What They Don’t Teach You in Graduate School

1

What They Don’t Teach You in Graduate School What They Don’t Teach You in Graduate School

Scott Dietzen, Ph.D.Scott Dietzen, Ph.D.CTO, BEA Systems &CTO, BEA Systems &

CMU CS ’92/ CMU CS ’92/ CMU Applied Math/CS ’84CMU Applied Math/CS ’84

[email protected]@dietzen.com

Scott Dietzen, Ph.D.Scott Dietzen, Ph.D.CTO, BEA Systems &CTO, BEA Systems &

CMU CS ’92/ CMU CS ’92/ CMU Applied Math/CS ’84CMU Applied Math/CS ’84

[email protected]@dietzen.com

Scott Dietzen

What They Don’t Teach You in Grad School ’03 2

Dedication And AcknowledgementsDedication And Acknowledgements

• This talk dedicated to the memory of Bruce Nelson, CMU CS ’82 This talk dedicated to the memory of Bruce Nelson, CMU CS ’82 – http://www.cs.cmu.edu/about/development/aboutnelson.htmlhttp://www.cs.cmu.edu/about/development/aboutnelson.html

• Why I volunteered (i.e., why I felt sufficiently presumptuous)Why I volunteered (i.e., why I felt sufficiently presumptuous)– Bruce help plant the seeds that inspired my entrepreneurship as well as Bruce help plant the seeds that inspired my entrepreneurship as well as

my time on the dark side (working in marketing & sales)my time on the dark side (working in marketing & sales)

– I’ve had some modest success as an entrepreneurI’ve had some modest success as an entrepreneur

• Transarc Transarc IBM (Principal Technologist) IBM (Principal Technologist)

• WebLogic WebLogic BEA (V.P. Marketing – Ha!, CTO) BEA (V.P. Marketing – Ha!, CTO)

• AcknowledgementsAcknowledgements– I plagiarized heavily from Bruce’s talk I plagiarized heavily from Bruce’s talk

– Borrowed some content from top-tier VCsBorrowed some content from top-tier VCs• Special thanks to Redpoint, AccelSpecial thanks to Redpoint, Accel

– Borrowed some content from fellow entrepreneursBorrowed some content from fellow entrepreneurs• Special thanks to the WebLogic teamSpecial thanks to the WebLogic team

• And Paul Maritz (Lessons Learned at Microsoft)And Paul Maritz (Lessons Learned at Microsoft)

Scott Dietzen


The Missing SyllabusThe Missing Syllabus

• Technology adoption cycleTechnology adoption cycle

• The hurdles to commercial success The hurdles to commercial success

• Why nonWhy non--technical issues mattertechnical issues matter

• Why technologists feel underpaidWhy technologists feel underpaid

• HighHigh--tech company organizationtech company organization

• StartStart--upsups

• Venture capitalVenture capital

• Managing for successManaging for success

Scott Dietzen


Classic Technology Adoption CurveClassic Technology Adoption Curve

This is the best case scenario---

all technology aspires to be legacy!

At any point on the curve, new technologies may wash

out (few make past each phase)

Adoption

Time

Early adoption

Crest of hype

Black lash against hype

Mainstream adoption

Late adoption (cash cow)

Mainframe, AS/400

software

Client/serverRDBMS

Web application

platform

Web services

Innovation Market Growth/Consolidation

Scott Dietzen


High Tech EffortsHigh Tech Efforts

For success Laser focus on specific customers—not theoretical—

and vivid understanding of pain and needs Clear understanding of needs hierarchy (what are they

buying? Where is the pain/need in their priority stack?) Most typical downfall

Cool technology, but insufficient business value Too high-level a value proposition—doesn’t connect

with new spending realities and specific pain points Unrealistic goals – Time/money insufficient to reach

demonstrable value

Scott Dietzen


Why High-Tech Efforts Fail (Cont.)Why High-Tech Efforts Fail (Cont.)

• Miss technology sea changesMiss technology sea changes– Proprietary networks (SNA, IPX, AppleTalk Proprietary networks (SNA, IPX, AppleTalk IP), SQL (Unify) IP), SQL (Unify)

– Java/J2EE (NetDynamics, Kiva, ATG, BroadVision, …)Java/J2EE (NetDynamics, Kiva, ATG, BroadVision, …)

• Too much complexity for mainstream adoption?Too much complexity for mainstream adoption?– DCE, CORBA, SAA, ATM, InfinibandDCE, CORBA, SAA, ATM, Infiniband

– Web platform (Web services, J2EE, .NET) still at riskWeb platform (Web services, J2EE, .NET) still at risk

• Weak executionWeak execution– Team comes apart or doesn’t come togetherTeam comes apart or doesn’t come together

– Focus wanesFocus wanes

– Not sufficiently responsive to changeNot sufficiently responsive to change

• Ferocious competitionFerocious competition– 40+ web application server vendors 40+ web application server vendors 3 viable today 3 viable today

Scott Dietzen


Why Non-Technical Issues MatterWhy Non-Technical Issues Matter

• In the “real” world, technology is the means to the end In the “real” world, technology is the means to the end ––not the endnot the end

• To change IT in the “real” world, you need to To change IT in the “real” world, you need to make the business casemake the business case to the technology end-userto the technology end-user– Define compelling value propositionDefine compelling value proposition

– Articulate the return on investment (ROI) Articulate the return on investment (ROI)

• There is a very high hurdle for doing thisThere is a very high hurdle for doing this– Think about receiving phone solicitations at your homeThink about receiving phone solicitations at your home

• This is why marketing and especially sales This is why marketing and especially sales are so highly-valuedare so highly-valued

Scott Dietzen


Why Do Technologists Feel UnderpaidWhy Do Technologists Feel Underpaid

Because they don’t understand the game

• Technologists often feel sales and especially Technologists often feel sales and especially marketing are trivialmarketing are trivial

• But in most companies, R&D is <5%; But in most companies, R&D is <5%; even in high-tech R&D it is generally <20%even in high-tech R&D it is generally <20%

• If this were not an optimal model, If this were not an optimal model, then the free market would correct itthen the free market would correct it

The intellectual level needed for system design is in general grossly underestimated. I am convinced more than ever that this type of work is very difficult and that every effort to do it with other than the best people is doomed to either failure or moderate success at enormous expense. –Edsger Dijkstra

Scott Dietzen


Technology Company OrganizationTechnology Company Organization

CorporationCorporation

Research(Huge Companies)

Research(Huge Companies)

Customers(Solvent Companies)

Customers(Solvent Companies)

Advanced Development(Most Companies)

Advanced Development(Most Companies)

Finance and Administration

Finance and Administration

EngineeringEngineering MarketingMarketing SalesSalesServices:

Consulting and Support

Services: Consulting and

SupportManufacturingManufacturing

Scott Dietzen


How Departments Contribute ValueHow Departments Contribute ValueMarketing

Defines, targets and articulates value (specifications and collateral)Defines, targets and articulates value (specifications and collateral)

EngineeringRefines and implements value (designs and tunes products)Refines and implements value (designs and tunes products)

ManufacturingPhysically creates value (products)Physically creates value (products)

SalesCreates desire for and demonstrates value (explains products)Creates desire for and demonstrates value (explains products)

ServicePreserves, transfers and enhances existing value (care and Preserves, transfers and enhances existing value (care and

customization)customization)

Finance and AdministrationAdministers the value-adding machine (company and customers)Administers the value-adding machine (company and customers)

MarketingDefines, targets and articulates value (specifications and collateral)Defines, targets and articulates value (specifications and collateral)

EngineeringRefines and implements value (designs and tunes products)Refines and implements value (designs and tunes products)

ManufacturingPhysically creates value (products)Physically creates value (products)

SalesCreates desire for and demonstrates value (explains products)Creates desire for and demonstrates value (explains products)

ServicePreserves, transfers and enhances existing value (care and Preserves, transfers and enhances existing value (care and

customization)customization)

Finance and AdministrationAdministers the value-adding machine (company and customers)Administers the value-adding machine (company and customers)

Scott Dietzen


MarketingMarketing

Marketing represents the company to the “target” customer

• Strategic marketingStrategic marketing– Directs product strategy and often corporate strategy (in Directs product strategy and often corporate strategy (in

conjunction with company thought leaders)conjunction with company thought leaders)

– Owns the company business plan Owns the company business plan

– Product/technical marketingProduct/technical marketing

– Pricing, channel strategy, competitive strategyPricing, channel strategy, competitive strategy

• Tactical marketingTactical marketing– Public relationsPublic relations

– Demand creation (finding/qualifying new customers)Demand creation (finding/qualifying new customers)

– Public face (literature, top-level web-site, events, advertising, etc.)Public face (literature, top-level web-site, events, advertising, etc.)

– Strategic partnershipsStrategic partnerships

– Company and product naming/corporate identity (Ouch!)Company and product naming/corporate identity (Ouch!)

Scott Dietzen


Marketing/Engineering InteractionMarketing/Engineering Interaction

With respect to Engineering, Marketing:

• Determines product lines and familiesDetermines product lines and families

• Specifies individual products externals Specifies individual products externals at a high-level at a high-level

– Engineering owns the internals and the detailsEngineering owns the internals and the details

• Is usually responsible for planning product Is usually responsible for planning product configurations, packaging, and documentationconfigurations, packaging, and documentation

• Sets prices, options, and schedules product Sets prices, options, and schedules product introductionsintroductions

Scott Dietzen


SalesSales

Sales represents the company to the customer (and vice versa)

• Actively approaches and cultivates new customersActively approaches and cultivates new customers

• Demonstrates a products added value and helps customer internal Demonstrates a products added value and helps customer internal champions overcome objectionschampions overcome objections

• Is customer’s liaison to the company for pre-sales support, post-Is customer’s liaison to the company for pre-sales support, post-sales product improvements, and win/win business dealingssales product improvements, and win/win business dealings

• Forecasts business bottom-upForecasts business bottom-up

– Revenue forecasts are prime corporate feedback loopRevenue forecasts are prime corporate feedback loop

• Note: Sales channels are typically very expensive Note: Sales channels are typically very expensive (This is a fundamental start-up conundrum)(This is a fundamental start-up conundrum)

Scott Dietzen


Marketing/Sales InteractionMarketing/Sales Interaction

With respect to Sales, Marketing:

• Forecasts business top-down Forecasts business top-down (Sales goes bottom up)(Sales goes bottom up)

• Selects distribution channels (in conjunction with Sales)Selects distribution channels (in conjunction with Sales)– Value chain can be complex (Value-added ISVs, SIs, OEMs)Value chain can be complex (Value-added ISVs, SIs, OEMs)

– Some product requirements come out of channel modelSome product requirements come out of channel model

• Provides sales tools to sell Provides sales tools to sell (transfer genuine confidence)(transfer genuine confidence) company and product value propositioncompany and product value proposition– Literature, advertising, demos, benchmarks, competitive analysis, Literature, advertising, demos, benchmarks, competitive analysis,

product training, roadshows, seminars, and so onproduct training, roadshows, seminars, and so on

• Conducts sales training (nontrivial)Conducts sales training (nontrivial)

Scott Dietzen


Life of a CTOLife of a CTO

Extremely inter-disciplinary role

• Spend time with Spend time with

– Customers and partners via sales (50% in my case)Customers and partners via sales (50% in my case)

– Industry orchestration (Standards)Industry orchestration (Standards)

– Engineering (defining release themes and refereeing disputes)Engineering (defining release themes and refereeing disputes)

– Corporate strategy/governanceCorporate strategy/governance

– Evaluating start-ups/ISVs as partners/acquisitionsEvaluating start-ups/ISVs as partners/acquisitions

– Investors and financial analystsInvestors and financial analysts

– Industry analysts and pressIndustry analysts and press

• In practiceIn practice

– Meetings, presentations, phone calls, and Meetings, presentations, phone calls, and emailemail

– Stretched a mile wide and ½ an inch deepStretched a mile wide and ½ an inch deep

– Far more grunt work than deep thinking (worse than academia)Far more grunt work than deep thinking (worse than academia)

Scott Dietzen


Comedy Break #1: Top Ten SignsYou May Be Traveling Too Much


6.6. You have to go to the hotel front desk to have them look You have to go to the hotel front desk to have them look up your room number (since it’s not on the plastic key)up your room number (since it’s not on the plastic key)

7.7. Flight attendant’s greet you by nameFlight attendant’s greet you by name

8.8. You’ve eaten nothing but airplane food for more than 24 You’ve eaten nothing but airplane food for more than 24 consecutive hoursconsecutive hours

9.9. You read the hotel stationary to find out what city and You read the hotel stationary to find out what city and country you’re incountry you’re in

10.10. You have a nightmare about being on an airplane, and You have a nightmare about being on an airplane, and then you wake up on an airplanethen you wake up on an airplane

(All true stories)

Scott Dietzen




1.1. Your neighbor mows your lawn for youYour neighbor mows your lawn for you

2.2. A United pilot tells you you’ve been flying ½ as many A United pilot tells you you’ve been flying ½ as many miles per year as he doesmiles per year as he does

3.3. You work a full Wednesday in Japan, fly to the states at You work a full Wednesday in Japan, fly to the states at the end of the day, and arrive in time for work the end of the day, and arrive in time for work ––10am Wed. morning!10am Wed. morning!

4.4. A constant state of sleep deprivation ensures that you A constant state of sleep deprivation ensures that you instantly adjust to any time zoneinstantly adjust to any time zone

5.5. Not only can’t you remember where you parked, but you Not only can’t you remember where you parked, but you don’t even know the make, model, or color of your don’t even know the make, model, or color of your rental car (worse in a blizzard)rental car (worse in a blizzard)

(All true stories)

Scott Dietzen


Why Do Technologists Feel Underpaid (Redux)Why Do Technologists Feel Underpaid (Redux)

Because they don’t understand the game• Responsibility for product and company success is paramount, and Responsibility for product and company success is paramount, and

rewarded accordinglyrewarded accordingly

• Accurately defining the product for the target market is generally much Accurately defining the product for the target market is generally much harder than building it harder than building it

– Domain expertise is often more valuable than programming skillsDomain expertise is often more valuable than programming skills

• Working with others (leading and managing) is harder Working with others (leading and managing) is harder than programming than programming

– Leaders are most highly valued, then managers, Leaders are most highly valued, then managers, then individual contributorsthen individual contributors

• Asking for money is hard; orchestrating a technology purchase can Asking for money is hard; orchestrating a technology purchase can require months of grunt work; and negotiating enterprise licenses can require months of grunt work; and negotiating enterprise licenses can be excruciatingbe excruciating

• As a result, the biggest bucks go to the management team and to sales As a result, the biggest bucks go to the management team and to sales people on commissionspeople on commissions

Scott Dietzen


Start-UpsStart-Ups

Successful high-tech start-ups (generally)• Identify existing target marketIdentify existing target market

• Have channel of distribution to that marketHave channel of distribution to that market

• Have unfair technology advantageHave unfair technology advantage

• Have time to market advantageHave time to market advantage

• Have tremendous growth potentialHave tremendous growth potential

Start-up employees• Are freed from maintenance/legacyAre freed from maintenance/legacy

• But must work very, very hard But must work very, very hard

• Are usually substantial stock holdersAre usually substantial stock holders

• Have to wear multiple hatsHave to wear multiple hats

• Must be able to work well on a teamMust be able to work well on a team

Start-up employees• Are freed from maintenance/legacyAre freed from maintenance/legacy

• But must work very, very hard But must work very, very hard

• Are usually substantial stock holdersAre usually substantial stock holders

• Have to wear multiple hatsHave to wear multiple hats

• Must be able to work well on a teamMust be able to work well on a team

Scott Dietzen


Evaluating A Start-UpEvaluating A Start-Up

• Evaluate from an investor’s view point Evaluate from an investor’s view point – Review the business plan, not just the technologyReview the business plan, not just the technology

– Corollary: Avoid the technically interesting, but Corollary: Avoid the technically interesting, but commercially unviablecommercially unviable

– Ask hard questions about risk and competitionAsk hard questions about risk and competition

– Under non-disclosure, get as much detail as you can Under non-disclosure, get as much detail as you can about financing structure (this may be tough!)about financing structure (this may be tough!)

– Meet with angle investor’s/VCs if you canMeet with angle investor’s/VCs if you can

• Most of all Most of all – Do you love the team, – Do you love the team, love the technology, and love the technology, and have fire in your belly!have fire in your belly!

Scott Dietzen


Joining A Start-UpJoining A Start-Up

• Equity considerations should Equity considerations should be primary be primary

– Expect to take a significant Expect to take a significant pay cut over what you could pay cut over what you could make elsewheremake elsewhere

• Translate equity offers into Translate equity offers into percentage of the company percentage of the company (Shares outstanding range (Shares outstanding range from 8m to 20m+)from 8m to 20m+)

– Founders should expect Founders should expect single digit percentage single digit percentage

– Lead founder often in Lead founder often in double digitsdouble digits

– CEO 5%CEO 5%

– Management team 2%Management team 2%

– Senior engineers <1%Senior engineers <1%(even early on)(even early on)

45%45% InvestorsInvestors

2020%%Founders/ Founders/ wizardswizards

10%10% Management Management teamteam

15%15% 11stst year year employeesemployees

10%10% Later Later employeesemployees

Fractional Ownership of an Typical 1st Round Tech Venture

Scott Dietzen


Premier Venture CapitalPremier Venture Capital

Why?• Defacto seal of approval for company/productDefacto seal of approval for company/product

• Trade share of ownership for resources Trade share of ownership for resources

• Let the pro’s finance the money-losing first years of company Let the pro’s finance the money-losing first years of company development (Your risk should be opportunity cost)development (Your risk should be opportunity cost)

• Get into the networkGet into the network

• Early warning about competitionEarly warning about competition

• Help with recruiting the management teamHelp with recruiting the management team

• Easier to get money down the roadEasier to get money down the road

• Smarter than “industry” moneySmarter than “industry” money

Why not?• DilutionDilution

• Interference/loss of controlInterference/loss of control

Scott Dietzen


VC Profile of an Early WinnerVC Profile of an Early Winner

Leadership – values & culture

Management TEAM

Open, respectful, honest communication

Reverence for the customer, fear of the competition

Aggressive, thoughtful, adaptive, reflective

Optimistic, hardy, creative, tough

A real and defensible business

Insightful & compelling value

Real business & business model

Defensible value proposition barriers

A business that works at scale

Operational excellence

Translate strategy to action

Focus, honesty, discipline, measures

Speed – including “time to decide”

A bias for action – “knee of the curve”

Scott Dietzen


Venture Capital Home Run IllustrationVenture Capital Home Run Illustration

WebLogic Funding

• Employee option strike price starts at zero (founder) Employee option strike price starts at zero (founder) and goes up to $.33/shareand goes up to $.33/share

• Angel financing: Regis McKenna, Frank Caufield, Ali Kutay Angel financing: Regis McKenna, Frank Caufield, Ali Kutay

• First (and final) round in ‘97: $12.5m in venture and First (and final) round in ‘97: $12.5m in venture and strategic industry fundingstrategic industry funding– VCs: TL Ventures & Bay Partners (Both got board seats)VCs: TL Ventures & Bay Partners (Both got board seats)

– Industry: Intel and Cambridge Technology Partners (SI)Industry: Intel and Cambridge Technology Partners (SI)

• Sale to BEA 10 months laterSale to BEA 10 months later– Approximately 10X+ return on investment (home run)Approximately 10X+ return on investment (home run)

– Grand slam if they held (BEAS goes from $25 to ~$350, split adjusted)Grand slam if they held (BEAS goes from $25 to ~$350, split adjusted)

BEA Funding

• First (and final) round in ‘95: $50m from Warburg Pincus! First (and final) round in ‘95: $50m from Warburg Pincus!

• As most of the limited partners held, their ROI reached 100X As most of the limited partners held, their ROI reached 100X

Scott Dietzen


Current VC EnvironmentCurrent VC Environment Conventional wisdom

Back to basics Dumb or bubble money has left the market Kind of like the early 90’s

Reality: Nothing basic about pounding hangover from the excesses of the late 90’s Major overhang of companies funded in the

boom Still too much capital flooding the obvious

categories History suggests that the downturn could be

much more prolonged

Scott Dietzen


$6.8 $9.9 $12.8$17.7

$49.0

$93.9

$34.6

$14.6

1558

3034

6100

4510

25092174

18961313

$0

$25

$50

$75

$100

1995 1996 1997 1998 1999 2000 2001 YTD02

0

1,000

2,000

3,000

4,000

5,000

6,000

Amount Invested ($B) Number of Deals

Amount Invested

($B)

Number

of Deals

Deal Flow and Equity into Venture-Backed Companies (annual)

2002 So Far… Like It’s 19982002 So Far… Like It’s 1998

Source: VentureOne

Scott Dietzen


80% Of Dollars Directed At 2nd And Later Rounds

80% Of Dollars Directed At 2nd And Later Rounds

0%

20%

40%

60%

80%

100%

1995 1996 1997 1998 1999 2000 2001 YTD 02

Later Round

Second Round

First Round

Seed Round

% of Amount

Invested

Investment by Round ClassInvestment by Round Class

Source: VentureOne

Scott Dietzen


EnvironmentEnvironment

0

5

10

15

20

25

30

35

40

1995 1996 1997 1998 1999 2000 2001

0

1

2

3

4

5

6Uninvested VentureCapital

Years of UninvestedCapital

Years of UninvestedCapital at 1995Investment Pace

Accu

mu

late

d C

ap

ital

Over-

com

mit

men

ts (

$B

)

Scott Dietzen


Venture Capital In ‘03Venture Capital In ‘03

• In 2000, 653 venture funds raised $107BIn 2000, 653 venture funds raised $107B

• In 2001, 331 venture funds raised $40.7BIn 2001, 331 venture funds raised $40.7B

• In 2002, 108 venture funds raised $6.9BIn 2002, 108 venture funds raised $6.9B

• Moreover, 26 firms gave $5B back to their limited Moreover, 26 firms gave $5B back to their limited partnerspartners

• So net new $1.9B go into venture funds in ’02 So net new $1.9B go into venture funds in ’02 (95% drop!)(95% drop!)

• Total over-committed capital for all private Total over-committed capital for all private equity is $100B! equity is $100B!

Scott Dietzen


Technology Investment Cycle—4 Phases

Technology Investment Cycle—4 Phases

Bubble Bubble (~2 yrs)(~2 yrs) Free-Free-

FallFall

(~2 yrs)(~2 yrs)

BottomingBottoming

(~3 yrs)(~3 yrs)

FirmingFirming

(~5 yrs)(~5 yrs)

1996-1999: Internet

1981-1983: PC & Workstation

1967-1969: Semiconductors

2000-2001

1970-1971

1984-1985

Today…

1972-1974

1986-19891990-1995

1961-1966

1975-1980

Scott Dietzen


Bottoming—Company HangoverBottoming—Company Hangover

From 1995-2000:

14,463

978

1,529

1,180

10,776

Companies funded

Went public

Were acquired

Went out of business

Remaining

Source: Venture Economics; Venture Source

Mortality effects, me-too effects still working their way through the system

Scott Dietzen


Internet Investment SettlesAt Early Levels

Internet Investment SettlesAt Early Levels

$0

$2

$4

$6

$8

$10

3Q99 1Q00 3Q00 1Q01 3Q01 1Q02 3Q02

Business Services

Software/ Database

Infrastructure

ISPs

Content

Electronic Commerce

Amount Investe

d ($B)

Equity Investment by Internet DimensionEquity Investment by Internet Dimension

Source: VentureOne

Scott Dietzen


Industry Allocations Fluctuate In 2002Industry Allocations Fluctuate In 2002

0%

20%

40%

60%

80%

100%

3Q99 1Q00 3Q00 1Q01 3Q01 1Q02 3Q02

InformationTechnology

Healthcare

Products &Services

Equity Investment by Industry SectorEquity Investment by Industry Sector% of

Investment

Source: VentureOne

Scott Dietzen


Software Clearly Dominant In 3Q’02Software Clearly Dominant In 3Q’02

Software 32%

Products 1%

Services 9%

Retailers 1% Other 1%Biopharmaceuticals

13%

Healthcare Services 2%

Medical Devices 8%

Medical IS 1%

Communications 16%

Information Services 2%

Electronics 5%

Semiconductors 9%

Info. Tech.65%

Prod. & Serv. 10%Healthcare

24%

Percentage of Overall Venture Investment,Percentage of Overall Venture Investment, by Industryby Industry

Source: VentureOne

Scott Dietzen


What VCs WantWhat VCs Want

• VCs generally are not anticipating disruptive technology VCs generally are not anticipating disruptive technology (e.g., internet, optical networking) revolutions near term(e.g., internet, optical networking) revolutions near term

• Broad, hugely ambitious plays are out; Broad, hugely ambitious plays are out; More realistic narrowly targeted (segmented) plays are in More realistic narrowly targeted (segmented) plays are in

• So don’t get too enamored with technologySo don’t get too enamored with technology

• The game today is applying technology to a business The game today is applying technology to a business problem that customers will gratefully pay to solve!problem that customers will gratefully pay to solve!– No more “Just get the eyeballs today, and figure out how to No more “Just get the eyeballs today, and figure out how to

monetize later” monetize later”

• Corollary: Technology is only a small part of the business Corollary: Technology is only a small part of the business plan. Compelling marketing and selling strategy are plan. Compelling marketing and selling strategy are essentialessential

Scott Dietzen


What VCs Want (Cont.)Funding to MilestonesWhat VCs Want (Cont.)Funding to Milestones

Capital

Risk (ß)

Valuation

Idea isFeasible Beta or FCS Model is defined

and proven

Seed R&D Ship Expansion

Scott Dietzen


What VCs Want (Continued)What VCs Want (Continued)

• Make the business case – What is the customer’s return Make the business case – What is the customer’s return on investment (ROI) that will allow you to defy gravityon investment (ROI) that will allow you to defy gravity

• Industry/domain expertise on management team is Industry/domain expertise on management team is mandatory!mandatory!

• Strong syndication Strong syndication – Money was a commodity in the bubble. No moreMoney was a commodity in the bubble. No more

– Other smart, well connected VCs in the dealOther smart, well connected VCs in the deal

– Angels also keyAngels also key

– Shared risk or herd mentality? Shared risk or herd mentality?

– Entrepreneurs need multiple VCs on the hook!Entrepreneurs need multiple VCs on the hook!

Scott Dietzen


Mind of a Successful EntrepreneurMind of a Successful Entrepreneur• Late ’90s (Bubble)Late ’90s (Bubble)

– ““Go big or go home”Go big or go home”– Build infrastructure, Build infrastructure,

spend ahead of the curvespend ahead of the curve– Get “buzz”Get “buzz”– Time to market is the keyTime to market is the key

– Raise only the minimum Raise only the minimum required; ROE is a required; ROE is a function of time function of time

– Optimize for the upsideOptimize for the upside

• Today (Reality)Today (Reality)– ““Survivor”Survivor”– Milestone-based spending, lag Milestone-based spending, lag

$ behind the curve$ behind the curve– Get (named) customers!Get (named) customers!– Cash flow breakeven is key Cash flow breakeven is key

(min. team, share hotels, gear (min. team, share hotels, gear on EBay, …)on EBay, …)

– Raise enough to get to a Raise enough to get to a significant milestone; ROE is a significant milestone; ROE is a function of tangible business function of tangible business progressprogress

– Protect the downsideProtect the downside

Scott Dietzen


Start up/VC SummaryStart up/VC Summary

• Despite the economy, major shifts continue to Despite the economy, major shifts continue to occuroccur

• In many ways, great time to be starting a In many ways, great time to be starting a companycompany

– Costs are down dramaticallyCosts are down dramatically– Talent is availableTalent is available– Luxury of being out of market scrutiny Luxury of being out of market scrutiny

• But, caution and prudence still rule the dayBut, caution and prudence still rule the day– Industry exceedingly well fundedIndustry exceedingly well funded– Business fundamentals not a “V” recoveryBusiness fundamentals not a “V” recovery

• Experience mattersExperience matters

Scott Dietzen


Comedy Break #2: Sabbatical Actually Helped My Career!

Comedy Break #2: Sabbatical Actually Helped My Career!

Scott Dietzen


Managing For SuccessManaging For Success

So you’ve got money in the bank. Now what?So you’ve got money in the bank. Now what?

Three golden rules:Three golden rules:

• Cash is your life supply, manage it ruthlessly Cash is your life supply, manage it ruthlessly

• Get the first version out the door quickly... Get the first version out the door quickly... don't wait for the perfect product don't wait for the perfect product

• Bad decisions happen; Bad decisions happen; recognize them, fix them quickly, and move on recognize them, fix them quickly, and move on

Scott Dietzen


Managing For Success IManaging For Success I

• Take great care in team buildingTake great care in team building– For start-ups/new product launches, For start-ups/new product launches,

only small teams of world-class talent will doonly small teams of world-class talent will do

– Ensure critical team roles are filledEnsure critical team roles are filled• Architect – Sweats the content (big picture and details)Architect – Sweats the content (big picture and details)

• Manager – Sweats the processManager – Sweats the process

• Product manager – Customer/scenario/solution championProduct manager – Customer/scenario/solution champion

• The “Cheer leader”/“Ass-kicker” – Demands/inspires excellence The “Cheer leader”/“Ass-kicker” – Demands/inspires excellence and commitmentand commitment

– Some overlap possibleSome overlap possible

– Success depends upon excellent teaming among four rolesSuccess depends upon excellent teaming among four roles

Scott Dietzen


Managing For Success IIManaging For Success II

Establish key scenarios/priorities to guide decision making Establish key scenarios/priorities to guide decision making around product development/releasesaround product development/releases

• Product releases should have a small (2-4) number of themesProduct releases should have a small (2-4) number of themes

• Do’able in reasonable timeframeDo’able in reasonable timeframe

• Validate themes with customersValidate themes with customers

• And then “And then “get ruthlessly and relentlessly behind themget ruthlessly and relentlessly behind them” ”

• Use scenarios to allocate resourcesUse scenarios to allocate resources

• Use scenarios to organize engineeringUse scenarios to organize engineering– Push ownership down as low as possible Push ownership down as low as possible

(to the natural scenario “owner”), but no lower(to the natural scenario “owner”), but no lower

• Focus, focus, focusFocus, focus, focus——High-tech projects can easily get distracted (the earlier in High-tech projects can easily get distracted (the earlier in the life-cycle, the greater the danger)the life-cycle, the greater the danger)

Scott Dietzen


Managing For Success IIIManaging For Success III

• Acquire with extreme cautionAcquire with extreme caution– For people and IP?; or For people and IP?; or

– For market/customers? For market/customers?

– Know who is going to manage it beforehandKnow who is going to manage it beforehand

– Carefully balanceCarefully balance• AssimilationAssimilation

• PreservationPreservation

• BEA has done 30+ acquisitions, but only a couple major BEA has done 30+ acquisitions, but only a couple major waves of change (“waves of change (“BBuilt uilt EEntirely on ntirely on AAcquisitions”) cquisitions”) – Tuxedo provided initial engineering cultureTuxedo provided initial engineering culture

– WebLogic first major agent of changeWebLogic first major agent of change

– CrossGain/WestSide second major agent of change CrossGain/WestSide second major agent of change (still running its course)(still running its course)

Scott Dietzen


Start-Up LessonsStart-Up Lessons

• BEA/WebLogic won because some big bets paid offBEA/WebLogic won because some big bets paid off– Web would push more business logic to server-sideWeb would push more business logic to server-side

– Java was a great language for server-side programming Java was a great language for server-side programming • Java on the client would drive Java on the server (Mostly wrong!)Java on the client would drive Java on the server (Mostly wrong!)

– Java VM architecture would prove to be dislocating agent Java VM architecture would prove to be dislocating agent for existing OLTP architectures (Tuxedo, CORBA)for existing OLTP architectures (Tuxedo, CORBA)

– Need a API standard for the server – Enter J2EENeed a API standard for the server – Enter J2EE

– Bundled suite of platform services Bundled suite of platform services Web application server Web application server

– Free trial web download (over sales objections)Free trial web download (over sales objections)

• The jury is still out on BEA’s future big betsThe jury is still out on BEA’s future big bets– Can we continue to carve out a niche between Microsoft and IBM?Can we continue to carve out a niche between Microsoft and IBM?

– Can we extend web/Java platform to encompass integration – Can we extend web/Java platform to encompass integration – EAI, B2B, UI (portal), data (XML Query)EAI, B2B, UI (portal), data (XML Query)

Scott Dietzen


What’s Hot: Web Application PlatformWhat’s Hot: Web Application Platform• Complexity of programming business applicationsComplexity of programming business applications

• Complexity/performance of XML processingComplexity/performance of XML processing– Semi-structured content repository meets file system and databaseSemi-structured content repository meets file system and database

• Complexity of application integrationComplexity of application integration– More semantic models of XML data mapping/transformationMore semantic models of XML data mapping/transformation– Choreography/orchestration missingChoreography/orchestration missing

• Complexity of operations, administration, and management Complexity of operations, administration, and management – More adaptive (self-configuring, self-healing) systems to meetMore adaptive (self-configuring, self-healing) systems to meet

a quality of servicea quality of service

• Business activity monitoring (BAM)Business activity monitoring (BAM)

• Security infrastructure (may be oversubscribed)Security infrastructure (may be oversubscribed)

• Wireless (historically oversubscribed, still working off excess)Wireless (historically oversubscribed, still working off excess)

• Data center consolidation on disposable hardware (may be Data center consolidation on disposable hardware (may be oversubscribed)oversubscribed)

Scott Dietzen


Recommendations forThe Would-Be Entrepreneurs

Recommendations forThe Would-Be Entrepreneurs

• Can you be a BSO (blind, stupid optimist)?Can you be a BSO (blind, stupid optimist)?

• Learn how to write and speak wellLearn how to write and speak well

• Learn to be a consummate team playerLearn to be a consummate team player

• But also be a leader – Step up and take responsibilityBut also be a leader – Step up and take responsibility

• Spend some time working on the technology Spend some time working on the technology transfer/business side (technical marketing, technical transfer/business side (technical marketing, technical sales, consulting)sales, consulting)

• Consider auditing classes in entrepreneurship at GSIAConsider auditing classes in entrepreneurship at GSIA

• Learn to be comfortable making decisions from Learn to be comfortable making decisions from incomplete informationincomplete information

• Have some fun now (while you still can)Have some fun now (while you still can)

Scott Dietzen


Bruce’s Final Oral ExamBruce’s Final Oral Exam

• Purely technical issues are of tertiary importance. Predicting Purely technical issues are of tertiary importance. Predicting technology evolution and delivering high-added value to the technology evolution and delivering high-added value to the business are first and secondbusiness are first and second

• CS graduate school most typically blissfully ignores thisCS graduate school most typically blissfully ignores this

• Start-up companies have the best wealth potential, but require Start-up companies have the best wealth potential, but require the highest effort, discipline, commitment, and riskthe highest effort, discipline, commitment, and risk

• The greatest technical influence comes out of connecting The greatest technical influence comes out of connecting technology to the business (technical marketing, product technology to the business (technical marketing, product management, CTO, etc.)management, CTO, etc.)

• Compensation is commensurate with responsibility and ability to Compensation is commensurate with responsibility and ability to assimilate incomplete information and act decisively upon itassimilate incomplete information and act decisively upon it

• Many Ph.D.’s with maturity become great technical managers. Many Ph.D.’s with maturity become great technical managers. Far fewer become great marketeers or executivesFar fewer become great marketeers or executives

Scott Dietzen


Thank you! Thank you!

Value-added contributionsValue-added contributionsmost welcomemost welcome

(If this can be made (If this can be made sufficiently valuable, sufficiently valuable,

then I’d like to do it annually)then I’d like to do it annually)

What They Don’t Teach You in Graduate School

Documents

Transcript of What They Don’t Teach You in Graduate School