If you can spare the time, a visit to The Venture Café might be worth your while.
Author Teresa Esser’s entertaining and illuminating new book about the perils involved in launching a high-tech business was inspired by a real café – the Muddy Charles Pub on MIT’s campus.
Once a month, new and would-be entrepreneurs from MIT gather at the Muddy Charles to network, swap ideas, offer advice and issue warnings. They hear from business people who have been there, done that and are willing to pass along the lessons of experience.
For those who don’t have such an entrepreneurial mecca in their neighborhood, reading The Venture Café: Secrets, Strategies, and Stories from America’s High-Tech Entrepreneurs may be the next best thing.
Esser reports tales from the business start-up front told to her by entrepreneurs, venture capitalists, angel investors, corporate lawyers and start-up employees. And, just as would be true if you were hearing from these folks while downing beer and pizza in a pub, you won’t always know if their advice is the best available. No matter, at least you will be alerted to the variety of start-up hurdles that need to be surmounted or avoided.
That seems to be Esser’s intent because she doesn’t hesitate to pass along completely conflicting advice with no attempt to argue the relative merits. Venture capitalist Anthony Cirurgiano of Argo Global recommends obtaining a referral from within his network of contacts before sending him a business plan, while Arthur Snyder of Citizens Capital says: “Never get a referral. Call me up. Pick up the phone.”
Entrepreneur Vanu Bose of Vanu, Inc. says: “During the first few years of a high-tech start-up, there’s no such thing as a safety net … If you think about it too much, you’ll never do it.” But George Mueller of Color Kinetics Corp. tells Esser he didn’t hesitate to spend his $13,000 in savings and run up credit card debt of $44,000 to get his company going because “for a high-tech entrepreneur like myself, the safety net is so large that you could always turn around and get a six-digit starting salary … Your frame of mind is that … you could always make it back in a high paying job.”
Take your choice.
Esser has divided the stories into chapters covering such nitty-gritty aspects of a business launch as forming partnerships that can last, hiring good people, deciding whether to get a patent or go the “trade secret” route, determining whether to seek investment from a venture capital firm, and getting favorable publicity for the company. She discusses the variety of issues that can come up when company founders consider an IPO or a buy-out offer.
Although The Venture Café focuses on high-tech entrepreneurs, most of what Esser reports might apply to almost any business start-up. For example, she writes that when she first visited Gregg Favalora of Actuality Systems, he wasn’t able to talk to her immediately because he was on the phone with his patent attorney. While waiting, she noticed the book, Patent It Yourself, by David Pressman, on the bookshelf. “Why do you need a do-it-yourself book if you are paying an attorney?” she asked him.
“He explained that he had used to the book to reduce the number of hours he needed to spend with his legal counsel,” she reports. “Instead of paying the lawyer to give him a crash course in the basics of patent law, Favalora could use the book and others like it, to learn basic facts … before his lawyer’s clock started running.”
There’s nothing exclusive to high-tech entrepreneurs in that. Or in this: A would-be entrepreneur Esser identifies only as “Stephen” described working with his partners in a dingy, roach-infested apartment because that was all they could afford. He said he was amazed when the director of new-business development of a prestigious Wall Street firm actually came to this hovel to interview him.
“I thought I would break the ice by asking him if he wanted anything to drink but I hoped he’d say no,” Stephen relates. Unfortunately, he said yes. Stephen went into the kitchen where the only glass to be found was a used plastic cup with a dinosaur on it that had come from Burger King. “Without taking the time to wash the dirty cup, Stephen filled it with cloudy tap water and gave it to his three-piece-suit-wearing visitor. The visitor soon left, never to be heard from again. Stephen didn’t need a computer to figure out what went wrong.
Esser tells success stories like the development of NBX Corp., an Ethernet telephone system, that three years after its launch was acquired by 3Com Corp. for close to $90 million. She had an up-close and personal view of that venture because, at the time, she was engaged to Pehr Anderson, one of its three co-founders. They are now married. Anderson, who left MIT in the fourth year of a five-year master’s program to start NBX, was a regular at the Muddy Charles Pub.
Esser also tells poignant stories of disappointment and failure, of fall-outs between partners, of venture capitalists booting out the company’s founder. She explains that a true entrepreneur learns from the mistakes of others rather than being discouraged by them.
One of the saddest tales is that of “Rob” and “Jake,” founders of a video game business who were advised by a venture capital firm to find a partner experienced in management. They found “Pete” who, Esser writes, had an impressive resumé. When Pete said he would line up financing, Rob and Jake were happy to leave it in his hands. Pete said a lawyer friend of his would draw up their partnership agreement, dividing the company into three equal shares. They signed.
Thereafter, Rob and Jake continued to work on developing the video game, but Pete continued to work at his high-salaried job. He never worked fulltime at the start-up. He never lined up financing. As far as Rob and Jake could tell, he did nothing at all. Then Pete decided to leave and take “his third” with him. Rob and Jake ended up using money they alone had plowed into the company bank account to buy Pete out. “We were naïve and trusting and young,” Rob tells Esser.
“It takes a lot of ego to start a new high-tech company,” says Carol Gebert of Central Dogma. “It takes so much self-confidence that sometimes you even start to wonder whether it’s delusion … Can you decide, deep down, that you’re going to go for it? Or are you just dabbling? Because if you’re dabbling, what’s the point?”
The Venture Café may not be the last word in business how-to books, but it’s a valuable resource in helping entrepreneurs and dabblers alike understand just what it takes to be a successful entrepreneur.