At the TechCrunch40 Conference today, Michael Moritz of Sequoia Capital moderated a panel of three founders who came from "humble beginnings": Marc Andreesen, David Filo and Chad Hurley. Here are their stories of how they founded or co-founded their companies, what they would have differently and lessons learned for other entrepreneurs. Read especially their tips for startups at the end. They resonate strongly with my startup experience and I imagine they do with most entrepreneurs. (Marc also has a great blog for startups here.)
The Humble Beginnings
Chad Hurley – As a child, he loved art. He painted on plywood and tried to sell. Art and business started to converge. College – got into the tech side, building web pages and trying to solve problems.
David Filo – Decided to go to Stanford based on the notion that companies like Intel and Apple were based there, so Stanford in the right place. Picked up computers as a senior in high school, -- BASIC was his first exposure.
Marc Andreessen - Came from rural Wisconsin; lemonade stand 10 miles out of town at the end of his road. Learned about location early. Idea of starting a business was non-existent. The big achievement to which kids aspired was to be VP of GE – peak of what was possible. Attending the University of Illinois, he never heard the term venture capitalist. When he graduated, his goal was to get out of Midwest and get on a coast. Jan 1994 – relatively dormant time -- he arrived. The concept of entrepreneurship has grown today.
How Did the Companies Get Started?
David – He and Jerry were pretty bored, plus their doctoral advisor had gone on a year sabbatical. Did not think of Yahoo as a business – built it for their own use and entertainment. Took 9 months until they realized that they may have to do something here besides be grad students and procrastinate on their PhDs. Forced to get a domain name, could not use Stanford servers, etc. Nothing much commercial on the internet then. Marc at Netscape gave some space in their data center – had a T3 line.
Marc – no advertising at all. In that era, there was a strong belief that no one could make money on the Internet. Everyone was waiting for backbones to get put in. No one had any sense of what next 5 years would look like. For a startup to get big, has to have a really crazy lunatic idea and be right – be lunatic and correct, extraordinarily low odds. Unless ego-maniac, and there are some in this industry—more sensible—focus on what product would we like to use, necessary in the market – ideas with lots of runway. Have to get to product-market fit with customer to get going. Big thing we did to accelerate Netscape was the distribution strategy—we released under dual license—non profit, academic, personal for free—and for fee for commercial use. Got big burst due to free. In April 1994 Netscape incorporated and launched its first product Dec. 1994. Coding hit critical mass June 1994.
Chad – Dec 2005 started thinking around video problems and put a site together to solve problems for ourselves. Took a few months to get to first iteration, fall of that year closed a round. Just three of them at the start. Chad worked on the front end UI, web pages; the others worked on building back-end and making everything run. Luckily they were prepared to scale—can never anticipate how quickly would grow.
David – Showed Yahoo to Mike Moritz: a business that had no revenue and no prospects of revenue. Started out as very simple directory service. Expanded well beyond into info services, news, sports, email – many unexpected area.
Their Roles in the Companies
David – My role at Yahoo – Jerry focused on external things, business side; I tended to stay focused on the technology, scaling problems, networks, data centers. Remain focused on what is behind Yahoo.
Marc – I was CTO of my second company, Chairman of Netscape. CEO job is an unrelenting stream of bad news. If a big company, get bad news email from overseas. Then from developers. Have to be able to listen to and absorb all that news, then filter and act on, and not let it get to you emotionally. I am way too emotional for that. David – we realized early on that we did not have the experience and skills to be the CEO.
Chad – surprises as CEO? All the problems. You try to make that transition from being the designer – building the product vs. building the business. Have to get the right people on board. Not that much of a transition – always trying to solve problems as a designer. If you get the right people in place you are able to survive. Because I did not know what I was doing, we were able to do things differently.
Marc – 1994 Red Herring was a pamphlet on Max’s Smoke Shop in Palo Alto. Then 400 pages long, then 2004 – back to being an 8 page pamphlet. Times, companies, business models are very different. Don’t have too many people come to the next company – need to build new culture – hard on others to join later and come into that culture. They feel left out of the beginning.
Bad News?
Chad – bad news? Initially because we were growing so quickly, worried about how to scale the back-end. We used a hosting provider at the start that was not scaled for this. Had to build our own data centers. A little bit scary. Never had outages, had to take site down to update it. Engineers now can wire around that. Media companies threatened by new business models? We felt we were providing a new opportunity, had to get out in front and educate them.
Marc – came within 60 days of going bankrupt, burning too much cash! 9/99 – started, venture shortly after, series C, private round of $100M June 2000 – credit money still flowing. 3/2001 went public, raised $160M. Outsourcing services company. Got to $70M revenue rate quickly. Then market disappeared, still burning cash at stratospheric rate. Did a restart. Sold the business -- the one losing all the money -- to EDS. Then restarted as a software company. Kept 100 people. Great time to start a company, had very little competition. When things look the worst, can be the best time to start something.
What would you do differently in hindsight?
Chad – would hire people faster if had to do it all over. Did not anticipate the growth. Should we be acquired? We wanted to provide a service that could continue. Had a little over 60 people when acquired.
David – never really understanding the opportunity that was ahead of us. We often underestimated what we had. Investing sooner. We made too many short-term decisions over the years. Should have focused on the right products, platforms, business structure for the next 10 years.
Marc – We had a $200M business when sold company in 1998 of companies paying for access to our traffic. We treated this as free money; it just sort of came in. Never took that opportunity seriously enough. If we had shifted focus -- we’re a content services company – things might have been different. As startup, you need dogged determination to pursue your path, but also, big business models change.
Chad – Steve Jobs gives great presentations, he is an entertainer. Really focus on developing great products. Does both really well. Marc – this is a product business, not a brand business. Compare Apple 1996 to 2006, same company , brand, people, marketing campaigns – demonstration of what you can do. Reaffirmation that the business is about products.
Mike – Steve jobs said “these are the good old days” in 1983 at a Macintosh offsite. What are your good old days?
David – From 1994 until now—every time has its moments, all very gratifying.
Chad – It’s great when you are first getting started. Hard to replace that part. Team of 8 people before funding, couldn’t promise them we could pay them. First working at our houses. Reid over at LinkedIn gave us space, then moved in with Sequoia.
Tips for startups?
Marc -- Have a founder who can be the CEO. Dangerous to hire a professional CEO from the start. Not many who can do both, I am not one of them. Second – beat off with a stick hiring too many people too soon. Until you get to product-market fit and people like using the product. All kinds of virtues, most great products build by great engineering teams. Keeps costs low.
Chad -- If you only have a few people working on a site, you can iterate faster and move when you see changes in the market. Look at how you are personally using the product to make decisions.
David -- Hopefully you attract people who are passionate about that space, not just joining a startup and making money.
