Tag: Longhorn Entrepreneurship Agency

Michael Dell on the Past, Present and Future of Technology

By LAURA LOREK
Founder of Silicon Hills News

IMG_2865In 1984, Michael Dell dropped out of the University of Texas to found Dell Computers.

“At the time, it didn’t seem like that big of a risk,” Dell said. “I didn’t have anything to lose.”

He saw a really compelling opportunity to launch a company focused on the way computers were being sold and distributed.
He made a deal with his parents that he would go off and do his company for a semester and if it worked, he would keep doing it and if it didn’t, he would go back to school.

Dell spoke Thursday night at the Omni Hotel in a keynote address put on by the UT Longhorn Entrepreneurship Agency as part of its UTEWeek. Brett Hurt, co-founder of BazaarVoice and Entrepreneur in Residence at UT, interviewed him before a packed ballroom of a couple hundred people.

At the beginning of his company, after several months, Dell presented his parents with a financial statement on the company’s performance. He still has that statement.

“For the first nine months, the company had revenues of about $6 million,” Dell said. “It was profitable from day one. It had about a 15 percent operating margin.”

The company had very little expenses, Dell said. The second year, Dell grew to $33 million in revenue. For the first eight years, the company grew 80 percent a year compounded and six years after that it grew at 60 percent a year compounded, he said.

“Put all those numbers together and you get tens of billions of dollars,” Dell said.

The essence was this was the dawn of the microprocessor age, Dell said. He came up with a way to deal with customers that gave the company a competitive advantage – the direct from Dell selling model, he said.

Hurt asked Dell if students should drop out of college to found a company. Hurt said he used Dell as an example of a Longhorn student who saw an opportunity and dropped out to pursue it.

“I get angry letters from parents sometimes,” Dell said. “I have to be a little careful.”

The decision is a personal one and generally a student should know it inside, he said. They shouldn’t have to get a lot of advice, he said.

“If I had gone and asked for advice, people probably would have said you’re nuts, it’ll never work, don’t drop out of school” Dell said. “But I wasn’t motivated by what other people thought.”

Hurt asked Dell what are some of the big ways entrepreneurship has changed since Dell launched his company.

Now the infrastructure and resources like startup labs and incubators make it a lot easier for entrepreneurs to launch a company, Dell said.

“The great thing we have in this country is we have a culture that accepts and embraces risk,” Dell said.

Job creation in the economy come from new and emerging businesses, Dell said.

The U.S. culture treats failure in a way that causes people to want to continue pursuing ventures, Dell said. That culture of risk taking is a huge competitive advantage for the U.S., he said.

Hurt asked Dell what advice he would give his 17-year-old self if he could go back in time. Dell said he would have learned more about management and building teams.

Dell took one class at UT focused on business: macroeconomics. He learned to buy low and sell high. He was a biology major. And he was only in school for a year.

“A lot of it was learning by making mistakes and experimenting,” Dell said.

When an entrepreneur does something that has never been done a naïve perspective or a different perspective is often where breakthroughs come from, Dell said. If you know too much, it’s not helpful, he said.

“I think there are things you can learn from experience but when you are doing something that has never been done before it’s more response time, thinking on your feet, agility that have a higher premium than necessarily experience,” Dell said.

In the world today, the rate of change is accelerating in all industries because of technology, Dell said. That’s creating new opportunities, he said. This is where people with new perspectives, they tend to be younger, bring new ideas, he said.

Hurt asked Dell why he took the company private last year. Dell completed a $25 billion buyout to take the company private last October.

“We were a public company for 25 years,” Dell said. “The stock appreciated 13,500 percent during that time.”

About six or seven years ago, Dell started changing its business from products to solutions, software and services, he said.

It began investing in different areas to provide more solutions to its customers, Dell said. The company made a number of acquisitions.

Dell wanted to focus on more long term planning, he said.

“Our decision making is simplified greatly,” Dell said. “It’s kind of like it was when we started the company…It allows us to dedicate our energy to our customers.”

Dell refers to itself as “the world’s largest startup.”

Since going private, Dell is incubating new businesses and crowdsourcing ideas, Dell said. It’s working with customers in new ways, he said. It launched a venture fund and it has all kinds of resources for entrepreneurs, he said. Cloud, mobile, social and cyber security are all key areas of focus for the company, Dell said.

Another trend Dell is excited about is in data applications. A huge opportunity exists in data analytics, particularly in industries like healthcare, Dell said. Dell has seven billion images in its medical archive, he said. What’s interesting is when Dell layers predictive analytics on top of that archive and can provide information to doctors around the world, he said.

Hurt asked Dell about the role the city has played in Dell’s success. Dell said Austin has been a wonderful place to grow his company. He has hired a lot of people out of the University of Texas. Today, Austin is still great, he said. UT is one of the main things that attracts people to move here, he said.

“There really hasn’t been a better time to be alive in the world,” Dell said. “This is a fantastic place. It’s hard to imagine a better place to be.”

Hurt said there’s quite a bit of pessimism out there about entrepreneurship.

“There’s always whiners and complainers, but screw them,” Dell said.

Dell has done a lot to make Austin a better place for all of its citizens. Last year, the Michael and Susan Dell Foundation donated $60 million to create the Dell Medical School at the University of Texas at Austin. Dell joked that it was the closest he would come to becoming a doctor. He went to UT to study biology with the intention of pursuing a medical degree.

During a question and answer session with the audience, Dell recounted his first job as a dishwasher in a Chinese restaurant at the age of 12 in Houston, his hometown. He soon got promoted to water boy and then assistant maitre d. He then got hired away by a Mexican restaurant. He later worked in a store that sold jewelry, stamps and coins and when he got his driver’s license at 16, Dell worked for the now defunct Houston Post delivering newspapers.

“I think those early job experiences are unbelievably valuable,” Dell said. They taught him a lot of lessons.

Another audience member asked Dell about mistakes he made early on.

Dell recounted how he didn’t know the company needed an Federal Communications Commission approval to sell computers. The FCC shut the company down. They had to scramble to get an FCC approval, he said.

“That was certainly a pretty major crisis at the time,” Dell said.

In the late 1980s, Dell had a problem with inventory management. The company ended up learning a lot about inventory management, he said. But it was a near fatal experience at the time, he said.

In fact, in the first three or four years, Dell could have gone out of business five or ten times, Dell said.

“Fortunately they weren’t big enough mistakes to put the company out of business,” Dell said.

Rod Canion Recounts How Compaq Fought IBM and Won

By LAURA LOREK
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.

UT Entrepreneurship Week to Feature Michael Dell and Rod Canion

headerlogoThe University of Texas at Austin is a hotbed of startup activity.
Last year, the University claimed the number seven spot on Entrepreneur Magazine’s list of the most entrepreneurial colleges in the nation.
And the Longhorn Entrepreneurship Agency, part of student government at UT, plans to showcase some of the state’s most accomplished PC entrepreneurs during its third annual UT Entrepreneurship Week which runs Feb. 28th through March 6th.
Michael Dell, founder of Dell, will speak on March 6th about how he started his company in a dorm room at the university in 1984 and how he took the company private late last year to create what he has dubbed as “the world’s largest startup.”
And the celebration of the PC industry also features a talk with Rod Canion, one of the cofounders of Campaq Computers, founded in 1982 in Houston. Canion’s talk is on March 5th. Canion and his co-founders previously worked at Texas Instruments when they set out to create Compaq. In 2002, HP acquired Compaq for $25 billion.
Brett Hurt, Entrepreneur in Residence at UT and founder of Bazaarvoice, will conduct the interviews. The event is being sponsored by the Herb Kelleher Center for Entrepreneurship.

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