Starting and Scaling a Starting and Scaling a Successful High-Tech Successful High-Tech

VentureVenture

Michael L. TortoMichael L. Torto

CEOCEO

““The Dumbest Guy in the Room”The Dumbest Guy in the Room”

Michael TortoMichael Torto

CEO rPathCEO rPath

mtorto@rpath.com

www.rpath.comwww.rpath.com

919-861-5716919-861-5716

My HistoryMy History

• Born in 1962Born in 1962

• Joined the Navy Reserve 1981Joined the Navy Reserve 1981

• Emerson College Boston 1985Emerson College Boston 1985

• 7 High-technology companies in 23 Years7 High-technology companies in 23 Years• Thin film research, medical manufacturing, scientific Thin film research, medical manufacturing, scientific

instruments, application and infrastructure softwareinstruments, application and infrastructure software• All venture backed, 2 Public, 5 Private, France, BelgiumAll venture backed, 2 Public, 5 Private, France, Belgium• Investors all over the worldInvestors all over the world

TechgnosisTechgnosis = $0 to $100 million in 2 years = $0 to $100 million in 2 years

Swan InternationalSwan International = $0 to $1billion in 5 = $0 to $1billion in 5 yearsyears

2 Years ago2 Years ago

Start up Start up Age Progression Age Progression

EntrepreneurEntrepreneur

EntrepreneurEntrepreneur

FrustrationFrustration

• Frustration Frustration = The gap between idea and = The gap between idea and execution, inspiration and the practical reality execution, inspiration and the practical reality of what it takes to start and scale a business.of what it takes to start and scale a business.

Start-up Part 1Start-up Part 1The “Science”The “Science”

Fundamentals of what it Fundamentals of what it takes to:takes to:

①① validate a visionvalidate a vision

②② build a differentiated build a differentiated productproduct

③③ partner early with partner early with customers customers

④④ negotiate venture fundingnegotiate venture funding

⑤⑤ attract a world-class teamattract a world-class team

Start-up Part 2Start-up Part 2The “art” (Lessons)The “art” (Lessons)

Value Topics/Top 10 Value Topics/Top 10 LessonsLessons

1. 1. Always be the dumbest Always be the dumbest guy/gal in the roomguy/gal in the room

2. Learn a little about a lot2. Learn a little about a lot

3. Best “ideas” often suck?3. Best “ideas” often suck?

4. Solve real world 4. Solve real world problemsproblems

5. Surround yourself with 5. Surround yourself with “motivated” people!“motivated” people!

6. Improvise, adapt, overcome6. Improvise, adapt, overcome

7. Be your best sales person7. Be your best sales person

8. Accept as much money as 8. Accept as much money as you can get.. early!you can get.. early!

9. Above all else, achieve the 9. Above all else, achieve the objective!objective!

10. One difference separates 10. One difference separates successful vs. unsuccessful, successful vs. unsuccessful, Entrepreneur vs. Entrepreneur vs. WishepreneurWishepreneur

Questions to ask Questions to ask yourself?yourself?

• Do I fail well? Do I fail well?

• Do I sell well? Do I sell well?

• If you have partners (founders) what will If you have partners (founders) what will they contribute?they contribute?

• Am I a good communicator? Can I simplify Am I a good communicator? Can I simplify things?things?

• Am I good on the emotional rollercoaster?Am I good on the emotional rollercoaster?

What’s does it take?What’s does it take?

Q.Q. It just takes a good It just takes a good ideaidea followed by followed by a lot a lot of handsof hands to make a to make a successful company…successful company…right?right?

Q. All it takes is the best Q. All it takes is the best product?product?

A. A. This can’t be further This can’t be further from the truthfrom the truth! Building ! Building a technology startup a technology startup is really toughis really tough..

What it Take is…What it Take is…

• Think out your business well!Think out your business well!

• Successfully launch and continue to deliver! Successfully launch and continue to deliver!

• You need to stay balanced -not get too focused You need to stay balanced -not get too focused into any particular stage or topic. into any particular stage or topic.

• You need to reach out and discover what other You need to reach out and discover what other successful entrepreneurs have done. successful entrepreneurs have done.

• You need to have courage to focus…but You need to have courage to focus…but willingness to adjust!willingness to adjust!

• You need lots of help!You need lots of help!

My First “full-time” Job!My First “full-time” Job!

• Coulter ElectronicsCoulter Electronics

Wallace CoulterWallace Coulter

• Engineer, inventor, Engineer, inventor, entrepreneurentrepreneur

• The two great passions The two great passions • applying engineering applying engineering

principles to scientific principles to scientific research research

• embracing the embracing the diversity of world diversity of world culturescultures

Lesson 1Lesson 1

Always be the dumbest guy/gal in the Always be the dumbest guy/gal in the roomroom• Ask more questions than give answersAsk more questions than give answers• Formulate your products based on market Formulate your products based on market

needs, not your own statements of factneeds, not your own statements of fact• Don’t believe your own PRDon’t believe your own PR• Do “real” market researchDo “real” market research

and analyze trends and and analyze trends and

competitorscompetitors

Validate VisionValidate Vision

• Have a Product Vision – Have a Product Vision – “Make it big”“Make it big”

• Create a Minimal Create a Minimal Marketable ProductMarketable Product

• Create a focus group Create a focus group ((not your friendsnot your friends) ) early and offer them early and offer them something tangible, something tangible, real valuereal value

• Market validates your Market validates your visionvision

““Big”, Simple ideaBig”, Simple idea

Solving more complex Solving more complex problemsproblems

Lesson 2Lesson 2

Learn “a little” Learn “a little” about “a lot”…of about “a lot”…of business.business.

• Need to understand Need to understand how your customers how your customers operateoperate

• Not just how the Not just how the “geeks” consume “geeks” consume technologytechnology

• The CTO, Founder, has The CTO, Founder, has to be the evangelistto be the evangelist

Lesson 3Lesson 3

Best ideas often “suck”…Best ideas often “suck”…

• Better “technology” doesn’t always come out Better “technology” doesn’t always come out on top!on top!

• Good enough to solve the problem often wins!Good enough to solve the problem often wins!

• Buyers are emotional….Buyers are emotional….

• ““You can buy better…but you can’t pay more” You can buy better…but you can’t pay more” – Harley Davidson Owners– Harley Davidson Owners

Lesson 4Lesson 4

Solve a real world problem!Solve a real world problem!

• DON’T rely on “Ancedata”DON’T rely on “Ancedata”

• Balance being ahead of the curve, without Balance being ahead of the curve, without driving the company into the ditch!driving the company into the ditch!

• rPath… the transition…rPath… the transition…• Virtual Appliance Company…to the Company Virtual Appliance Company…to the Company

that helps IT manage entire systems in that helps IT manage entire systems in physical, cloud and virtualized environments.physical, cloud and virtualized environments.

DistributionDistribution

• It’s all about distribution…It’s all about distribution…without a channel, you have without a channel, you have nothing.nothing.

• Stage the distribution Stage the distribution strategy- direct to channel.strategy- direct to channel.

• Users matter…but so does the Users matter…but so does the model. Make money!model. Make money!

Ways to build value:Ways to build value:

• Build Customers, Build Build Customers, Build Revenue, Build both!Revenue, Build both!

• Open source is a double-Open source is a double-edged sword.edged sword.

• It’s all about distribution.It’s all about distribution.

Lesson 4ALesson 4A

Don’t over think your business….Don’t over think your business….

• Most think about all the reasons why it “won’t Most think about all the reasons why it “won’t work”work”

• Instead, try thinking about all the reasons Instead, try thinking about all the reasons why it will work! why it will work!

• Experiment with the business modelExperiment with the business model

RoadblocksRoadblocks

““Obstacles are those frightful things you Obstacles are those frightful things you see when you take your eyes off the see when you take your eyes off the goal!”goal!”

Henry FordHenry Ford

Build a Differentiated Build a Differentiated productproduct

• Not good enough to be a Not good enough to be a “me too” in technology“me too” in technology

• Not good enough to set Not good enough to set you sights on an you sights on an incremental incremental change ..unless it has change ..unless it has significant economic significant economic impactimpact

• When developing your When developing your value proposition and value proposition and value statement… ask value statement… ask yourself … “So what?”yourself … “So what?”

• Harder and harder to raise Harder and harder to raise money on a “small idea”money on a “small idea”

Dean KamenDean Kamen

Differentiated ProductDifferentiated Product

Differentiated ProductsDifferentiated Products

•TechgnosisTechgnosis

•Swan Swan InternationalInternational

•FaceBookFaceBook

•GroupOnGroupOn

Lesson 5Lesson 5

Surround yourself with Surround yourself with motivated people…motivated people…

•Find people with skills that Find people with skills that compliment yours… and compliment yours… and “use” them! “use” them!

•People that want to OWN People that want to OWN IT! IT!

•People who don’t make People who don’t make excuses, but make things excuses, but make things happen.happen.

•Negativity “kills” Negativity “kills” companies – Ask how do we companies – Ask how do we achieve the objective, not achieve the objective, not why it wont work!why it wont work!

Attract a world Class Attract a world Class TeamTeam

• The “Market” and your “differentiated The “Market” and your “differentiated product” should bring out the best of the bestproduct” should bring out the best of the best

• Sifting through the clutter is your challengeSifting through the clutter is your challenge

• Focus beyond their “technical skills” and build Focus beyond their “technical skills” and build a team of well rounded peoplea team of well rounded people

• Your company is NOT a charity…Get rid of the Your company is NOT a charity…Get rid of the dead weight earlydead weight early

• rPath – everyone knows a little about a lot!rPath – everyone knows a little about a lot!

Lesson 6Lesson 6

Be flexible and Be flexible and prepared to prepared to improvise, improvise, adapt and adapt and overcome. overcome.

• Initial assumptions can Initial assumptions can be wrong! Markets will be wrong! Markets will shift!shift!• SwanSwan

• Centive Centive

• rPath rPath

Lesson 7Lesson 7

Be your own best Be your own best sales person… If you sales person… If you cant sell it, its cant sell it, its unlikely anyone else unlikely anyone else can!can!

• Inventors, Inventors, Technologists, Geeks…Technologists, Geeks…You can and should You can and should sell!sell!

Lesson 8Lesson 8

Accept as much money as you can get in! Accept as much money as you can get in!

• Asking when you need it—reduces leverage.Asking when you need it—reduces leverage.

• It always takes more money than you think.It always takes more money than you think.

• Choose a VC /Financial partners that you can Choose a VC /Financial partners that you can trust and work with!trust and work with!

• VCs expect more than one round.VCs expect more than one round.

• Plan to prove market adoption with the first Plan to prove market adoption with the first round.round.

Lesson 9!Lesson 9!

Above all else, achieve the Above all else, achieve the objective!objective!

• Focus on the right SyllableFocus on the right Syllable

• Do 10 things, 10,000 times, not 10,000 things Do 10 things, 10,000 times, not 10,000 things onceonce

Lesson 10Lesson 10

One difference separates the successful from One difference separates the successful from the unsuccessful, the Entrepreneur and the the unsuccessful, the Entrepreneur and the Wishepreneur…Wishepreneur…

Lesson 10Lesson 10

The successful are willing to The successful are willing to do what the unsuccessful do what the unsuccessful

are not!are not!

10 Lessons Learned10 Lessons Learned

①① Always be the dumbest guy/gal in the room.Always be the dumbest guy/gal in the room.

②② Learn “a little” about “a lot” of businesses.Learn “a little” about “a lot” of businesses.

③③ All it takes is a good idea and lots of people…right? All it takes is a good idea and lots of people…right?

④④ Think out your business well. Solve a real world problem – Don’t rely on “ancedata”Think out your business well. Solve a real world problem – Don’t rely on “ancedata”

⑤⑤ No on has ever “made it” on their own.No on has ever “made it” on their own.

⑥⑥ Be flexible and prepared to improvise, adapt and overcome. Initial assumptions can Be flexible and prepared to improvise, adapt and overcome. Initial assumptions can be wrong!be wrong!

⑦⑦ Be your own sales person… It’s never too early to start selling!Be your own sales person… It’s never too early to start selling!

⑧⑧ Accept as much money as you can get!Accept as much money as you can get!

⑨⑨ Above all else, achieve the objective!Above all else, achieve the objective!

⑩⑩ There is only one difference between the successful and the unsuccessful…There is only one difference between the successful and the unsuccessful…