Individuals play the game, but teams beat the odds.
—SEAL team saying

Over the last 40 years technology investors have learned that the success of a startup is not just about the technology, “it’s about the team.”

We spent a year screwing it up in our Lean LaunchPad classes until we figured out it was about having the right team.

Startup Team Lessons Learned

During the last 12 months we’ve taught 42 entrepreneurial teams with 147 students at Stanford, Berkeley, Columbia and the National Science Foundation. (As many teams as most startup incubators.)

Get into the Class
When I first started teaching hands-on, project/team entrepreneurship classes we’d take anyone who would apply. After a while it became clear that by not providing an interview process we were doing these students a disservice. A good number of them just wanted an overview of what a startup was like—an entrepreneurial appreciation class (and we offer some great ones). But some of our students hadn’t yet developed a passion for entrepreneurship and had no burning idea that they wanted to bring to market. Yet in class they’d be thrown into a “made-up in the first week” startup team and got dragged along as a spear-carrier for someone else’s vision.

Step One—Set a Bar
So as a first step we made students formally apply and interview for the Lean LaunchPad class. We were looking for entrepreneurs who had great ideas and interest in making those ideas really happen. We’d hold mixers before the first class and the students would form their teams during week one of the class.

But we found we were wasting a week or more as the teams formed and their ideas gelled.

Step Two—Apply As A Team
So next time we taught, we had the students apply to the class as a team. We hold information sessions a month or more before the classes. Here students with preformed teams could come and have an interview with the teaching team and get admitted. Or those looking to find other students to join their team could mix and market their ideas or join others and then interview for a spot. This process moved the team logistics out of class time and provided us with more time for teaching.

But we had been selecting teams for admission on the basis of whether they had the best ideas. We should have known better. In the classroom, as in startups, the best ideas in the hands of a B team is worse than a B idea in the hands of a world class team.

Here’s why.

Step Three—Hacker/Hardware, Hustler, Designer, Visionary
As we taught our Lean LaunchPad classes we painfully relearned the lesson that team composition matters as much or more than the product idea. And that teams matter as much in entrepreneurial classes as they do in startups.

In a perfect world you build your vision and your customers would run to buy your first product exactly as you spec’d and built it. We now know that this “build it and they will come” is a prayer rather than a business strategy. In reality, a startup is a temporary organization designed to search for a repeatable and scalable business model. This means the brilliant idea you started with will change as you iterate and pivot your business model until you find product/market fit.

The above paragraph is worth reading a few times.

It basically says that a startup team needs to be capable of making sudden and rapid shifts—because it will be wrong a lot. Startups are inherently chaos. Conditions on the ground will change so rapidly that … Next Page »

Comments | Reprints | Share:          

Relume Technologies founder Peter Hochstein, a pioneer in LED outdoor lighting and multi-player video game technology, unexpectedly died of natural causes over Memorial Day weekend. He was 65 years old.

Hochstein, who served as Relume’s president, board director, and chief technology officer, passed away at his home in Troy, MI, Relume said in a statement.

Oxford, MI-based Relume, one of the Michigan’s most promising cleantech startups, makes technology, invented by Hochstein, that allows outdoor lights to last longer and consume less energy.

“What Peter has done over the past decade was develop a whole portfolio of intellectual property (IP) that allows LED lighting to deliver on its promise, to be as good and as bright as existing lights and use only a fraction of the energy,” Beringea managing director Jeff Bocan told Xconomy in an interview today. “His IP is real ground breaking and was literally decades away from others in the industry.”

Beringea, a venture capital/private equity firm based in Farmington Hills, MI, is Relume’s top financial backer, having invested $3.5 million into the company over the past two years.

Hochstein, who graduated from Acton College and University of Toledo with degrees in science and physics, was a prolific inventor.

In 1991, he invented a multi-player video gaming technology, which he later patented. With his children stuck inside the house during the long winter months in Michigan, Hochstein created a way to them to play Nintendo’s Super Mario Brothers with other kids in the neighborhood over a telephone’s standard copper wires, Bocan says.

More than a decade later, Hochstein sued Microsoft and Sony, alleging the Xbox and Playstation 2 consoles violated his patents. Sony eventually settled, but a federal judge in Detroit last year ruled in favor of Microsoft, according to a Bloomberg News report.

As a senior project manager at General Motors’ materials and structure laboratory, Hochstein worked on classified ballistic missile projects for the American military and LED lighting technology.

Hochstein founded Relume Technologies in 1994. The company’s LED technology eventually caught the eye of Beringea, which made its first investment in December 2009.

“We realized ‘Wow, there is an absolute of treasure chest of value here in the IP,’” Bocan says. “If we can build a real lighting company, bring in management, there’s an amazing opportunity to build a next generation lighting company based on this technology.”

Hochstein’s death is a big blow to Relume, Bocan says.

However, he says, “The hard work has already been done. The next step was commercializing the technology in such a way that we truly are meeting the market demand. We’re blessed that we were given a huge running start on the industry.”

Relume just landed $1 million in orders over the past two consecutive months, a milestone for the company, Bocan says.

“It’s starting to happen,” Bocan says. “It’s one of those sad things, we lose Peter right when we were starting to deliver on his vision.”

Comments (3) | Reprints | Share:          

If Jeff Williams has brewed some sort of secret concoction to converting local startups into big pay days, he’s not letting on.

“You just make sure you develop good companies that people want to have,” the low key Williams tells Xconomy. “We were fortunate to have some nice exits.”

That may be the understatement of the year. For a region starving for success stories, Williams has already provided two of them: the $275 million sale of HandyLab to Becton Dickinson (BD) in 2009 and the $205 million sale of Accuri Cytometers to BD earlier this year. Both HandyLab and Accuri are University of Michigan spinouts.

Williams was also previously CEO of Genomic Solutions, a life science products company in Ann Arbor he co-founded in 1997. The company ultimately went public in 2000 and eventually merged with Harvard Biosciences two years later.

That makes Williams the near-consensus savior of Michigan’s high tech economy, with HandyLab, Accuri, and Genomic Solutions as Exhibits A, B, and C. Local boosters say Williams’ success is proof that the state best known for its declining auto industry is sharply turning the corner.

“Jeff is one of those rare individuals who brings the whole package to the table as an early-stage CEO—very smart, driven, understands technology, strategy, how to manage a growing company, how to work with investors, and how to exit,” says Tim Peterson, managing director of Arboretum Ventures, which funded both Accuri and HandyLab. “We are very lucky to have him here in Michigan.”

Not that Williams is screaming for adulation.

“I try not to pay too much attention to that stuff,” he says.

Don’t worry Jeff. I’ll do that for you.

In truth, Williams is one third of a team that seems to have a found a winning formula: the U-M spins out a medical company, Arboretum finances it, and Williams leads it. The triumvirate provides much needed consistency and mass to a fragmented state that often struggles to attract the attention of outside investors and buyers of anything other than automobiles. In fact, Arboretum recently recruited Williams to run another U-M-bred startup, Life Magnetics.

“If there’s anything to the system, it’s that Arboretum and I get along very well,” Williams says. “We both gravitate towards good companies. We’re definitely seeing that with Arboretum, that it has become a premiere venture capital firm in the country.”

“The U-M has certainly gotten very good at backing companies spun out of the university,” he continues. “You hate to see all of that technology go to waste… It’s good to show that our technologies can be developed to a stage that they can be acquired.”

It certainly helps that Arboretum and the university can turn to a serial entrepreneur with a proven track record … Next Page »

Comments (1) | Reprints | Share:          

A couple of years ago, Peter Dresslar saw an opportunity to start his own company when he was working as an information science consultant for a big corporation he describes only as the world’s largest research-based pharmaceutical company. Now Dresslar is the 38-year-old CEO of a software analytics company with plans to move to San Diego, joining the region’s expanding concentration of software analytics companies.

But the Michigan resident is not a typical startup CEO. If anything, he’s a reluctant entrepreneur.

“I kind of liked the corporate life,” Dresslar told me over a breakfast last week at the Cottage in La Jolla. “I don’t really like this startup business, with no real HR.” Don’t get him wrong. “It’s not that I don’t want to be an entrepreneur—I really believe in the business,” Dresslar says. “It’s just that there are aspects of running a small business that are not my cup of tea.”

Aside from yearning for a full-fledged human resources department, there are the frequent the frequent treks across time zones. Dresslar estimates he’s racked up more than 400,000 miles over the past decade, including almost-weekly flights between his home in Ann Arbor and the software development office in La Jolla.

That will probably change in coming months. The company he founded, Torrey Path, is in late-stage due diligence with two venture capital firms. If he gets funding, Dresslar plans to expand the business, which will presumably include someone to handle payroll, benefits, and other pesky HR issues, at his soon-to-be corporate headquarters in La Jolla. Either way, he plans to relocate his family to San Diego after his kids finish school in Ann Arbor. That should eliminate much of his air travel. All of which should enable Dresslar to spend more time on what he’s really interested in, which is information technology and bio-informatics.

Dresslar founded Torrey Path because he saw how to provide complex scientific data to life science companies—along with analytical software tools that customers could use to extract information that would be really useful to them.

Dresslar says he and his immediate family have funded the company so far.

So how did a guy from Michigan come up with a quintessential San Diego name for his company? “We were trying for something not-too-techie sounding that was evocative on a few levels,” he says. “It certainly didn’t take me many visits to fall in love … Next Page »

Comments (1) | Reprints | Share:          

If nothing else, Michael Robertson gets credit for stickin’ it to the establishment. Maybe it’s because he was born in 1967, amid America’s flaring protests. Maybe it’s just a result of his penchant for libertarian views.

When I saw an announcement earlier this week from Robertson about GizmoCall, his new browser-based calling service, my first thought was, “This looks like another one of Michael Robertson’s guerilla campaigns.”

When I bounced that off Robertson in a call Wednesday while he was finishing lunch, he replied, “Right. That’s where the money is. Whether it’s telephone companies, or music companies, [or Microsoft---let's not forget Microsoft], it’s where disruptive technologies can add value.”

That’s the way many entrepreneurs think. But where other entrepreneurs approach technology disruption as a delicate matter, akin to tickling a dragon’s tail, Robertson seems to relish a more direct provocation.

As the founder of MP3.com, Robertson was at the center of a legal firestorm that pitted his dot-com startup against major record labels and the Recording Industry Association of America. Of course, he had become an overnight sensation as San Diego’s most-prominent dot-com millionaire in 1999, when MP3.com raised more than $370 million in its IPO.

As MP3.com’s largest shareholder, Robertson pocketed an estimated $103 million when he sold his company to French media conglomerate Vivendi in 2001 for $372 million. Since then, he has self-funded most of his new ventures.

Later in 2001, Robertson started a new business around technology for a Linux-based operating system intended to compete against Microsoft Windows. He provocatively called his startup Lindows, unleashing a predictable flurry of trademark lawsuits from Microsoft. The software giant, which apparently feared losing its Windows trademark, later paid $20 million … Next Page »

Comments | Reprints | Share:          

Jim Benson, an impatient visionary and aerospace entrepreneur, died today of a brain tumor, according to a statement issued by SpaceDev, the San Diego-based company he founded.

SpaceDev developed the hybrid rocket engine used to power SpaceShipOne, the Burt Rutan-designed spacecraft, in its historic 2004 suborbital flight, which won the $10 million Ansari X-Prize. Benson, who was 63, resigned from an operational role at SpaceDev two years ago, but retained a seat on the board.

Comments (4) | Reprints | Share:          

After years of disappointment, Mike Lewis is finding encouragement in small signs that business is coming back to life for Pearson Fuels.

Lewis opened Pearson Fuels in a blighted San Diego neighborhood in 2003, with financial backing from the owners of a local Ford dealership, where he had worked in finance. It was part of an ambitious $15 million “Regional Transportation Center” regarded by state and federal energy officials as a model for promoting the use of alternative fuels.

The centerpiece was a futuristic automobile showroom operated by Pearson Ford that sold Think electric cars and alternative-fuel vehicles then made by Ford.

The adjacent Pearson Fuels service station, built and operated by Lewis, sold nine kinds of fuels, including conventional gasoline, ethanol, biodiesel, propane and different grades of compressed natural gas.

By 2004, however, Ford stopped making alternative fuel vehicles and the gleaming showroom, which is now empty, lost its reason for being. Lewis continued to operate Pearson Fuels, but the service station sold mostly conventional gasoline.

I met Lewis as a reporter for the San Diego Union-Tribune earlier this year, when the price for unleaded gasoline was soaring beyond $4 a gallon. Amid a resurgence of interest in alternative fuels, I described his entrepreneurial quest here.

Lewis remains convinced that alternative fuels will prove to be a good business over time. But even as millions of venture dollars pour into the development of new biofuels each quarter, he still sees enormous challenges in developing a viable market.

“You have to be very cautious about investing in a government-induced market,” Lewis said. “That’s what we did, and it was a mistake.”

Now Lewis is seeing a gradual comeback in what was once a moribund alternative fuels business.

Lewis is one of the few ethanol suppliers in California, and he has been working to expand the market by helping new service station owners get the necessary permits to install ethanol pumps. In exchange for his consulting services, he gets a long-term contract to supply ethanol to the station.

Yesterday, the San Diego ethanol entrepreneur was in Riverside County at groundbreaking ceremonies for two new ethanol fuel service stations in Beaumont and Perris. The day before, he was in Carlsbad for the grand opening of a new alternative fuel station in Carlsbad—the second in San Diego County. A third is expected to open in Oceanside in two more weeks

Next week, he plans to attend similar ribbon-cutting ceremonies at new Chevron stations in the East Bay communities of Concord and Hayward. During the construction of each station, Lewis supervised the permitting and installation of pumps that sell E-85, a mixture of 85 percent ethanol and 15 percent gasoline

By the end of October, there will be exactly five service stations in the entire state that sell E-85 fuel. Pearson Fuels has long-term contracts to supply ethanol for all five, and Lewis is working to get E-85 pumps installed at eight more.

You might think that puts Lewis in an enviable situation. In California, there are an estimated 500,000 “Flex-Fuel Vehicles” that have the capability of running on either E-85 or unleaded gasoline.

But developing this business takes an unusual kind of perseverance.

At the Pearson Fuels station in San Diego, the only station that Pearson owns, Lewis sold 38,000 gallons of E-85 in June, when the alternative fuel was at least 90 cents cheaper per gallon than regular unleaded gasoline.

Since then, gasoline prices have fallen. Now E-85 is only about 20 cents cheaper per gallon. Lewis says he only sold about 18,000 gallons of E-85 last month.

So while soaring gasoline prices have made 2008 the best year ever for alternative fuel sales, Lewis says all that really means is that it’s just been his least unprofitable year—so far.

Comments (3) | Reprints | Share: