doing all this stuff. They were so nice and apologetic and we’re like ‘No, this is so cool!’”
President Obama listened to five pitches and later referenced one in a speech at Applied Materials, a feat that amazed Baer.
“Anybody who has worked on a startup pitch knows it’s really hard. Especially a short pitch, a two-minute pitch, to make sure everyone can understand what your business is.”
But Obama, in referring to his visit at Capital Factory, nailed one of the pitches not in two minutes, but in two lines.

Advice for Entrepreneurs

Baer also teaches 1-Semester Startup, now known as Longhorn Startup, with Bob Metcalfe and Ben Dyer. Asked to give advice for young entrepreneurs he had several thoughts:

  • If you don’t have something you’re passionate about, find someone who is passionate and latch on. Many entrepreneurs have gotten their “big ideas” while rubbing shoulders with other people who were passionate.
  • The two traits he looks for in an entrepreneur: One, the ability to make decisions with less and less information and Two, passion. Passion, he said, is compelling to anyone you want to invest in or work for your company.
  • Sometimes mistakes are a sign of growth. “With my first company I was trying to make everything perfect,” Baer said. “I could be a total hard ass. Could be pretty not nice to be around. I had very high expectations and got upset when people made mistakes. But if you’re making mistakes, you have bad systems. You have to make a plan that allows for people to make mistakes. By the second company, when a problem would happen I’d be like ‘Oh, that problem! I know how to deal with that problem. Cool, we’re big enough to have that problem!”

The next Entrepreneur-in-Residence speaker is Cotter Cunningham, CEO of RetailMeNot, October 29th at the AT&T Executive Education and Conference Center.

How to Get Money from VC and Angel Investors

Laura Kilcrease, Brett Hurt, Michele Skelding and Rick Timmins Photo by ©2013, Scott Van Osdol, www.vanosdol.com

Laura Kilcrease, Brett Hurt, Michele Skelding and Rick Timmins Photo by ©2013, Scott Van Osdol, www.vanosdol.com

Founder of Silicon Hills News

Austin has one of the nation’s most active angel networks through the Central Texas Angel Network, known as CTAN.
Last year, CTAN, with 100 members, invested about $8 million in 28 companies, including 13 new companies and 15 portfolio companies.
Every angel investor is doing it because they are passionate, said Michele Skelding, a CTAN member and angel investor.
She spoke at the RISE Lunch & Learn panel Tuesday on Angel & VC Funding at the AT&T Executive Education and Conference Center in Austin.

Michele Skelding photo by ©2013, Scott Van Osdol, www.vanosdol.com

Michele Skelding photo by ©2013, Scott Van Osdol, www.vanosdol.com

Laura Kilcrease, UT McCombs Entrepreneur-in-Residence, moderated the panel, which included Skelding, Brett Hurt, a serial entrepreneur who has founded five companies and is now an angel investor and Rick Timmins, member of CTAN.
Throughout an hour long discussion, the panelists talked about a wide range of topics including what they look for when deciding to make an investment to tips on how to talk to a potential investor.
A startup must have five critical ingredients to build a successful company, said Hurt. He details them on his blog Lucky7.io. They are a solid business plan, a good team, the proper mindset, funding and culture.
While Hurt, 41, spent the first half of his life building companies, he plans to spend the second half helping entrepreneurs make an impact on Austin. His focus is on ideas that can become big businesses. Hurt co-founded Bazaarvoice which is now a $540 million company.
Laura Kilcrease and Brett Hurt photo by ©2013, Scott Van Osdol, www.vanosdol.com

Laura Kilcrease and Brett Hurt photo by ©2013, Scott Van Osdol, www.vanosdol.com

Hurt has met with 200 entrepreneurs in the last six and he says there are people thinking big in Austin and some of them are thinking really big.
“There are some people who are thinking too big,” he said.
He’s only interested in working with companies that have products like Bazaarvoice and HomeAway. The one difference is if he has his Angel hat on he will make an investment in something different like Deep Eddy Vodka. He actually met Clayton Christopher, the founder of Deep Eddy Vodka, through RISE.
“I’m a huge, huge fan of RISE,” Hurt said. “This is one of the best things the city has going.”
If he makes an investment in a company like Deep Eddy and he gets back three times his investment then that’s just fine, he said.
But normally, he wants to see companies that have a clear path to get to $100 million in revenue or $1 billion in revenue.
“Most of the things I see are not close to that,” he said. “Lifestyle businesses are just fine. I’m a think big guy.”
When it comes to writing a check, Timmins looks at four things. The most important thing is the entrepreneur, he said. He looks for leadership qualities, managing skills, the ability to take advice and listening skills.
“It’s about the person or the people running the company,” he said. “Fifty percent of what I look at when I decide to invest is about the entrepreneur…If there are any doubts in my mind, I don’t do it.”
His second criterion for investment is the company’s technology and whether it’s disruptive enough. He’ll often consult experts to help him assess that.
The third thing he looks at is a customer.
“All you need for me to believe this is one paying customer who believes in what you’re doing and what you’re trying to establish,” he said. “The last thing I look at is the business plan.”
The business plan makes up just 10 percent of his decision making process.
“I don’t believe business plans anymore,” he said. “But I want you to go through the exercise…I want you to go through the process of thinking through it.”
As a venture capitalist, Kilcrease looks at two key aspects: the jockey and the team, she said.
“We know the business plan is wrong but it’s giving us an idea of what you’re thinking,” she said. “The next thing I look at is the market.”
The average angel investment is around $275,000 and the average venture capital round is $2 million to $3 million.
“I think the jockey and the market is key,” Kilcrease said. “The very last thing I look at is the technology. An “A team” will be able to rework the technology to the market or pivot as they go along.”
In addition to VCs and Angels, now investors are starting to see a third category called the Super Angel who is funding the gap between seed stage and Series A funding for startups, Kilcrease said. And another funding source is syndication between angel networks across the country, which can provide funding in the $1 million to $3 million range, she said.
“Don’t just think about angels as a $50,000 check,” she said.
Mentorship that a company gets is more important than the amount of money they receive, Hurt said.
“A business needs capital and mentorship,” he said. “It’s like a marriage. You can take money from angels and it can be your worst nightmare. It’s got to be the right fit.”
CTAN has five funding cycles through the year, said Skelding. And CTAN added office hours as a more informal way to get to know the angel investors and for entrepreneurs to discuss their ideas, she said. One big mistake entrepreneurs make is that they are just not prepared to pitch to investors.
“You’ve got to learn how to speak to an investor,” Skelding said. “They’ve seen thousands of deals.”
Entrepreneurs need to serve up their ideas in a way that is quick and interesting, she said.
Angels will invest in any type of businesses, Kilcrease said.
“If you get the right angel there’s almost no area they won’t consider,” she said. Whereas, VCs have specialized areas they invest in, she said.
Since 2009, Timmins has invested in 24 companies and only one has a chance to be public, he said.
In response to a question about the single biggest mistake people make in their pitch, Hurt said that entrepreneurs go into the VC or Angel pitch and they show a hockey stick growth slide that they don’t believe in.
“Set expectations you think you can meet,” he said.
Rick Timmins photo by ©2013, Scott Van Osdol, www.vanosdol.com

Rick Timmins photo by ©2013, Scott Van Osdol, www.vanosdol.com

Timmins echoed that sentiment saying that entrepreneurs need to set realistic expectations and achieve them.
“If you don’t want the pressure of being accountable then be like my parents and don’t ever raise money,” Hurt said. His dad created a halogen fishing light but turned down an offer from Wal-Mart because he wanted to keep his business simple.
Another audience member asked about when to take additional funding for her business.
“Only take the amount of money that will add value to get you to the next level,” Kilcrease said.

Bazaarvoice stock soars in its first day of trading

Brett Hurt, CEO and founder of Bazaarvoice, photo courtesy of McCombsToday.org

Bazaarvoice made some newly minted Austin millionaires today.
The social media marketing company stock debuted on the Nasdaq, priced at $12 a share, Friday morning and rose as high as 41 percent to $17.16 in the afternoon.
The stock, traded under the stock symbol BV, opened at $15.77 a share, up 33 percent, when trading began. The company raised $114 million in its initial public offering. Check Yahoo Finance for its most recent trading activity.
It’s Austin’s first IPO for a tech company this year.
Bazaarvoice provides online social marketing services and software to companies. It helps companies capture and display reviews on their websites and promote their brands online. Its customers include Cabela’s, Footlocker.com, Petco, Sephora USA, LG Electronics, Microsoft, Philips Consumer, Proctor & Gamble, Newell Rubbermaid, Orbitz and USAA, among others. The company reported revenue of $64.5 million in 2011 and a net loss of $20 million.
Bazaarvoice has raised $20 million in venture capital from Battery Ventures, First Round Capital and others, according to TechCrunch.

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