Tuesday, May 17, 2011

Startups, back in the day

I did this interview on entrepreneurship a while ago, and just noticed they now have a transcript up. I'm describing events between 2000-2003, when I was CEO of a startup called SafeWeb.

Me: ... It was the usual lose-a-dollar-on-every-transaction-but-make-it-up-in-volume kind of thing that a lot of people experienced this back in the day. So we succeeded wildly in terms of getting users and…but that was just eating up our cash reserves in terms of the bandwidth costs and stuff like that. ... it was apparent to us we couldn’t continue this way; we weren’t going to become profitable on the consumer side. And there were some efforts at that time to see if there was interest in say Yahoo or by Yahoo or other portals to acquire us so that they could have a kind of Yahoo branded privacy experience for their users. Stuff like that. We had some pretty high level meetings. I shook Jerry Yang’s hand and had a meeting with him at Yahoo and we thought, ‘Oh, hey there’s a chance we’re going to get acquired here.’ But those things didn’t play out and so we had to make a very tough decision just to drop that business and head in the enterprise direction. And that was a very tough decision and we had to cut our team quite a bit after that decision. I’ll never forget …

Me: ... Emeryville’s where Pixar is and a bunch of biotech companies just south of Berkeley; it’s right near the Bay Bridge. And it’s a beautiful little place and we were right on the water, we had a beautiful office and one day I had to … well, how do you fire people? You don’t want to fire people in the middle of a work day with other people around so you know, you kind of wait till the end of the day. This is all, if you look up in management books, there’s a whole algorithm for how you fire people. But one of the problems we had was we had to fire a lot of people, we had to do it all at once and there wasn’t space in the office. So what we did, because we didn’t want to call people in sequentially, so we basically ... just told ... guys to meet us outside. The group that we were going to let go and we had a conversation out there. And I’ll never forget ... it was a beautiful, sunny, idyllic day. We were standing next to the Bay but I was firing five or ten guys. And some of these guys were people I had known for years ... one of the guys actually started crying. And it just… I tell you, every time you hire somebody you should picture that you might have to fire them. That forces you to be careful in the hiring because the most painful thing for me at least, as a CEO, that I ever had to do was fire somebody. And you can’t … you’re not a man if you delegate that. You hired him, you brought him in, you've got to face him and tell him what’s going on. And it’s the toughest thing, I think, for me. Anyway, so anybody who’s ever done it knows what I’m talking about.


Me: OK, so, at this point, we were competing well in the SSL VPN space [enterprise security]. We have the potential of closing a pretty big round … like 5, 10 million dollar round, with one of the big Sand Hill shops. And at this time, I’m still the CEO. But what’s happening now is my Department Chair is telling me I have to come back. You’ve been out a year and a half, and you’re going to have to resign or come back. And that’s a typical story, actually. Universities are pretty rigid about this stuff. My wife is also a professor at the same university. So unless she wanted to give up her career, too, I had to go back to the university. I couldn’t stay down in the Valley anymore... very tough decision ... at one point, the senior partner, the managing partner of this fund that wanted to put the money in, we had had a very nice dinner in, you know, one of these. Can’t remember the name of the restaurant. It’s one of the standard restaurants where you eat with VC’s down there. [Laughs] Anyway, so he calls me on the phone ... for some reason I think I’m back in Eugene. He calls me. I’m in my office. I’m actually sitting right where I’m sitting right now. And he says, “Hey, we really like you. We love the company. We think it’s a great opportunity. We want to put the money in. But we’re not putting it in unless you’re CEO. And we don’t like the guy that you have slotted in to take your place.” That was a very tough decision. The future of the company basically bifurcated on that point. So had we taken the money, we would have muscled up. And we probably would not have gone for an acquisition until much later. And it would have been like a 100 million, 200 million dollar acquisition. Instead, because we didn’t get that money, we had to look more immediately for an acquisition. And it turned out to be a smaller acquisition. So my whole life, basically, in that other parallel universe, I would be very different, living in a very different life right now.

Interviewer: And so why did you make that decision? Here you’ve got someone who’s offering you money, who thinks so highly of you as an entrepreneur, that he won’t have anybody else in your place. You still have the possibility for incredible riches. Why give that up?

Me: Well, you know, part of it is, it’s a life choice. And I’m still, to this day, I’m still a professor. So, I’m obviously intellectually interested in the kind of work that I do as a theoretical physicist. And I ultimately chose that, and the family situation, over staying in the company. And, I mean, I became Chairman of the Board of Directors, but I wasn’t the CEO anymore. So, it was a tough decision. I second guess it. I mean maybe I should have stayed, you know.


Al_Li said...

 You can engage in un-PC genomic research not only because you have tenure, but also because if you ever get fired or forced to resign, you can always go back to the startup world. 

steve hsu said...

I think people who have tenure have a *responsibility* to take on high risk research that others cannot. It's amazing how risk averse most researchers are, just trying to keep the grant money flowing.

Sometimes I feel like physics is way too hard and I'm a moron for not staying in the startup world :-)

ben_g said...

Which one do you find more stressful?

steve hsu said...

They are stressful in different ways. Entrepreneurs deal with a lot of external randomness, so/but if you don't win it isn't necessarily a judgement about your intrinsic worth. On the other hand, there are few challenges as pure as sitting in an office with a blank whiteboard and trying to discover/invent something new in theoretical physics. If you fail you can't blame anyone else.

So, startup environment is more intrinsically stressful, but if you fail as a researcher you can't blame anyone but yourself.

ben_g said...

For me the most stressful part of a startup is also the most rewarding-- messing up all the time, and having to learn new things.

I don't feel like I can blame others for my startup failures.. if I were working for a PHB I could blame him or the company's vision.

If I weren't doing a startup I think professor would be my ideal job.  EIther way you get to spend all day working with ideas..

steve hsu said...

What is your startup? It's unusual that you get to work with ideas. In my experience it's all execution after a while and not that conceptual.

David Coughlin said...

Well, you know, part of it is, it’s a life choice.

Can you get to 40-something and not have major life choices that you rue?  I look back and see the big branches of my multiverse that got lopped off by this screw-up and that.

Dhruval Patel said...


Recently Silicon Valley has been awash with money, especially for early strage

Sam H said...

I am forming my own start-up, although it is not a high-tech company. I don't feel like I can handle the risk associated with doing the job full-time, so I want to work a regular job as well. The only problem is my regular job is a 9-5, and my start-up is in B2B sales, so it is difficult only possible if I hire someone right off the bat. But he/she may steal my idea and go out on their own. :-(

Did you find it tough balancing being CEO at a start-up while being a professor?

Blog Archive