What compelled you to write The Tech Entrepreneur’s Survival Guide?
I started writing during the last year of ThingMagic’s independence. The writing helped me process the angst, the anger, and of the internal turmoil the company went through over that particular period. When I re-read some of those notes later, I almost couldn’t believe the kind of things people say and do when a stack of money is on the table and everybody wants as big a piece as they can get.
Getting the book into its final shape was really about translating and generalizing the personal experience into a comprehensive guide to tech entrepreneurship.
I also like to put closure to the things I do. Writing a book about this 10-year episode of my life, I have found to be a great way to put things in perspective for myself and create something of value for the next tech entrepreneur.
Where did you develop the idea for ThingMagic and how did you get the process started?
I was reaching the end of my graduate student tenure at the MIT Media Lab. My four cofounders and I were all going to get our PhD and with that we either had to commit ourselves fully to an academic career or leave school. We decided to try the real world. Unlike many famous entrepreneurs who drop out of school to start a company, we started a company because we had to leave school.
We didn’t commit ourselves to an idea or even a particular technology initially. At the Media Lab we had worked inside the Things That Think consortium and had developed all kinds of interesting and smart devices. We felt it would be important to take those ideas out into the real world and put them to test in commercial applications. After we got started, we realized that RFID technology, small passive computer chips that communicate wirelessly are a really important building block for smart objects around us. That’s when we started to focus on RFID and gradually we turned the company from a technology design firm into an RFID product company. The academic Things That Think consortium got a commercial sibling in ThingMagic.
You started your company at the beginning of the dot com bust, needless to say a risky time, did you ever consider holding off?
No, not really. It was one of those moments, when you don’t really have the option to consider the macro economic climate to make your personal decision. We had to work somewhere and we decided the best thing to do was found a company.
However, the climate in the venture industry did inform our strategy on how to build the company. We held off on taking venture capital for 5 years and in the meantime bootstrapped ThingMagic literally from nothing. The fact that we had practically no financial assets among the founders was actually our greatest asset. We did not need much. We were used to a modest student life style and could build the company without concern for cars, retirement savings, mortgages, and all the other commitments that we would have to deal with later in life. The simplicity of life right after school is a strong argument for founding a company early in your life.
What is the biggest mistakes first-time entrepreneurs tend to make?
It’s hard to single out “the biggest mistake”. Lot’s can go wrong, and the trouble is, it’s usually something different, each time you try. There are a few common mistakes though:
For example, I have seen many companies hire senior management too early. Once you hire senior management, including a CEO, you are forcing the company to mature quickly so that you can pay executive salaries and cover all the other expenses of a sizable operation. It’s a lot harder to keep bootstrapping at that point. You are putting the company on a timeline and if you can’t meet the timeline it is hard to stay on top of the game.
Another mistake involves taking outside capital. If you take too much too soon, the company is being constraint by the need to pay back that capital including a significant return on investment. That need may not be compatible with the timeline of the market, your particular strength, or the interests of the founding team.
This is not to say that startups shouldn’t hire senior management and take venture capital when they can get it. However, the right timing is crucial and overdoing it can be fatal.
Because of many of these crucial mistakes, most startups fail in the first year how did ThingMagic survive?
I think the ThingMagic team was prudent, humble, and modest, especially in the beginning. For example, we were prepared to earn money as technical consultants early on to keep the company going. Later on, when times were difficult we adjusted our business model even when that meant that we lingered for a few years waiting for better times. When things got really tough, we had to lay off some of our people. It was hard and we certainly didn’t make that decision easily, but it was necessary for the venture to survive.
What would you say is the most rewarding or exciting part of being a tech entrepreneur? What is the hardest part?
For me, the most rewarding aspect of venture creation is the notion of creating something completely new. As a technology entrepreneur you have this incredible opportunity to invent and create technology that has not been offered before. At the same time you are building the institution that hopefully will be around for a long time. This twofold process of creation is absolutely amazing, especially when it works out.
On the flip side, the hardest part for me was the uncertainty. You just don’t know where you are going. You may have a plan but almost certainly you will end up in a different place. The chances that you end up in a good place are actually pretty good. Tech entrepreneurs are not starving to death. On average they do very well. You just can’t predict what that place will look like.
What tips do you have for someone mid-career, looking to turn to entrepreneurship?
I believe turning to technology entrepreneurship requires that the entrepreneur leverages some element of her life prior to founding the company. When you start out of college or grad school, what you bring to the table is a mix of know-how and technical skill, or sometimes real technology in the form of patents. Many graduates are on top of the latest and greatest in their field when they leave school.
As a mid-career entrepreneur you have to bring something to the table as well. It could be financial resources, but I think your biggest asset is that you have worked in an industry and have encountered real world problems, not academic ones. The opportunity and challenge for the midcareer entrepreneur is to leverage her real-world experience.
With college graduation just around the corner and a job market still in recovery, what advice do you have for recent college graduates considering starting their own business?
I think they should go for it. Starting your own company is the best real-world complement to an academic education. I can guarantee you you will learn more and faster than in any other career. If it works out, wonderful; if it doesn’t consider it an educational investment.
What should prospective employees take into consideration before joining a startup team?
The first thing to realize is that joining a startup is not a sure path to retire at age 30. It’s more like buying a lottery ticket. If you are extremely lucky, you joined one of those few tech start-ups that went on to go IPO and enjoyed valuations north of 10’s of Billions of Dollars. Those who joined Google and Facebook years before their respective IPO are millionaires.
However, more likely, you will be enjoying a middle class life based on a regular salary. Once in a while you may see an extra bonus check when the startup you are working for gets sold or goes through some other liquidity event. Such an event should be a nice surprise, but it usually it is not a life changing financial event for the employees.
What are some current technology trends that you foresee as possible directions for future startups?
As an electric engineer by training I am frustrated that the most lucrative startup ideas these days seem to involve nothing more than a smart phone app. There is definitely innovation in those applications and business models, but the actual technical content is a bit shallow.
It is my hope that more energy will go back into truly technical innovation and venture creation. There continue to be a lot of unsolved problems. To offer just one example: user interfaces to small personal computing devices continue to be not very user friendly at all. The standard computer keyboard and mouse by far still outperforms the iPhone touch screen or any other smart phone interface. Making those interfaces more efficient will require new materials, news sensing technologies, better power management and battery technology, new silicon design, and new packaging. The list of opportunities is really really long and that’s just one application domain.
In what ways was ThingMagic’s technologies a forerunner in RFID and The Internet of Things?
ThingMagic was a member and technology partner of MIT’s Auto-ID Center, which started at about the same time as my company. The mission of the AutoID Center was to bring RFID technology to the retail supply chain. Together with a number of other sponsors we developed new RFID technology in the UHF spectrum, which would achieve much longer ranges and more speed so that we could track large numbers of items as they moved through the supply chain. The idea was to put a tag on literally every item in the global supply chain and connect those items through the internet.
Today the term Internet of Things is used in a slightly different context, arguably more modest. Most of today’s Internet of Things companies are developing technologies to connect small and inexpensive devices, for example for home or building automation.
In your book, you write about the six personality types that every startup founding team needs. Are there certain traits or characteristics that lend themselves to entrepreneurship better than others?
I have thought about that question long and hard, and each time I identified a personality trait a founder should have, I realized that the exact opposite quality was also required. For example, as a founder you have to be perseverant, but you also have to be realistic. You can’t really change course based on a piece of advice you get from someone. You have to stick to what you think is right and what you set out to do. At the same time, you need to realize when your plan isn’t working out, and adjust your business before it is too late.
So what’s the conclusion? I think to some extend it means that everybody has a shot at being an entrepreneur as long as they are being self aware, know about their weaknesses and know how to balance those weaknesses by engaging with complementary team members.
In your book you note that there are significant pros and the cons that go along with venture capital. How were you able to make your decision to take venture capital for ThingMagic?
We had it easy. The market for our technology was so hot that we literally had investors call us trying to convince us to take their money. Our A round was oversubscribed by a factor of two. Some investors were mad at us for not accepting their funds.
The money that we did accept changed our company dramatically, through. We about doubled our expense budget in a matter of months. When the climate in our industry changed later, it was very hard to get back to the frugal ways of our bootstrapping days.
My advice to fellow tech entrepreneurs: think careful if you need venture money and if the answer is yes, be smart about how much you take and then – most importantly - spend it slowly.
Was it a difficult decision to sell ThingMagic? How did you know when the time had come?
Deciding to sell the company was not difficult, actually selling it was. We had run the company almost 9 years, by the time we decided to offer it for sale. 9 years is a long time. Founders get tired, investors lose patience, employees start to wonder where the whole thing is going. In our case, it was a mix of all these harsh realities and emotions that caused us to gentle move in the direction of exiting.
Finally, would you do it all over again? What would you do differently?
Yes, I would do it all over again. I would read my book first, though. That would speed up the initial setup process tremendously.