On the Road
It was advertised as a 'boot camp for start-ups.' But the entrepreneurs who attended focused on just one obstacle: their mind-set
Alexander Romero has wised up. Just a few months ago the 25-year-old thought his Web-based start-up was on the right track because his projections showed it would earn $1 million in its first year. But now he knows better, which is why his revised business plan estimates a healthy first-year loss of $10 million. "I'm trying to adapt to the new Internet psychology," he explains.
Romero's understanding of that psychology--which spurs investors to value ambition more than they do profit--isn't the result of years spent tooling around Silicon Valley, lunching with elite venture capitalists. That would be difficult, since Romero lives in Cincinnati. But in March he was among the 600 fledgling entrepreneurs who attended a two-day tutorial on the basics of launching a high-tech company. Advertised as Bootcamp for Startups, the event--held in Mountain View, Calif., where the usual start-up fervor has been heightened by a flourishing Internet economy--featured not a single forced march. Yet just sitting at the epicenter of the digital economy, and feeling its vibrations, seemed to have a powerfully transforming effect on attendees. "It really turned me into action mode--get stuff done, get it done now," says Wayne McDonell, founder of San Francisco's iEmploy, which plans to provide human-resources services to start-ups via the Internet. "Just go-go-go."
Indeed, the "boot camp" sometimes felt like a pep rally, and for good reason. Exhilarating as the glory days of the Internet revolution may be--as last year's start-up becomes this year's initial public offering--the on-line environment can also feel utterly overwhelming. After all, Internet entrepreneurs operate in an industry that has a short history and few well-established role models. And while everyone agrees that the old rules of the industrial economy no longer apply, no one's sure what has taken their place. The ostensible reason that many businesspeople flocked to the event was money--figuring out how to capture the attention of Silicon Valley investors. But it quickly became apparent that these entrepreneurs were also looking for something less tangible: validation from their peers.
Romero's proudest moment came when he made a presentation before a panel of venture capitalists. By the time he had finished his pitch for the company that he'd cofounded--it offers Web pages for families--he was practically cheerleading. "Familybeat-dot-com! C'MON!" he hollered. He now says that the sense of belonging that he felt at the "boot camp" helped solidify his belief that Cincinnati "is not a great place for a high-tech start-up." Which is why, he says, he'll move to Silicon Valley this summer. There, VCs "aren't looking for the absolute proof that the company has to be profitable in so many years," Romero says. "They understand the Internet is high risk, high revenue."
By contrast, in conservative Cincinnati, Romero adds, the big question is "When is the company going to make money?"
Will Spencer and his friends came to Bootcamp for Startups as Stanford University undergraduates armed with an idea. By the time they left, they had a business.
On the first day of the event, Spencer, 21, was sitting in the audience, scribbling notes and feeling like a fifth wheel. He was there only because his friend Ralph Garvin Jr., another Stanford junior who happened to be the CEO of six-month-old Woosh Inc., had managed to get free tickets. Spencer served as the start-up's marketing director, but in Woosh's short life there hadn't been any marketing to do. So far, at least.
But then moderator Guy Kawasaki, who formerly served in the official role of chief evangelist at Apple Computer, asked for volunteers to make a 30-second "elevator pitch"--one short enough for an eight-floor ride--to the VCs onstage, who included Sequoia Capital general partner Michael Moritz as well as Michael Levinthal, a general partner at Mayfield Fund. Spencer felt Garvin's hands on his back, pushing him up out of his seat.
As he faced the crowd, Spencer's voice quavered, but he got the words out and made a clean, logical pitch for Garvin's brainchild, technology aimed at facilitating business-to-business E-commerce. The five panelists gave him a thumbs-up. As the audience applauded, one of the conference organizers flung an arm over Spencer's shoulder and told him that he would talk to him later. Returning to his seat, Spencer raised his arms in triumph.
For fellow attendee McDonell, Spencer's gesture summed up the energy and enthusiasm that are what he loves about Valley entrepreneurs. "He held up his hands, and all of his buddies were cheering and yelling," McDonell says. "That's what I wanted to see." The members of the Woosh team spent the rest of the conference schmoozing. "People were asking us for business cards, and at that time we didn't have any," says Spencer. Thanks to those contacts, Woosh has shifted into fast-forward. "Within a week we had retained [Silicon Valley law firm] Wilson Sonsini Goodrich & Rosati as general counsel, Ernst & Young and PricewaterhouseCoopers wanted to do our accounting, we were filing patents, and we were well on our way to becoming incorporated," Garvin says. The management team--most of whom have at least a year to go before graduation--made plans to take time off from Stanford to properly launch Woosh. "I felt like we walked outside and someone strapped a rocket to our backs," Garvin says.
The start-up's sudden ascent shows how the pace has accelerated for young companies in the Valley, where overnight success has become the new goal--and sometimes the reality. Most "boot camp" attendees were under 35 and male, and about 35% operated Internet or E-commerce start-ups. Their common role model: Jerry Yang, the panelist who five years ago was an engineering student working out of a Stanford trailer. Now the company he cofounded, Yahoo, boasts a market cap of $34 billion. And as he sat onstage Yahoo was announcing its intention to buy Broadcast.com, which delivers audio and video via the Internet, for $5.6 billion.
Speed counts, and panelists pounded home that message again and again. Don't wait to perfect your product before taking it to market. (You can fix it later.) Don't worry about intellectual-property protections. (Being first in the market is your only real safeguard.) Don't even stop to write a detailed business plan. (Three pages is enough.)
The organizer of the gathering, Garage.com, was itself a start-up, founded last year by Kawasaki, Forbes publisher Rich Karlgaard, and Valley lawyer-consigliere Craig Johnson of Menlo Park's Venture Law Group. Garage.com is an Internet-based matchmaking service for entrepreneurs and investors, primarily angel investors. And those were exactly the people that many camp attendees had come to see. At the end of each panel discussion, entrepreneurs swarmed around the departing VCs and angels, sometimes trapping their prey in front of the stage as the next event got under way. The shared goal was immortalized on film when--in an effort to get the attendees to smile for a group photo--Kawasaki yelled out the magic acronym: "IPO!"
For all the camp's emphasis on getting money from investors, there were still reminders that, in the end, getting money from customers is what counts. The former president and CEO of software giant Cadence Design Systems, Joseph Costello--longhaired, sporting a purple shirt, and wildly gesticulating--spoke of serious lessons he'd learned from a hang-gliding course that he'd taken at Berkeley. While landing, he explained, you have to focus all your attention on the open field ahead of you. Otherwise you die. Same with business, he insisted, in which "customers are the open field." Fred Gibbons, founder of Software Publishing Corp. and now a lecturer at Stanford's graduate school of engineering, wondered whether raising too much capital might actually distract a start-up. "There's a lot of inefficiency with a lot of money. You think it can solve problems; it can't," he said. "The only thing that can solve problems is real answers to the product questions and product needs that customers have."
Gibbons's words hit home for Shannon J. Smith, 28, whose Seattle company, Market Matrix Inc., markets E-commerce software and consulting services. After bootstrapping for three years--and running a profitable Internet business--Smith had come to the camp to learn how to raise money. Now he wasn't so sure. When Gibbons solicited questions, Smith's hand shot up. How do you keep your attention on customers if you suddenly have a lot of money to play with? he asked. "One of the biggest problems that companies that bootstrap have is they lose their focus when they raise money," Gibbons replied. "Do it your way, not the venture capitalists' way."
Ironically, Smith's question earned him the attention of several potential investors. "It was a feeding frenzy," he now says. But Smith wants to be choosy about his investors and cautious about what he does with any money he gets. Cheered by the interest that his company stirred in investors--and the support he felt from the other like-minded entrepreneurs--Smith is convinced that he knows what he's doing. And besides, the camp underscored for him two valuable lessons: "One, there's a ton of money out there, and two, getting it is not necessarily the answer."
Emily Barker is a senior staff writer at Inc.