The Venture Cafe: Secrets, Strategies, and Stories from America's High-Tech Entrepreneursby Teresa Esser
After the recent nosedive in the high-tech business world, entrepreneurs looking to make it big in technology are bound to have cold feet. But in Cambridge, Massachusetts, the most creative minds of high technology continue to get together at the Muddy Charles Pub and talk shop-from the lessons they've learned through their fights in the trenches and the accomplishments that they're most proud of to what keeps them awake at night and the things they never want to have happen again. Now, The Venture Café shares their invaluable insights with a behind-the-scenes look at the recent high-tech business boom, the characters and ideas behind it, and an account of the recent market downturn. It offers personal anecdotes, war stories, insider information, and practical advice vital to success in today's fast-paced business environment.
Author Biography: Teresa Esser lives in Cambridge, Massachusetts.
On the MIT campus sits a nondescript watering hole where the people who build new, high-tech ventures from the ground up gather to share their experiences, stories, successes and mistakes. Teresa Esser is an MIT graduate and the wife of one of these entrepreneurs, who dropped out of MIT to start a successful high-tech company. Esser has written this book to share many of the lessons she has learned from her research into the types of minds that come together in the Muddy Charles Pub.
Esser writes that her goal when writing this book was to "find out what works, and what does not work, from the people who know: venture capitalists, entrepreneurs, chief executive officers, technologists and spouses of the above." She set out to examine the relationships between these people and discover how they decide who to trust and how successful relationships are built.
By interviewing more than 150 high-tech professionals, Esser gathered enough information to help others shape their own entrepreneurial strategies and plans for breaking into the high-tech marketplace. After two and a half years of formal and informal interviews of knowledgeable people from California to New York, she has compiled their experiences into a storybook filled with the skills and know-how that can help people avoid mistakes along the way to high-tech entrepreneurship.
An Environment of Risk Taking
Many of Esser's colorful examples of the entrepreneurial spirit involve the taking of risks, and the differentiation between those who are willing to take life-changing risks, and those who have trouble sacrificing the security and comfort of the well-traveled path for the uncertainty of chucking it all in search of independence and dreams. What results is a collection of vibrant stories and characters that confirm the power of risk taking, and the vital lessons that can be learned when people take charge of their own fate and challenge themselves to solve the most difficult problems.
Her words of experience and encouragement create an informative guide from which newcomers can gather valuable instruction without having to suffer the pains that arrive when the unexpected problems of a new venture expose themselves.
The Entrepreneurial Mind
Once a person has determined that he or she has an "entrepreneurial mind," it is time to gather faith in oneself and make the decision to "Go for it." This will take securing a financial safety net, and venture capitalists are usually required to create one that will support an entrepreneur while he or she gets established. Esser's examples demonstrate that intensive legwork during the early stages of a company is crucial to its success, and this preparation, whether it is technical training or the time spent with other entrepreneurial-minded people, can help to create a core team of people who can make an idea fly.
Esser explores the image stage of business development with colorful anecdotes involving horribly failed business meetings and bad software decisions. She then describes how different entrepreneurs have gone about protecting their intellectual property, and offers several tips about how to save money on patent lawyers and protect new technology. She also describes how entrepreneurs can attract dynamic people, hire the best, check their references, and keep them around by keeping burnout at bay.
Other issues on Esser's menu of entrepreneurial entrees include: what venture capitalists look for when they evaluate new proposals, hard lessons from the "dot-com, dot-bomb phenomenon," how the right CEO can be found, how the media can be used to raise investments, and when to cash out of a lucrative venture.
Why We Like This Book
The Venture Café is filled with valid tips and suggestions for making a high-tech start-up work, and offers valuable advice for anyone entering the field. Her writing flows with an inviting style, and the characters she examines reveal a wealth of knowledge that comes from years of struggle, stress, stamina and sometimes staggering success. By weaving these tales from the trenches into a guide of numerous survival tactics for budding entrepreneurs, she has shed welcome light into the shadows of this often foreboding yet sometimes incredibly lucrative pursuit.
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Read an Excerpt
The Venture Café
By Teresa Esser
Warner BooksCopyright © 2002 Teresa A. Esser
All right reserved.
Chapter OneTHE ENTREPRENEURIAL MIND
A year ago my husband and I took a train ride through Germany's Rhine River valley. As I looked out the window at the gorgeous scenery, I noticed a curious event going on in the seat across from me. A four-year-old girl had dropped her ticket between the slats of the train's heating unit, and this carelessness had caused her mother to become extremely frustrated. The four-year-old was not at all sorry about dropping her ticket, but the mother was fighting back tears. She pressed her hand against her forehead and tried to avoid looking at her daughter.
A cyclist in a nearby seat noticed the woman's duress and removed a tool kit from his backpack. After a short conference with the woman, he began to disassemble the heating unit. While the cyclist labored over the air grate, the four-year-old pouted. "It's not my fault," she seemed to say. "I didn't do anything wrong." She made her hands into fists and kicked the side of the train.
Although the cyclist tried every screwdriver in his tool kit, he wasn't able to extract the fallen ticket. After fifteen minutes of tinkering, he reassembled the heating unit and went back to his seat.
The situation was eventually resolved when the ticket taker came around to collect our fares. He took one look at the angry four-year-old and let the family ride.
As I watched the scene play itself out, I began to feel sorry for the girl's mother. It must have been devastating to watch one's four-year-old drop an expensive ticket down an air vent. To have the child stage a tantrum about it must have been simply unbearable. Next time, I thought, the woman would have to do a better job of teaching her four-year-old to hold on to her ticket. Or perhaps she would learn that it's a bad idea to put train tickets into the hands of four-year-olds.
After the group had left the train, I asked my husband, Pehr Anderson, whether he had noticed the ticket incident.
"Of course," he snapped. "I could hardly ignore it."
I told him that I felt bad for the woman, since the lost ticket must have represented a significant financial hardship. I was glad that the ticket taker had allowed the family to ride, anyway.
"Eurail shouldn't be issuing paper-based tickets," Pehr retorted. "The airlines have switched to electronic ticketing. I don't know why the trains are still using paper."
I was surprised by Pehr's reaction, since it reminded me so much of the expression I had seen on the four-year-old's face. Pehr shared the four-year-old's view that the lost ticket was not the girl's fault. The system was broken, and it needed to be changed. The little girl had done the world a favor by pointing this out.
"Do you have any idea how impossible it would be to convince every train station in Europe to switch over to an electronic ticketing system?" I asked Pehr. "You'd have to negotiate with representatives from all sorts of different countries, and none of them would speak English as a first language."
"Paper-based tickets are obsolete," Pehr grumbled. "There's no reason to make people carry around paper tickets."
I thought about how difficult it would be to convince Eurail to change its ticketing system and how easy it would be to simply purchase another ticket. In my mind, there was no question about the better option. If riding Eurail meant keeping track of a paper ticket, then I would figure out a way to keep track of a paper ticket.
But then, I'm not an entrepreneur.
Instead of trying to change the world to meet my needs, I'm perfectly willing to alter my behavior to meet the world on its terms. When I encounter unpleasant situations, I try to resolve them quickly and then go on to other matters.
When the ticket problem was resolved, I opened my travel book and read about different places we could go for dinner. "There's a really famous cathedral in Cologne," I told Pehr. "Maybe we should look at it."
But Pehr was not interested in thinking about an ancient cathedral. Instead of being happy that the ticket situation had resolved itself, Pehr spent the remainder of the train ride scribbling notes onto his Palm Pilot. The ticket incident had provided him with an amazing entrepreneurial opportunity, and he was determined to figure out how much it was worth.
Pehr had no interest in worrying about something as boring as eating, since that was not the sort of problem that could be permanently solved. "We eat, and we get hungry again," he said. "If we fix the ticket problem, no one else will ever have to worry about losing a paper ticket."
Instead of helping evaluate the different restaurants in my guidebook, Pehr suggested that we grab a bag of doughnuts and jump back on the train. The little girl did not have the resources she needed to bring electronic tickets to Eurail, but Pehr might.
Or he might not.
I wasn't kidding when I told Pehr that it would be just about impossible to convince Eurail to adopt an electronic ticketing system. Pehr isn't European, and he doesn't even live in Europe. It would be better to leave the ticket opportunity for someone else.
But that didn't matter to Pehr. Pehr didn't care whether or not he would actually be able to transform the way Eurail handled its ticketing. What he cared about was that he had found a problem that needed to be fixed. It didn't matter whether Pehr would solve the problem or move on to something closer to his area of expertise. What mattered was that the problem existed.
When I told Pehr that I couldn't understand why he was spending so much time worrying about something that had nothing to do with him, he scowled. "You're no fun," he complained. If he had been back in Cambridge, hanging out at the Muddy Charles Pub, he would have received lots of praise and encouragement for his amazing ability to notice that Eurail was broken. But Pehr wasn't at the Muddy Charles Pub. He was stuck in a foreign city with a person who was not an entrepreneur, and his idea was not being encouraged. Frustrated, he scribbled the last fragments of his idea onto his Palm Pilot.
As Pehr wrote, I found a place for us to have dinner.
Throwing Teddy Out of the Pram
Entrepreneurs are like that. Instead of worrying about visiting historical landmarks and figuring out what to have for dinner, entrepreneurs try to figure out how they can change the world. A normal person would be satisfied with sampling the local cuisine and posing for a photograph in front of the ancient cathedral, but the people who start new high-tech businesses are different from normal people. It's not enough for them to touch a building or sample a recipe that has stood the test of time. Entrepreneurs aren't satisfied until they have made a lasting impact on their surroundings.
Unfortunately, this overwhelming desire to change the world can be extremely frustrating when it manifests itself on a daily basis.
A year after Pehr and I returned from Europe, I went out for a cappuccino with a man named David Gill. Gill is the head of the innovation and growth unit at London's HSBC bank, and he's seen hundreds of entrepreneurs struggle through the early phases of starting a new high-tech company. "The ideal entrepreneur is not the kind of person that you'd want as a personal friend," Gill tells me. "The phrase we use in England is 'throwing Teddy out of the pram.' If they don't get their way, they get very upset. Without realizing it, they tend to be manipulative.
"Entrepreneurs have to be completely driven by vision, such that they only see what they want to see. Sometimes businesses go off the rails because they have a CEO who can't see some of the warning signs, but that's why there needs to be a team of at least two. You need the 'Genghis Khan' CEO and the 'safe pair of hands' CFO.
"The CFO is the guy who looks after the numbers and tends to the casualties. He's the person who smooths things over after the great general chair comes through. And often you couldn't reverse the roles. The guy who is a superlative number two is probably never going to be a Genghis Khan."
I try to picture following Genghis Khan around on the fields of battle and counting the number of people he'd killed. I imagine it would be rather exhausting. Following Genghis Khan around would mean putting up with extremely unpleasant living conditions and pulling all sorts of wacky stunts. It would probably be something like traveling with Pehr around Europe and trying to convince him to trade doughnuts for a decent dinner.
Far from the Maddening Crowd
Making the decision to quit one's day job and become a Genghis Khan of entrepreneurship can make a person extremely lonely. "It's like suddenly going off to college when all of your friends stay in high school," entrepreneur Carol Gebert tells me. "Suddenly it seems that there are only about three people in the entire world you can talk to. You can't share the entrepreneurial experience with people around you because they don't understand."
Gebert and I were sitting in her kitchen in Cambridge, talking about her experience starting an "e-business infrastructure provider for the pharmaceutical industry" called Central Dogma. As Gebert described her plans for bringing the benefits of large-company vertical integration to the myriad of emerging biotech start-ups, I noticed a gleam in her eye that seemed vaguely familiar. The gleam spoke of stubbornness and intelligence, of mischief and curiosity. It was the same gleam I had seen in the eyes of Pehr and the unruly four-year-old.
"Do you really want to know what it's like to start a new high-tech company?" Gebert's eyes seemed to ask. I leaned forward to hear what she had to say. As I listened, I began to feel as though I were being challenged to a game of chicken.
"Before you can become an entrepreneur," Gebert instructs, "you've got to look deep inside yourself and overcome certain existential issues. Your ability to withstand adversity is directly related to your ability to understand those existential issues.
"It takes a lot of ego to start a new high-tech company. It takes so much self-confidence that sometimes you even start to wonder whether it's delusion. The very first thing you have to decide is whether or not you believe in yourself. Are you following a vision, or are you being deluded? 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? It's just a hobby for you. You're not on the road to becoming an entrepreneur."
Gebert first started down the road toward becoming an entrepreneur when she was a postdoctoral researcher in Boston University's molecular biology department. Her first experience with the entrepreneurial process involved getting together with a friend, talking about starting a company, and filling notepad after notepad with amazing ideas. But after six weeks of "dabbling," Gebert realized that she wanted to progress to the next level. And that meant quitting her day job and working on the company full-time. As long as Gebert and her partner were fully employed as biotechnology researchers, their business idea was going to remain a hobby. And that wasn't good enough for Gebert.
Gebert was serious about starting a company, and she hoped her friend would demonstrate an equal level of commitment. But Gebert's friend wasn't willing to give up his safe job at the lab and take a risk on a high-tech start-up. He was proud of the work he had done to earn his position and saw no reason to walk away from what he had. More importantly, he didn't enjoy the entrepreneurial process as much as Gebert did.
"Every time there was a little bit of adversity, my friend would get downhearted," Gebert remembers. "He would say, `This is not clear. It's only going to work if it's really simple and clear.'" Gebert's friend didn't understand that starting a company involves discovering new and better ways to get around some extremely difficult problems. "Every time you come up against adversity, you've got to find some way around it," Gebert says. "If it's easy, then it's likely that someone else has already come up with that idea."
Gebert tried to convince her friend that the little difficulties and frustrations were all part of the fun of starting a new enterprise, but her friend didn't share Gebert's passion for risk taking. Besides, Gebert's friend wasn't interested in changing the world. If he had been on the train with Pehr and me, he would have been more than happy to check out the cathedral and help me look for a decent place to eat dinner.
When Gebert realized that her coworker wasn't going to join her, she had to reevaluate her own level of commitment. It had taken years of hard work to earn the position of postdoc at Boston University. Founding a new high-tech start-up would take even more hard work, and there was no guarantee that the enterprise would be successful. Was Gebert actually willing to walk away from everything she had worked for to start from scratch for the second time?
As Gebert pondered these issues, she tried to consider her predicament in a much larger historical context. There might be only three people that Gebert could talk to about her experience, but history books are filled with people who took gigantic risks and came out on top.
"When William the Conqueror crossed from Normandy into England, the first thing he did was burn all the ships," Gebert says. "His troops had to either fight to the death or win. I think the same thing happens in business. If you're really going to go all the way, then you must close your exits. You must create a situation where you can't go back."
Given the ease with which high-tech professionals can acquire new jobs, I have a hard time imagining how Gebert could reproduce the commitment level of burning one's ships. But for some people, the potential embarrassment of having to admit defeat is a powerful motivator. "When you resign from your job and tell everyone around you that you're going to do this, you start to really commit yourself," Gebert explains. "I hate admitting I'm wrong, so for me it was more of a psychological decision."
Whenever Gebert starts to feel downhearted about her business, she imagines being harassed by a jealous friend. "I thought you were going to start a business," the friend taunts. "Eeh! You've given up! You've gotten a job!"
"I don't think so," Gebert retorts.
Branded for Life: Start-ups and Navel Piercings
Making the decision to commit oneself fully to a new and uncertain enterprise can catapult a person into an entirely new psychological zone. And once a person has decided to take such a leap in her professional life, she may find it necessary to make similar adaptations in other parts of her life as well.
Excerpted from The Venture Café by Teresa Esser Copyright ©2002 by Teresa A. Esser . Excerpted by permission.
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