Entrepreneurship

TO VC, OR ALT VC?

Modern day Shakespeare would be a startup entrepreneur asking the question: “TO VC, or ALT VC?” Raise venture capital or bootstrap? Bootstrapping is a hard but great alternative to raising venture capital (VC).

Unfortunately, the media rarely tells the story of the bootstrapping startup. The more commonly told story is of the glories of raising VC. Raising VC makes for a great story but the consequences of those choices, if not thought through, can have very not exciting and sometimes painful consequences for the entrepreneur a few years down the road.

Because of hype around funding, many entrepreneurs confuse the formula for startup success as one of raising capital versus one of getting customers and generating revenue. This is akin to highlighting that you are going to run a marathon versus actually running one. The emphasis is erroneously placed on the intent versus the result.

My last company, Bronto, was entirely bootstrapped — no venture capital, no angel investment, no private equity, no subsidizes from existing businesses, etc. But, despite that, Bronto required a huge investment — an investment in time and forgone salary. In the summer of 2000, I left my mid-level marketing position at Red Hat and the last paycheck that I would see for three years. It was a hard road to travel but I had several advantages that prepared me well for the journey:

  • Savings. Karalyn are I are savers. We geared up to live our life on one salary (hers!) for a long time. We kept our “burn rate” low and planned for the long game.
  • Habit. I used to be a Peace Corps Volunteer and made $6k/year (outside of housing.)  So, I was used to living with little.
  • Cheap. I can be scrappy. I taught myself web programming (LAMP = Linux Apache MySQL PHP/Perl) so I could be self sufficient and create my own product. I didn’t want to become a developer but had to learn these new skills in order to create the product and start the company. Hiring developers was an expensive option that I wasn’t able to afford.

On the flip side, I was fortunate because I didn’t have other challenges like heavy student debt (I paid it off beforehand), struggling or dependent family members (parents and siblings stable, no kids yet), and other things that would have made these choices very difficult. Also, many software companies are not capital intensive businesses to start. Biotech or manufacturing stories would be very different.

Bootstrapping is more common in tech than one might think. Here are a few examples:

  • SAS. Cary NC-based analytics company, generating over $3 billion in revenue per year. A forty-year overnight success story!
  • MailChimp. Atlanta-based email marketing powerhouse, doing over $400 million in revenue.
  • Zoho. India-based cloud business app provider, generating over $400 million in revenue.

We all started and grew in highly competitive spaces. We all thrived because we could exclusively focus on the customer with a long-term perspective.

Why don’t all startups bootstrap? Well, it’s hard. Money helps. And, often the entrepreneur’s life situation prevents them from doing so. Also, many believe that there is a race to market and the window will close. This can be true but I believe that is usually not the case if the entrepreneur aims to build along-term sustainable organization versus a short-term M&A transaction. Other times, the startup truly has a unique business model that needs to be funded differently. Great VC success stories are often like this — Red Hat, Google, … And, sometimes the models don’t always work, like Napster, but still made sense to be VC funded.

Some will say that “the VC model is broken.” This is partially because the model is applied to too many tech startups where the economics won’t work, especially for the entrepreneur. Most tech startups and their entrepreneurs would be better served by bootstrapping. Plus, it has many advantages, like:

  • Financial. Bigger piece of a small pie often makes more financial sense. And, sometimes those pies aren’t so small. Of VC-backed startups, founders collectively own 15% of the company at the time of IPO. That percentage is much higher for bootstrapped founders. Plus, there isn’t the same pressure to have an IPO for institutional investor liquidity and these founders avoid the hard reality of liquidation preferences when early lofty valuations don’t match acquisition prices. (More here! This could be an entirely different post.)
  • Focus. Investors can bring many benefits beyond money. But, they also require time and focus — at the expense of your customers and employees.
  • Direction. What do you want to do? Do you want to be high profile and grow faster or would you have more control to shape the destiny of your creation? Either way is fine. Just make the choice deliberately because your financing choice will dictate your path. And, if that direction is inconsistent with your vision, you will lose.

VC can make sense. But, it is not the only game in town. Its important to do what makes sense for your business and, most importantly, for you. Also, the required discipline around bootstrapping makes for great businesses. And,  great businesses attract incredible employees, customers and even investors. They all want the same thing.

In the end, VC or ALT VC depends on what you want to do. Both paths can lead to great businesses but can have very different outcomes for the entrepreneur.

To VC, or ALT VC? This is the question. Easy to ask. Hard to answer.

Bronto, Entrepreneurship

“Stories from the Bronto Journey” @ Harvard

Last week, I spoke to a Harvard class on “Stories from the Bronto Journey.” The class was offered as part of the Technology and Entrepreneurship Center at Harvard (TECH) and consisted mainly of undergraduates — almost 200 of them! Excited to see so much enthusiasm for technology and entrepreneurship.

Here are some takeaways from my talk:

  • Entrepreneurism is often less about the “what” and more about the “how”. Innovation is how you execute and approach the challenges.
  • My entrepreneurial journey was very long and with five stages — the before, the genesis, the grind, the graduation and the after. The grind is long, hard and usually uncelebrated — but it makes all the difference.
  • Graduations (or exits) can be bittersweet. Build your art and someone else will find it as attractive as you.

Watch on YouTube: (long @ ~31 minutes)

Or see the slides on Slideshare.

Enjoy!

Entrepreneurship, Raleigh-Durham, Technology

My Hustle into Red Hat

Here is a wildly embarrassing video about how I hustled my way into Red Hat. I recommend starting at the 3min 15seconds mark to watch the blooper reel. It has the best bits. Enjoy!


They say great entrepreneurs have grit and hustle. I’m not sure if I am a great entrepreneur but I have been known to have moments of hustle.

One such moment was in 1999. Back then, I was a second year MBA student at the University of North Carolina, focused on technology / marketing / entrepreneurship. I have always been entrepreneurially minded but I figured that I should go work for a software company for a little bit before starting out on my own.

It was frothy back in the Dot Com Boom days. There were lots of startups to go work for. But, I found few that were truly interesting and innovative. In my search, I stumbled upon a little company called Red Hat and was intrigued. It was based in Durham and still very small, less than a 100 people. More importantly, I found its open source model and community fascinating. I believed that it was truly going to change how software was developed and deployed. Back then, Red Hat was rough around the edges but I could see that there was a diamond in there. I had seen this diamond in the rough before so I knew what to look for.

I graduated from college in 1993. As a computer science major, I had been fairly tied into the pre-Web Internet and even ran a Bulletin Board System (BBS) as a kid. But, I took a detour after graduation and joined the Peace Corps. By the time the “World Wide Web” burst on the scene in late 1993 and 1994, I was living on a remote island with no connectivity. My days were filled with teaching and coconuts instead of coding and startups. (Which was awesome btw!) I missed the Web’s grand entrance but deeply understood what it looked like before becoming mainstream. I saw the same thing with Open Source in 1998 and 1999. Fortunately for me, I was near its epicenter and determined not to miss out on it again.

I wanted into Red Hat but I needed to get their attention. So, I recruited my business school friends to help me make a video, stating my case. I pressed the video onto a CD-ROM and FedEx-ed to the CEO. Easy to do now but no so easy in 1999.

It worked! (in addition to a few other tactics like organizing a school-wide presentation for the CEO and telephoning the head of marketing every week.) I joined as an intern and then converted to a full-time employee around graduation. Meanwhile, I let my more lucrative offers at places like Dell Computer expire. Red Hat IPO-ed on scant revenue later than summer and managed to survive the Dot Com Bust to become the $15 billion 10,000-employee gorilla that it is today.

Some of that $15 billion is likely because of the awesomeness of this video.

Bronto, Entrepreneurship, Raleigh-Durham

“The Bronto Story” for the UNC’s Adams Apprenticeship Fall Conference

Last Friday I had the pleasure of being the primary speaker for the Adams Apprenticeship Fall Conference evening event. The Adams Apprenticeship is a mentorship program that pairs successful entrepreneurship with UNC’s most promising future entrepreneurs.

For my presentation, I told the “Bronto Story” and lessons learned. I wish that I would have recorded it because it was fairly entertaining. But, here’s the gist of it:

  • This story is a story not the story. Every entrepreneurial journey is different.
  • Entrepreneurship is hard, especially in the early days. Its not for everyone but for people wired a certain way, it is the only way to live.
  • The journey broke down into three parts — Genesis, Growth and Graduation. I am particularly proud of my cleverness in that all the words started with the same letter.

I summarized the talk with these points:

  • It’s a journey. Not a transaction. Mentors and advisors help.
  • Genesis(s) are rough and gritty. Passion and encouragement matter.
  • Growth is about focus and execution with an engaged + committed culture
  • Graduations are about architected sustainability and are bittersweet

Also, that night, I joined the program as an Adams Apprentice. I look forward to seeing where that goes and supporting the efforts by UNC in growing the local entrepreneurial community.

Bronto, Entrepreneurship, Raleigh-Durham

NCSU Computer Science Presentation on “From Code to Company”

Last month I had the honor of speaking to NC State Computer Science students and faculty as part of their Executive Speaking Series. In the talk, I walked through a number of hard learned lessons in building Bronto Software. You can review the official writeup on the NCSU CSC webpage or here:

Joe will share lessons learned in building a company out of his spare bedroom ten years ago to a successful award-winning software company – entirely bootstrapped without any outside capital. Today, Bronto Software employs over 120 people in over 20,000 square feet on the American Tobacco Campus in nearby Durham. Bronto was recently named as NCTA’s Software Company of the Year and as a TBJ Best Place to Work.

I enjoyed giving the talk and especially mingling with the students afterwards. Hopefully they found it insightful … or at the very least entertaining. Personally I always found these type of talks rewarding back as a student in my Harvard and Carolina days.

So, without further ado, here’s the YouTube video for your watching enjoyment:

Bronto, Marketing, Technology

How To Be More Secure With Your Data

To follow-up on last week’s security post, Email Service Providers like Bronto need be vigilant about security and act like the banks of the new millennium — banks of personal information with email addresses increasingly being the new currency. Of course, if you walk through city streets with your wallet hanging out, a secure bank is not going to help you very much. Here are some thoughts on what you can do to keep your email and customer lists more secure:

  • Think about what you are storing. Customers’ contact lists often contain much more than email addresses. Be aware of what data you are storing on whatever email marketing platform you are using — in particular, avoid including very sensitive pieces of data like credit card numbers and social security numbers for your contacts.
  • Protect and rotate your password. Most intrusions happen through the first door versus technical back doors. Your password is often the front door key so it is best to have a “strong” password and change it periodically. Strike the balance of it not being so hard to remember that you have to scribble it on a sticky note that sits on your desk. That’s not secure either.
  • Control access. Every account at Bronto includes multiple users — use them. And, when some one no longer needs access, delete it. Shared user accounts and passwords are inherently insecure and a cause for break-ins.

This is all common sense that sadly isn’t common enough. Bronto has a full suite of security features to make these type of things easy to do. Read this post on Brontoversity to learn how.

Phishing and Key Logging

Now, here’s the tricky one that you probably didn’t think of but has been the reason behind some recent data thefts. This really happens so read this one carefully.

The intruder sends you a phishing email trying to lure you into downloading a computer virus. The virus is a key logger. The key logger runs in the background and secretly logs and sends every key to the intruder. Then the intruder simply listens for your username and password and then tries the combination themselves. Https and other secure connections won’t help you here because your typing is captured before your information is encrypted and sent along to connected website. Then the intruder goes in through the “front door” by signing into your account with your username and password and takes what they would like.

In addition to the suggestions above, I recommend the following to mitigate the risk from phishing / key logging break-ins:

  1. Be aware of phishing emails and what you download from them.
  2. Install and maintain current anti-virus software. Anti-virus software will monitor your system for common key loggers.
  3. Limit the IP addresses that can access your account to your office’s IP address. Will this be inconvenient when you try to sign into your account from home or on the road? Yes but a secure office would have a VPN to let you securely access the Internet through your work network. Read the Network Access section of this post to learn about how to do this in Bronto.

Ultimately secure data is a journey and not a destination — you are never a 100% there and the effort to keep your data secure never ends. But, there is a lot in your control to make your data more secure and exponentially more difficult to steal.

Bronto, Marketing, Technology

Email Service Providers are the New Banks

Willie Sutton was a famous bank robber from the first half of the twentieth century. One time a reporter asked him, “why do you rob banks?” His now famous response was, “because that’s where the money is.” The new money these days is personally identifiable information — email addresses and related bits — and Email Service Providers like Bronto are the new banks.
Today this reality became thrust into the forefront with Epsilon reporting that they had a major security breach that resulted in stolen email lists from many top brands including Best Buy, Capital One and Disney. Read more from the article in Security Week.

This is an unfortunate issue and reinforces why we take security and privacy very seriously at Bronto. We’ve invested much effort in the past 15 months into improving not only our own technology and internal security stance, but also providing many features to customers to allow them configure their own security controls according to their preferences. Among the areas we’ve improved during this time are our network, our internal management applications, and our internal policies and training. Additionally we’ve also improved our ability to detect and monitor activities going on inside our application and network, so appropriate staff are alerted to investigate, 24×7.  On the customer side, we have added new features in the areas of account management, password security, user permissions, & API security. The security of your data is of the utmost importance to Bronto, and we never forget that.

We understand that we are a twenty-first century bank and the vault of your data is extremely valuable and needs to be kept very secure.

Unfortunately, with incidents like this, no one wins and the only redeeming value is that it sends a strong message to everyone in the industry that their security, whatever it is, could be better and forces them to re-assess and improve. We will certainly be re-assessing ours and looking for improvements. And we welcome conversation with anyone in the industry regarding how all of us can tighten security and provide a more secure world for all.

Bronto, Entrepreneurship

The Story Behind the Bronto Name

Often when I talk about the company to a group of people, I inevitably get the questions: Why Bronto? What’s the story behind the name? Sometime ago one of our prospects emailed me the same question. To settle some of the curiosity out there, I thought that it would be helpful to share my email response below.

Fortunately, the situation for bronto named dinosaurs has improved since my email response. Making up for the Brontosaurus being discredited, a palentologist discovered a new dinosaur and, earlier this year, applied the bronto moniker to it. Brontomerus. The name means “Thunder Thigh” in Greek. Hilarious! Also love how the Brontomerus is kicking butt in its wikipedia pictures. Awesome!

Paleontologist Mike Taylor, we salute you!

Hi Eliana –

I am the founder and CEO of Bronto Software so I can provide some insight into the name Bronto. I named the company after my childhood love for dinosaurs while bootstrapping the company out of my spare bedroom many years ago. As a 7 year old, I loved dinosaurs, in particular the Brontosaurus, so when given the chance to name my own company, I couldn’t resist.

Yes … it is true that in many ways bronto is not the ideal name for a technology company. Brontosaurus is an extinct, plant eating animal that supposedly had the brain the size of a pea. And, in most drawings, it is often on the verge of being eaten by a T-Rex. Also, the Brontosaurus is mislabeled. It didn’t exist and was later re-categorized as a different dinosaur. In the race for discovery, a paleontologist had the wrong head on it and erroneously labeled it as a brontosaurus … which my 9 year old niece told me (to my surprise) a few years after starting the company. Read this article.

Despite all this, Bronto is really a great name and embodies our humility in humanizing technology and software. We are committed to making our customers better marketers and have embraced this simple principle throughout our product and service. The paradox of having a name like Bronto keeps us approachable and real. So, hopefully you’ll have a chance to see what Bronto makes different and why we embrace its name and ideals. Plus, the name gives us the opportunity to take lots of brontosaurus pictures in interesting places.

Hope that helps clarify your question.

Cheers, Joe

Entrepreneurship, Raleigh-Durham

Adventures in Entrepreneurship

Last month we kicked off a new video series with the CED, the largest entrepreneurial support organization in the country. The series features local Raleigh-Durham entrepreneurs and their startups. I play host for the series and hope to go beyond the typical entrepreneur interviews and give viewers a better sense of life as a entrepreneur and in a startup. Special thanks to Caroline Riddle, our community guru at Bronto, for all her help in producing this series. For the first episode, Eric Boggs and Adam Covati, two bronto alumni, discuss their startup Argyle Social. Now, without further adieu, here’s the first episode: