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Plan A (and B and C)
As the two entrepreneurs set out to make and sell their products, their actions and decisions follow a Plan A, B and C format. Plan A is to use their network of contacts. Plan B is to hit the streets and figure things out for themselves. Plan C is to leaf through the yellow pages. With one notable exception - their Hong Kong manufacturer was recommended to them by a Wharton classmate - Plan A almost never works. Plan B is quite effective. For example, when it came time to design a package for their product, they visit a local mall (the color scheme of a box from Brookstone and the design of a box from Nordstrom's form the foundation of the MouseDriver package). Plan C is perhaps the most surprising. "It was not lost on us how much more often the Yellow Pages came through for us than our Wharton network," writes Lusk (both Lusk and Harrison are credited as authors, but it is Lusk who tells the story). "Plan C was trumping Plan A on a regular basis, for a couple of reasons we found interesting. One was self-evident: We were in an industry that didn't place a premium onMBAs."
Why Business Schools Don't Help
The other reason, according to Lusk, was the realization that business schools didn't really prepare one for start-up entrepreneurship. Half of the time, a business school is more a "job school," preparing people for jobs in investment banking, consulting and management in Fortune 500 companies. "Even when it focuses on start-ups, business school generally turns its attention toward new ventures with the potential to generate huge revenues and/or change the dynamics of an industry," Lusk writes. "This approach leaves out the majority of the world's start-up businesses, which have only a handful of products and employees, and possess little or no chance of changing the course of any marketplace."
In other words, Wharton MBA or not, the travails and triumphs that Lusk and Harrison experience are the ones faced by anyone who has a great idea and wants to start a company to sell it. From developing prototypes (the first quality control test for the new MouseDriver occurs when a prototype accidentally falls on the floor and stops working), to finding the right distribution channels to the right customers, from learning the hard way that sales reps can cost you more money than they bring in, to knowing where to put your marketing money (and, even more important, where not to put your marketing money), Lusk and Harrison offer a detailed look at the journey that any entrepreneur must be prepared to take.
Why Soundview Likes This Book
Despite what they may promise, "how-I-did-it" books rarely offer much how-to help to readers; the circumstances are often exceptional in one way or another. The greatest advantage of The MouseDriver Chronicles is that it is an unexceptional story. Unlike Michael Dell, Lusk and Harrison have not radically redefined an industry. The MouseDriver will never be compared to Bill Gates' disk operating system. And while the two entrepreneurs boast ivy-league credentials - and a professor offers some helpful guidance and support at the beginning of the venture - Lusk and Harrison succeed not because they have a fancy degree, but because they have a good idea and the tenacity to see it through. The lessons on what to do - and, perhaps even more, what not to do - pour from every chapter, making The MouseDriver Chronicles a must-have for entrepreneurs. Copyright (c) 2002 Soundview Executive Book Summaries
TAKING THE LEAP
I remember sitting somewhere near the last row of Wes Hutchinson's marketing class, wondering what the hell I was going to do. I had just sleepwalked through a presentation for my version of an I-phone, a cell phone with three key features.
(1) It could access the World Wide Web for e-mail, stock quotes, sports scores, etc.
(2) It looked and worked almost exactly like three other I-phones already on the market.
(3) It was never, ever going to be built, by me or anyone else.
It wasn't original, it wasn't exciting, but I knew I had enough to pass, so I was relaxed pitching the I-phone. Too relaxed. Sometime between Professor Hutchinson barking out "Next up, John Lusk," and my last PowerPoint slide, my big problem crept back into my head and stayed there as I wrapped up and shuffled back to my seat.
I was three months away from leaving Philadelphia with an MBA from the University of Pennsylvania's Wharton School of Business and in immediate danger of getting a job.
I didn't want a job. I'd had one for four years at Ernst & Young, working on big projects for big companies like American Airlines and BellSouth Telecommunications. I liked the job, I cared about it. The job was nice, but in the end I left it for Wharton.
I'd come to Philadelphia with a good idea of what I wanted to do. I'd studied entrepreneurship and marketing, the overly syllabled names for the art and/or science ofcreating companies that make and/or sell products and/or services, with a specific goal in mind. I wanted to start and run my own business.
Sitting in the back of Professor Hutchinson's class with three months left in school, watching imaginary marketing show-and-tells, my problem boiled down to two words: What business?
Definitely not the I-phone. No way, and that was my best shot at the moment, for all the digging I'd done. And I'd done a lot of digging. I'd worked during school at the Wharton Small Business Development Center and seen dozens of start-up ideas, and nothing had seemed right for me. I'd worked off-campus with the Pennsylvania Private Investor Group, reviewing dozens more start-up plans for a bunch of angel investors. Still nothing. I didn't have an answer. And without an answer for what business, it was on to the next question in line: What the hell was I going to do?
If I didn't have a business to start, I'd have to get a job. Thinking about jobs was giving me a headache. I'd already researched a few with venture capitalists (VCs) and some technology start-ups. At least with those guys, I'd be working alongside entrepreneurs, while still earning a living with a ... job.
But I just couldn't get over the idea of being so near to what I wanted and yet so far. Regardless of what job I took, I wouldn't ultimately be responsible for the success of the company. Even on the VC front, where I figured I could find work analyzing seed-level and early-stage companies, the possible fringe benefits of learning the ins and outs of lots of start-ups (before picking one to sign on with) weren't enough. I just couldn't see myself looking the poor, tired, hungry creator of any start-up business in the eye and saying, "Hey, with all my corporate experience and my Wharton MBA, I can tell you that you should be doing X and Y and Z as an entrepreneur."
For me, the bottom line was I wanted to feel the pain of starting a company. I wanted to pay my dues, and I wanted to pay them now. Yes, I wanted to go into debt, have my ego crushed, and experience firsthand the thrill of working like a dog for months on end without a paycheck in sight. I wanted a battle, I wanted a chance to win a war.
I most definitely didn't want a job.
So I wallowed through my near-term future for the millionth time. Meanwhile, my roommate Kyle Harrison was getting totally crushed in front of Hutchinson's class. I had no doubt he was headed for a failing grade. Neither did any of our classmates. It was fun to watch.
Kyle was choking his way through a pitch for something he called MouseDriver, a novelty computer mouse that looked like the head of a golf driver. Nothing was going right for him up there. Presentations in Professor Hutchinson's class had to be in a set format, with spreadsheet data to support claims, all arranged just so. Something had gone badly wrong in Kyle's spreadsheets—the numbers didn't work, the spreadsheets were in disarray, and he couldn't recover on the fly. It was a toss-up Whether I'd give him a hard time or a pat on the back on the way home. Either way, he was going to have to redo the assignment to pass.
The funny thing was, unlike my bogus I-phone, MouseDriver was a real product, one that just might work. From rooming with Kyle, I knew that he and a former work colleague named Ed McClung had come up with the idea for MouseDriver while sitting in The Ginger Man restaurant in Dallas in 1995. The two of them worked for Andersen Consulting at the time, and had been killing a few minutes before meeting clients when they idly began to wonder if there might be anything better than T-shirts, paperweights, pens, and baseball caps to give clients as promotional items. They'd started sketching their first designs on the back of a coaster at the restaurant bar.
Ed gave Kyle most of the credit for the idea, and Kyle had kept working on designs and plans for MouseDriver as a hobby, even securing a design patent for it. When he'd left Andersen for Wharton, it had been for many of the same reasons I'd come to Philadelphia—he'd wanted to learn about entrepreneurship. And though he'd run through a number of start-up ideas in the classes he'd taken and the small on-campus group of entrepreneurial brainstormers he'd joined, Kyle kept returning to MouseDriver. He saw MouseDriver as a good product for starting a modestly profitable company, and he liked its simplicity. He saw it as something that, someday soon, he might make and people might want to buy.
So here we were, in Professor Hutchinson's marketing class. I'd pitched the I-phone, a knockoff product idea I'd pulled out of my ass. Kyle proposed MouseDriver, an original product he really believed in. Therefore, I pass with flying colors, and Kyle goes back to the drawing board.
Even though Kyle had bombed completely, there wasn't any shame in it. Marketing and entrepreneurship classes are valuable, but it's hard to tell what it means to get good or bad grades in them. However many timed-tested methods, case studies, theories, and war stories they throw into the air, ultimately these courses are about new products, new plans for old products, the future, and the unknown. And every business school student knows the story of Fred Smith, who took his C-minus Harvard Business School marketing paper home to Memphis, Tennessee, and turned it into a start-up called Federal Express.
I watched Kyle slink back to his seat and thought about his post-graduation options. He was staring down the barrel at job offers from Dell and a handful of dot-coms. It was 1999, and those kinds of companies were hot. I, on the other hand, wasn't exactly hot for them.
As Kyle's offers had rolled in, my feelings about dot-coms were mixed. When we'd started business school in 1997, the idea of e-commerce on the World Wide Web was just around the corner from being big, still more of a private discovery than a mass revelation. I'd thought I'd caught the Internet wave a bit ahead of everyone. After all, I had an undergraduate MIS (management information sciences) degree from Southern Methodist University, and my years with Ernst & Young were spent in IT (information technology) consulting. It seems laughable now, but I had even been a little territorial about the Internet.
The truth hurts: I had thought of the "New Economy" as my sandbox. When, within months, every single one of my Wharton classmates had contracted dot-com fever, it felt as if they'd all jumped in my play area and wrecked my sand fort. I just wanted to take my shovel and pail and grumpily go home.
Besides, at this point, as exciting as the possibilities were in the dot-com world, joining an already existing start-up didn't seem like the same thing as hammering out something of my own in the real world. A lot of my classmates would disagree, but that's how I saw it.
Kyle saw it my way. He was pleased with his job offers, but a lot more enthusiastic about starting his own business. Now, nearing the end of his last semester at Wharton, he'd narrowed his choices down to two entrepreneurial plans.
One was an Internet start-up concept called PayMyBills.com, which had been dreamed up by John "J.T." Tedesco, a Wharton student Kyle had met in his entrepreneurial brainstorming group. J.T. was a great guy, and Kyle had spent a lot of time fleshing out PayMyBills.com with him and Jeff Grass, who had helped J.T. develop the idea.
Kyle's other idea for a start-up, despite the Hutchinson Marketing Bellyflop of `99, was MouseDriver. Kyle and J.T. had worked together on that one too. Both ideas had promise. Both needed funding. With graduation looming, it was time for Kyle and J.T. to choose between projects.
PayMyBills.com was an Internet start-up idea at a time when the sky was the limit for online businesses. It was a Web world in 1999; Amazon.com's founder and CEO Jeff Bezos peered out from the cover of Time magazine as its Man of the Year. New metaphors and acronyms came flying in from all directions, and it was hip to know what they meant. B2C, B2B, portals, content aggregators, infomediaries, digerati, lol. It was the corporate equivalent of the early days of rock `n' roll, when companies could vault from garage obscurity to worldwide success on the strength of one hit. Dot-coms rocketed to the top with software based on a single idea or customer-focused insight, and in that light PayMyBills.com looked like it had as good a chance as any to take a ride, maybe better than most. It addressed a consumer need: To consolidate and automate the presentation and payment of household bills. It had the potential to take advantage of all the revenue streams available to the most promising start-ups—sign-ups, subscriptions, banner ads, product tie-ins—and room for value-added alliances with other hot Web services.
PayMyBills.com was J.T's baby, and it held the potential for changing everyday life and generating millions (maybe even hundreds of millions) of dollars in revenues. MouseDriver was Kyle's baby, and it was, well, a clever-looking computer mouse. It wasn't going to change the world. Before it could change the fate of even a few gift shops, MouseDriver needed money, manufacturing, and marketing. Even then, it would never have the potential of PayMyBills.com.
Kyle had a lot on his mind. He had to turn down job offers. He had to pick between two start-up dreams, and try to talk J.T. into agreeing with his choice. And if he wanted to pass marketing, he had to completely redo his presentation for Professor Hutchinson.
Then again, while I dreamed of starting my own company, my roommate was already working on two.
Class was over. Kyle and I packed up our presentation notes and headed home together with separate worries, walking down Locust Street.
* * *
A few weeks later, I was staring down at the empty snack packet directly in front of me on a United nonstop out of San Francisco, returning to Philly as a partially changed man, one that wanted a few more honey-roasted peanuts.
I'd had a round of interviews with a handful of Bay Area VC firms and dot-com start-ups, and I'd learned a few things. On one hand, the five-day trip had reinforced my beliefs: I was interested in what the VCs and dot-commers had to say, but I wasn't ready to join them. I still wanted to start something of my own.
On the other hand, walking around San Francisco and talking with some of the players slugging it out in the New Economy was a real thrill. It was energizing to see people starting companies all over the place. I got it in my head how great it would be to move to San Francisco, just to be in an environment where it seemed like everyone was looking to do something new. Even though it was in an expensive area of the country, San Francisco looked like an ideal place for starting a company, establishing contacts, finding funding, and ferreting out entrepreneurial mentors to brainstorm with. And if I failed, well, so what? The entire Bay Area was booming. I'd land a job somewhere in the city or Palo Alto or San Jose and maybe dream up another venture and go from there.
I still hadn't figured out what business to sink my teeth into, but I was raring to go. I wanted to move to San Francisco.
Kyle, meanwhile, had made the most of his time in the weeks following his swan dive in Hutchinson's class. He'd redone his presentation to resuscitate his marketing grade. More important, he'd all but made up his mind to go with MouseDriver as the vehicle for his start-up.
A series of large and small financial events had turned Kyle in the direction of MouseDriver. The first came out of a conversation between Kyle and Mike Rinzler, another Wharton classmate. Kyle and J.T. had been speculating on how to manufacture at least a sample MouseDriver, when Mike offered to hook them up with a contact of his named Carmine. Carmine was the president of East Asia Action Express, a company out of Hong Kong that served as a sort of manufacturing agent, brokering deals between would-be entrepreneurs like Kyle and J.T and Asian manufacturing companies. Carmine was American, a young guy right around our age, who had already spent ten years in Hong Kong.
Finding East Asia Action Express had been a terrific stroke of luck. One of the hardest things for any product entrepreneur to do is find a manufacturing solution, and this one had fallen right in Kyle's and J.T's laps. East Asia Action Express was an agent, and a reliable referral from a friend. Carmine would shop among manufacturers for the best possible deal for MouseDriver. The only catch was he was half a world away. Kyle and J.T. had searched briefly for a U.S. manufacturer, but when East Asia Action Express came in with an offer that was about one-quarter that of any domestic bids, it was off to Carmine. Carmine of Hong Kong.
Kyle and J.T. scraped together $1,000 of their own money, the low-low price at which Carmine agreed to produce a prototype of MouseDriver. Their investment was small, but it impressed me. They didn't have much pocket money; $1,000 showed they were serious about MouseDriver.
When the prototype arrived in Philly, everyone was impressed. It was only a gray plastic model for a novelty mouse, and it was a strange-looking thing, twice the size Kyle and J.T. had hoped it would be. None of that mattered. What people saw was a student idea turning into something real. Classmates took time out from chasing down offers at investment banks, consulting firms, and dot-toms to ask about it. Professors perked up when they saw it—especially Len Lodish.
Len Lodish is an entrepreneurial marketing professor at Wharton. The limited-enrollment class he teaches is always one of the most sought-after; it usually ends up being bid up during the course auction process, so most students don't have a chance to attend. Kyle and I were among the fortunate few to get into one of his courses.
Professor Lodish is also a successful entrepreneur. When he'd first seen what Kyle and J.T were doing with MouseDriver, he'd challenged them to follow through. When he saw the prototype, he locked onto the project. He wanted to know what the next steps were. Kyle and J.T. talked about building a manufacturing tool to produce MouseDrivers. Lodish asked if they knew what it would cost. Kyle had already talked to Carmine: East Asia Action Express could get it done for $20,000.
Len Lodish wrote Kyle and J.T. a check for $20,000. It was both an investment and a challenge; accepting the money meant going ahead with MouseDriver as a real product, the basis for a real start-up business.
Kyle and J.T. took the money, and MouseDriver was on its way.
I was floored. Absolutely floored. And yes, maybe a little envious. Kyle and J.T. had walked into Lodish's office with an oversized blob of dull gray plastic and walked out with a business. I set up a meeting with Professor Lodish myself, to talk about what he'd done for MouseDriver and lay out my own hopes for creating a start-up after graduation, just to hear what he had to say.
My meeting was less lucrative than the Kyle/J.T. session. Lodish didn't write any checks—I didn't have anything worth writing a check for. I didn't have an idea for my own company, but he challenged me just like he'd challenged Kyle and J.T. Everyone's going in the same direction, he said, and I knew what he meant. My classmates were engaged in a very understandable stampede toward banking, consulting, and dot-com companies. This is the time to try something different, he said. Run it out of your kitchen if you have to, but take a risk and start something of your own. Now is the time. If it doesn't work out, he said, you can always join the stampede.
He was preaching to the choir, but time was running out on the school year. I left Lodish's office, caught my plane, and walked and talked and buzzed with possibility in San Francisco. I flew back into Philadelphia without a viable idea for a start-up in sight, not knowing that during my West Coast trip, everything had changed for MouseDriver.
J.T. had struck gold again. Within days after agreeing to accept Professor Lodish's investment capital to launch MouseDriver, J.T. had landed a $250,000 investment in PayMyBills.com. Idealab!, a start-up company incubator (a kind of alternative VC firm) out of Pasadena, California, had put up the money and, in doing so, had put Kyle and J.T. in a bind.
Idealab!'s investment was enough to pull J.T. out of the mix as far as MouseDriver was concerned. It wasn't the size of the investment so much as the fact that PayMyBills.com was J.T.'s creation, and the temptation to turn his own idea into a real dot-com was too good to pass up. He offered Kyle a job with PayMyBills.com, but Kyle turned it down because of his interest in seeing MouseDriver, his own creation, all the way through. They settled it with J.T. agreeing to invest in MouseDriver and then peeling off to start PayMyBills.com with idealab!. Kyle was left alone to start his own company.
I didn't know it at the time, but I was only twenty minutes away from having a mouse in my future.
I got back into town on a Monday, and ran into Kyle on the stairway of our brownstone apartment. We started talking about my trip and about how I wanted to start my own company. Kyle was just like me on that front, and we started going through all the reasons why we wanted to run our own businesses. It was all about how we wanted to bring our own ideas to fruition and execute a marketing strategy we made on our own. We wanted to have control, and we wanted to go through the entire experience of building something from next to nothing.
Kyle told me the news about J.T. idealab! and PayMyBills.com. And then it jumped into both our heads.
We said it at the same time, with different pronouns.
"I/You could do MouseDriver with you/me."
There was no debate, just the instant realization, followed by an avalanche of ideas and plans about moving to San Francisco and teaming up to try and create a start-up around MouseDriver.
That was it. All that fretting and speculation answered by a short conversation with my own roommate on our own stairway. It was as close as I've ever come to a eureka moment. In all of my interviews in San Francisco, I'd been toeing the line, playing it safe. Now we were crossing the line.
It felt exhilarating, and it felt right. School was almost over, and Kyle and I were ready to go. Of the 750 students in our class at Wharton, maybe 10 were starting companies right out of school. Two of them were talking on the stairs of their apartment, hatching their first plans together.
Excerpted from The MouseDriver Chronicles by John Lusk and Kyle Harrison. Copyright © 2002 by John Lusk and Kyle Harrison. Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
|Taking the Leap||1|
|Our Plan for World Domination||13|
|Go West, Young Men||30|
|Making Mice Is Hard to Do||46|
|Our First Second Thoughts||59|
|Darkness, Darkness, Darkness, Darkness||72|
|Good God, We Make a Sale||88|
|Looking for Mr. Wacky Wall Walker||105|
|Must We Do Everything Ourselves?||118|
|The Art of Low Finance||129|
|Super Bowl Sunday||140|
|We Do Orlando||154|
|Yes, Of Course It's Mac-Compatible||168|
|We Get Paid||199|
|I Am Forced to Wear a Suit||209|
|Massage Parlors, Sizzling Exposes, Lawyers, One-Day Shoots, and Gambling Debts||226|
So, like good analytical MBA graduates, we went back to the office (our apartment) and discussed whether or not we really had time to write a book. We'd been sharing "The MouseDriver Story" from day one (that story being, Why in the hell would two Wharton MBAs bypass all the great moneymaking opportunities in banking, consulting, and dot-com to manufacture a novelty computer mouse out of their kitchen?) and quickly decided that a book highlighting our MouseDriver experience would only be a motivating and inspiring extension to that story. Really, it was a no-brainer. We already had a ton of material that we could work from. Our MouseDriver Insider newsletter had just been profiled on the cover of Inc. magazine, and we had a daily diary that we'd been keeping during our first year of business. In essence, all of the material we needed to put together a book already existed…albeit in a somewhat crude format.
So, to understand why we decided to write the book is to addresses the primary reason for creating the MouseDriver Insider newsletter. And that reason was to tell the truth. As MBA graduates in 1999, we were under the impression that the start-up life consisted of this glamorous lifestyle in which entrepreneurs grew their businesses quickly and boasted about being masters of the universe in the new economy. After spending three months in San Francisco trying to ramp up our little single-product company (during the dot-com heyday), we quickly realized that our start-up process, in which we were "bootstrapping" the company with personal savings, credit cards, and money from friends and family, was seemingly a much different experience than what we perceived it would be while in school. There was no funding for us, there was no salary, there was no coveted "network" of start-up gurus for us to call on, and the whole process certainly wasn't glamorous. It was hard work. It was ego-crushing. It was exactly what 99 percent of most entrepreneurs experience when starting a company.
The Insider was initially written to let our MBA classmates in on the real truths and experiences associated with starting a company. They were written to enlighten, to amuse, and to give others the opportunity to live a real entrepreneurial experience vicariously through us. But most of all, the Insider (and The MouseDriver Chronicles) were written to motivate and inspire -- to show others that entrepreneurship isn't about success or failure but about the experience and lessons, both personal and professional, learned along the way. (John Lusk and Kyle Harrison)