Good morning MIT

Barry Rowan (ex CFO of Nextel and CEO of Vesper) about meaning of life

Yesterday I attended a talk by Barry Rowan (former CFO of Nextel, acquired by Sprint in 2005 for $35Billion, and CEO of Vesper). The topic was about things he wish he had known early in his career. Basically, he talked about what makes he feel fulfilled.

He said that there are 3 keys to UNHAPPINESS: EXPECTING, COMPARING and COMPETING. As an example he said that in his 5 year Harvard Business School reunion, everyone was asking "how are you doing?". In reality they wanted to know about your professional position and even your salary. And it was not that they wanted to know your salary; they wanted to know how they were doing compared to others ("how am I doing?").

He also mentioned that "we can't get enough of what we don't really need". He quoted Rockefeller when he was asked "how much money is enough", and he replied, "just a little bit more".

Office Snapshots, would you like to work here?

I just came across Officesnapshots.com, a website where you can see startup offices. Don't miss the snapshots of Tokbox,(one of the YCombinatory startups I have been watching lately), Tocquigny (the best offices by far), SixApart, Twitter, Pixar, Threadless, Wazap, Keggy, or Burnkit.

I attach some pictures below.

YCombinator Demo Day

Today was Y Combinator Demo Day. To read a review of the startups presented I recommend this blog post: Innovation Economy (or these other ones: OnStartups, Xconomy, or Techcrunch). There are some very cool (and simple) ideas. For a review of the YC startups presented last Spring you can read this post in Techcrunch.

I am happy to read the excellent reviews of PollEverywhere --real time polls with text messaging-- of my classmate, friend, and neighbor Jeff Vyduna. I also had the same excellent reaction the first time he showed it to me.

Lunch with Jeff Raikes, new CEO of the Bill & Melinda Gates Foundation

Jeff Raikes, President of Microsoft, gave us a talk as part of the executive lunches for Microsoft MBA interns. Jeff joined Microsoft in 1981 (he probably does not have financial problems). In September, he will become the new CEO of the Bill & Melinda Gates foundation.

The talk covered basic topics of management. He recommeded us:

• To follow our passions
• To have a plan in life but be open to opportunities

He also talked about opportunities in business:

• For him, a good definition of high growth in business is when there are more opportunities than resources (which applies to Microsoft). You have to be good at picking the right ones. And you need to use good judgement to set the priorities and set the right tradeoffs.
• There are big opportunities when there is a paradigm shift (e.g., graphic user interface in 84). He clearly stated that innovation is not only on technology, it is also about business model transformations.

Some additional interesting comments he made:

• People usually get excited about a new trend and they get binary (either/or)
• "I'd rather have people paying for our SW; but if they have to pirate someone, I would prefer to be us"

Startup ideas

Paul Graham from YCombinator posted last week a list of ideas they would like to fund. The readers comments are also worth reading, with plenty of additional ideas.

Some days ago, Seth Godin also posted a list of interesting product features that do not exist today.

As Dharmesh mentioned, just pick an idea and stop waiting for the right opportunity: Be an entrepreneur, not a wannabepreneur. With the help of Paul Graham and his readers, now it is easier to pick an idea.

Intelleflex

I wanted to comment about my past visit to Intelleflex, the developer of extended capability RFID solutions.

We met with Richard Bravman, CEO, who had previously spent 26 years at Symbol Technologies (the leaders in barcode readers). In 2007, Symbol was acquired for Motorola for $4B . Richard is also on the board of Cognio (acquired by Cisco in 2007), Nomadix (acquired by Docomo) and Fiberlink.

He stressed how important is to understand the sale cycle in different industries and the impact in your business. For example, they only have one product which it took only 3 weeks to sell in the aviation industry (e.g., Boeing) versus 2 years in the utility industry. On average, it takes them 200 days. He also commented on how important is to go to the customers and not talk about RFID but about their business problem and added value.

He also mentioned that a typical P&L of a hardware platform startup should look like:

• Revenues: 100%
• Gross Margin: 60%
• SG&A: 22%
• R&D: 12%
• Operating Income: 26%

He also talked about the RFID industry and more specifically about Intelleflex. To make clear Intelleflex's competitive advantage, he explained the difference among the different types of RFID and its evolution:

• Bar codes (non RFID): Everybody knows them from the supermarkets. The problem is that they are too prone to human errors (e.g., a person forgets to scan one product out of 20).
• Passive (cheap): They started as a replacement of barcodes. They reflect the energy and they do not require line of sight (vs. bar codes). Additionally, it is possible to read multiple tags simultaneously. The main benefits are that they are cheap and work with non-LOS.
• Active (expensive): Both the reader and tag have 2 way radios (e.g., based on Wifi, like Aeroscout).
• BATTERY ASSISTED PASSIVE (Intelleflex solution). It is a passive tag that amplifies the reflected energy (+30dB). Some of the benefits are: a) Longer range (50meters for read/write) and more sensitivity; b) Price point close to passive; c) Battery only costs 10 cents and lasts 5 years in normal operations. Interestingly, at the end of the battery life, the information remains stored in the tag and it becomes a passive tag; d) Robust performance under difficult RF conditions (e.g., around metals&liquids); e) it can store up to 64Kbits of information; f) the information can be encrypted.

He also pointed out that the first wave of RFID failed because of 2 reasons (and the hype became a deceive):

• It commoditized and froze the market before there was a market. Customers did not want to pay 75 cents for a tag when everybody said that tags were going to cost 5 cents in the short term. It never happened
• Low cost contradicts reliability (e.g., in a supermarket). Only 97% of the time passive RFID works.

So far Intelleflex has received over $40M in funding used mainly to put all the functionalities in one chip with low power consumption (tag) and to develop readers.

Right now their main customers are in enterprise asset management, manufacturing work-in-progress, supply chains, parts maintenance or even casinos (chip tracking).

Interestinlgy, during my last semester I have done a project with the founders of Oat System, (including Venkat K. and Sanjay Sarma, the inventor of RFID ) which operate in the same industry, and have been recently acquired by Checkpoint.

 

Exporting successful startup ideas

Exporting successful startup ideas to Spain or LatinAmerica is a common topic of conversation with people interested in entrepreneurship. Especially those ideas that need to be localized, because either you need to translate the language, you need to adapt certain features, or you need to make local contacts/agreements/content.

I already talked in a previous post about Second Life and Del.icio.us. Some of the other ideas I have been discussing lately because they do not exist in the Spanish market (or are not getting traction yet) are:

• LiveOps - on-demand call center technology, as well as virtual call center services through a network of over 20,000 independent home agents
• Opentable - restaurant reservation network
• Elance-marketplace to find freelancers (programmers, translators, etc.). Infolancer has been recently launched in Spain by the same team as Infojobs.
• Zillow - online real state service; allows users to see the value estimates of millions of homes across the United States, not just those up for sale
• Streetline - real time information about parking space availability
• Dash Express - GPS navigation device that is connected to the internet and integrates real time information about the local context (e.g., traffic, gas prices in stations around you, availability of houses on sale around you, etc.)
• Surveymonkey - simple way to create online surveys, collect responses and analyze results. EncuestaFacil was recently launched in Spain
• Skyhook - WiFi location system used on the iPhone. The system uses fingerprinting with existing WiFi routers that have been previously mapped (they literally had vans driving around cities to creat their database of localized WiFi routers)

All of them with innovative and viable business models.

Summer at Microsoft Corporate Strategy

I am spending the summer in Seattle working as a Manager in the Corporate Strategy Group of Microsoft. This is a small group (mainly with management consulting experience) that advises senior executives on launching new businesses and identifying growth strategies for Microsoft. The content of the projects is really interesting and the quality/seniority of people I am interacting and networking with is incredible.

One of the interesting things is that I work in the corporate building, on the same floor as Bill Gates, Steve Ballmer, Chris Liddell, Ray Ozzie, etc.

Earlier this month the people on my floor waited outside Bill Gates's office to wish him a fond farewell as he made his way of out his office on his official last day at Microsoft.

   

This Monday we had lunch with Steve Ballmer. He talked about leadership and management in general, argumenting about the tradeoff of staying relevant and interesting today (i.e. in the current areas) vs. in other new areas in the future (e.g., phones, TV, reading) where there will be great opportunities to apply SW. He also talked about the application of SW to social issues:

• Health (the largest industry in the world and the largest growing)
• Education
• Science (e.g., solutions to problems in environment)

One of the interesting things we heard is that when evaluating future opportunities, like in life, if you are big buy, you need to be patient with business (although not with people).

"Start young, think big, stick with it", Ronald Cohen (founder of Apax)

I just finished "The Second Bounce of the Ball", a required reading for entrepreneurs written by Ronald Cohen, the father of Venture Capital in Europe.

Ronald Cohen, McKinsey alumni, founded in the 70s Apax Partners, now the largest private equity firm in Europe with over $20B under management. Apax backed companies such as AOL, Apple, Vueling or Edreams. In the book he shares his experiences as an entrepreneur and with entrepreneurs. Some topics are cliche and some chapters a little bit repetitive. But overall, I recommend the book.

A compilations of quotes:

• All entrepreneurs share certain personality traits: a high level of confidence and high levels of optimism, energy and determination. But the people who become entrepreneurs come in all ages, shapes and sizes, and their entrepreneurial skills vary considerably.
• Start young, think big, stick with it: that is valuable advice that I did not get, but which I can now offer the aspiring entrepreneur.
• Building a business is like climbing a mountain. It presents a great challenge and, if you get to the top, there is a great sense of achievement. That desire for achievement was our motivation.
• There have always been privately financed companies. Private equity existed in 14th and 15th century Italy, where merchant bankers would fund enterprise and trade. In the 16th century, when European traders were travelling to the New World, voyages were funded by private investors, each of whom took a share of the risk and a share of the profits in proportion to his or her own investment. But custom, the captain of the ship took 20% of the value of the cargo. The rule still applies.
• You must find an opportunity that matches your skills and ambition. When I started out there were opportunities in hi-tech, but I am not a high tech person. I could not have built Google. Had I stayed at McKinsey I would have been able to use my analytical skills in calibrating the strenghts and weaknesses of companies, identifying their best opportunities and putting in place structures to take advantage of these opportunities, but that did not satisfy my ambitions.
• Your business will grow to match the size of your vision. Once you have decided on the business you want to build, fixing the vision is the biggest constraint on the scale of your future success.
• Perseverance: If you have matched the opportunity you have chosen to your skills and ambition and if you have a clear vision of your goal, you must stick with it.
• This is a favourable time to be an entrepreneur. If you are one for whom the North Face is an exciting, even irresistible, challenge, aim high. The higher you aim, the higher you will go.
• Uncertaintly and opportunity go together. The first taks of the entrepreneur is to seek out opportunity in uncertaintly. Where there is uncertainty there is the possibility of great success
• I realized that compared to most people, I have a powerful desire to achieve and an unusual capacity for hard work
• While I do not discount the value of experience and maturity, my general advice is to start early rather than late. You are never going to be 100% ready. "You cannot learn to swim by exercising on the beach".
• The world of entrepreneurship is a world of seizing opportunities. Defining correctly which market you are in, how large it is and the size of the opportunity you have identified within it: these are the fundamental questions about calibrating risk and return.
• "Good is the enemy of great": if you start off recruiting people who are merely good, great people will not join the team
• Every recruiting decision is an investment decision: it has a cost, a level of risk, and if it works, a great reward
• Identifying the most talented people, persuading them to join you, and leading an organization that empowers them, are three core skills for an entrepreneur. The moment you put the right person in a senior position, you feel it. The load on you is significantly reduced.
• My own starting point at Apax was something close to the film The Dirty Dozen, which told the story of a group of tough individualists with complementary skills, whoc come together to achieve the most challenging of wartime missions. I recommend that film to any budding entrepreneur.
• It takes wisdom to build a great company. Wisdom leads eventually to FULFILLMENT, which is ultimately about achieving a healthy balance between what you do for yourself and what you do for others.

Ric Fulop, founder of A123 Systems

Ric Fulop, founder of A123 System, gave us a talk in our Managing Innovation class. A123 Systems is the Boston based startup (MIT spinoff) that everybody talks about. It develops next generation Lithioum-Ion batteries (high power and fast recharging), 

I already had the opportunity to talk to Ric multiple times earlier this year.

Interestingly he said:

• "If you are in a mature market, you cannot make any mistake with your customers... they will never talk to you again. But if you create a market and the customer wants your product very badly, then you are allowed to make mistakes or be late"

He also discussed about competitive advantages of startups. He said that in a startup you need:

• Either low cost or proprietary technology: With one of both you can knock at the door of somebody.
• Customer integration (supply chain): this is something you develop later (you cannot start there).
• System locking: it is critical for long term sustainability

Interesting links

During the last days I have read some useful blog entries related to entrepreneurship:

• A two-part rule for naming your startup: Use a compound name, with 2 components: one word that relates to the product and a second word that represents a metaphorical adjective that evokes the characteristic of the company's product. Some examples, PayPal, IronPort or Brightmail.
• Increase value instead of lowering the price: Seth Godin says that when your customers or sales force ask you to lower the price what they are actually asking is to increase the value. If people don't want to pay, it is because you are not delivering enough value for the money you are charging. Seth is completely aligned with Ken Morse and Howard Anderson in our Technology Sales class at MIT.
• End of the startup phase: Marek Fodor (founder of Atrapalo) wrote in his blog about when the startup phase ends (and therefore, defines some of the characteristics of a startup). Some of the possible criteria he mentions are: a) you breakeven; b) Most employees do not work more than 8 hours a day; c) The company has a receptionist; d) Ideas launched by the competition are the main source of inspiration; e) founders have separated offices from the rest of the team; and f) Founders can stay away (e.g., on vacation) for multiple days and the company continues working as fine (or better) than when they are there.
• Two important lessons from Dharmesh Shah (founder of Hubspot and serial entrepreneur)
  a) Don't Just be a wannabepreneur: If you've got a passion for startups, you need to be in a startup. Very appropriate for me :-)
  b) Raising VC Funding does not equal success: It demonstrates that smart people believe in you and provides credibility to recruit, have customers, have partners, etc-- but it is not success. VC funding is only an opportunity to create success.

Rafael del Pino, founder Chairman of the foundation sponsoring my MBA, dies

Rafael del Pino y Moreno, founder of Ferrovial Group and the Rafael del Pino Foundation, has passed away. He was 87.

In 2000 he retired from his position as Chairman of Ferrovial. His son, Rafael del Pino Calvo Sotelo (who also holds an MBA from MIT), now heads the Ferrovial Group. We had lunch with him when he visited Boston back in April. In 2006 Ferrovial acquired BAA, the world's largest airport operator, for ~$20Billion. BAA manages seven British airports, including London's Heathrow, Gatwick and Stansted. Major construction projects undertaken by Ferrovial include the Bilbao Guggenheim Museum and major airports around the world. Ferrovial also has a strong presence in the US with the control of the Chicago Skyway highway concesion for example. Ferrovial currently has over 100,000 employees.

Since 2000 Rafael del Pino focused on creating the Rafael del Pino Foundation, with the objective of creating weatlh, competitiveness, and dynamism in the Spanish economy by improving the capabilities and business training of the leaders of the future. The foundation has a competitive scholarship program that fully sponsors MBA studies (about $150,000 per scholarship) in the top business schools in the world. The goal is to contribute to further educate the people that for their academic or professional excellence will be the leaders of the future. The list of awardees is here.

I want to thank his economical and personal effort that has allowed me to study at MIT and put me in the path to achieve my goals in life. I would also like to express my condolences to his family and friends.