Navigating Your Way to Startup Success

Harlan Beverly

• Publisher: De Gruyter
• Year: 2017
• eBook ISBN: 9781501507014
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Startups, like sailing vessels, do not travel in straight lines. The wind and the waves of the real world move the ship, and your startup, in unpredictable ways. This book is designed to give you an analytical set of tools to help you navigate your startup or corporate innovation through the murky waters of real life. Every business has failures. No business succeeds without some change of plan. Navigating Your Way to Startup Success will show you how to create a startup designed to test its assumptions so those that are not worthy fail—often and fast. This book builds on modern startup management techniques like Agile and Lean to bring an analytical and quantitative framework to the most common startup failures. Navigating through those failures means finding your way to startup success.

Harlan T Beverly, PhD holds a BS in Electrical and Computer Engineering, an MBA from UT Austin, and a PhD in Business from Oklahoma State University. Harlan teaches entrepreneurship at the University of Texas at Austin. He is also Assistant Director of the Jon Brumley Texas Venture Labs at UT Austin, the world's first university business accelerator. Harlan has successfully launched five hardware and 15 software products including the Killer NIC, 2007 Network Product of the Year (CPU Magazine). He has raised over $30 million in venture financing in the challenging intersection of entertainment and technology.

Chapter 1
Introduction—Why do you want to launch a startup, anyway?

Have you ever had a great idea that you thought would sell? Maybe you have had an idea for a cool new product, service, or app? Most of us have, and most of us do nothing about it. It might be years later that we see a TV commercial for exactly that idea, right there in front of us. Oh! If only we had pursued that idea, we would be rich now. That little pain of regret that we feel is coming from somewhere inside of us, but from where exactly? Is it really that we wish we were rich? Or is there something else that we wish for? If it had been us on that TV commercial, what about it would make us proud and happy?

In this chapter, we will begin to introduce the overarching concept of this book: that failure is not only the best way to learn, but it is also essential to eventually navigating your way to startup success. When a ship captain navigates the sea, he uses markers in the sky (stars) and may also follow a map and a compass. Despite all these navigation aids however, a ship still almost never sails in a straight line. The currents of the ocean and the direction of the wind determine how straight that ship sails. In order to get from here to there and have a successful voyage, the ship must constantly course correct, sometimes even constantly tacking to make progress upwind. This sailing metaphor is what it means to navigate a startup to success too. Sure, you will have a map (your business plan), and a compass (your bank account), but when you are on the high seas of a startup in motion, learning to tack and course correct is critical to finding your way to success.

Just as a ship will go off course, a startup will have many failures on its path to success. These failures do not mean turn around, run with the wind, and hide. Quitting and giving up is the only true way to fail at a startup. As long as you keep tacking and adjusting to the small failures along the way, you can and will eventually find success. The trick, and the goal of this book, is to show you how to make those failures small, hit them early on, and use those failures to sense the wind and adjust in the right direction. Learning through failure is the technique that thousands of successful startups have used to find their way, and you too will learn this skill.

Before we begin to introduce the process of startup creation and the way to navigate your startup to success, we must first look at what it means to be successful. Stephen R. Covey’s famous book, The 7 Habits of Highly Effective People focuses its first two habits on exactly this concept: What is success to you? The first habit explains the habit of self actualization, that you can “be proactive” about your life and cause change. The second habit continues with this theme in understanding that to cause change, one must have a goal—one must “begin with the end in mind.”

So, what is success to you? Do you believe that you can effect change and make progress towards that goal, yourself?

Let’s first look at success. When I started my first company, Bigfoot Networks, Inc., in 2004, I did not understand the difference between a goal and a motivation. I had it in my mind that my goal was to make a billion dollars. Yes, you read that right, one billion dollars. I had even dreamed of how I would spend that money: starting a scholarship fund for my extended family, buying an island, owning a plane, and, of course, never working again. Looking back on it, this goal was perhaps a bit ambitious for a first company, but I truly thought that my idea was big enough to achieve it. What I failed to understand, though, is that in order to achieve such a massive goal, I would need to sacrifice other goals that I didn’t yet understand I had. If I evaluated my true motivations a little more deeply, I would understand that maybe that goal wasn’t actually what I wanted after all. Was I truly prepared to do what it would take to get that billion dollar check? Was I willing to sacrifice time with my family? Was I ready to put every penny I had into this one endeavor? Was I ready to invest 10, 20, or even 30 years of my life into this goal? The first failure I made as an entrepreneur was not really taking the time to consider if my goal really was what I wanted. What were my true motivations? The best goals should be measurable, achievable, and should reflect what truly makes us happy. We’ll explore these themes in this chapter. First, though, I think I should tell you a bit more about myself.

I have a PhD in Business, earned through many years of reading research papers and doing my own primary published business dissertation using complex statistical analysis. The reason this should matter to you is that I do have some understanding of what researchers have come to recognize about entrepreneurship and business. That said, my thirteen years of practical experience, founding three startups, working as a CEO, and being a part of dozens more startups, is much more relevant to this book. If there is a way to fail at a startup, I’ve done it. I’ve also overcome it. That’s the knowledge I’d like to pass on to you here. I should also mention that I’ve had startup success; at least, as measured by my own metric of success. This chapter is about finding your metrics of startup success.

In order to understand my own success metrics though, I think it’s important to understand a bit more about where I come from—stuff not found on the back cover. I was born in a small town in Ohio called Lima. Lima was an industrial town of about 50,000 residents. It’s not small enough to know everyone in town, but it is small enough to know everyone in your neighborhood, and my neighborhood was poor. I grew up poor. Not destitute, but we often relied on welfare checks, government cheese, and food stamps. It’s not because my parents were not hard workers—they were and still are. The problem is that unless you’ve been living under a rock, you know that Lima, like so many industrial towns in this country, died in the 1980s due to industry no longer being economically feasible. We suddenly became an international society, and with that, the industrial revolution left so many towns like Lima with too many people vying for too few jobs. This lifestyle, scraping from paycheck to paycheck, shaped me. I was determined at a young age to break this cycle. I wanted to do more with my life and I was willing to work to get it. I thank my parents for this spirit, because they were always willing to work any side job and do anything to get ahead.

I started my first job at age 10. I was then the youngest paperboy ever in my town. I got the job because my dad vouched for me that he would help me if I needed it, and he did just that. I have always had one job or another since then. I too was and am willing to work any job. I’ve done sales door to door (more on that in Chapter 5). I’ve mowed lawns, served food, been a travel planner, and so much more. My favorite job ever was lifeguarding. I enjoyed the independence of the job and the aura of authority it gave me. What I really loved was being the boss (of the pool).

I got lucky—well, my parents created some luck for me. They moved to the nice side of town, right on the edge, the cheapest house they could afford. Because of that move, my sister and I were able to go to the good high school. It was worth it. Shawnee high school had teachers that inspired me. I became fascinated with electricity and, through some grit and hard work, I started getting A grades. My mom filled out all the loan paperwork, and suddenly, I was off to college. I was the first person in my family to go to college. I’m most thankful to my parents for that move to the good side of town.

I finished my degree in electrical and computer engineering in five years. It took me an extra year because I worked all through college, including a year at the Naval Research Labs building space satellites. Some of those satellites were classified, but I can proudly say that at least three satellites are or were in space with some of my hard engineering inside them. My early successes doing electronics for satellites eventually landed me a job at Intel, where I excelled in VHDL/Verilog and ASIC design. What is that? It’s complex engineering stuff for making microchips. The pay was great, and I loved Intel. I did not love that I couldn’t understand why we were building the things we were, like a 10 Gigabit per second network card (for which I was one of the lead designers). Why were we making this crazy thing? Who wanted it? I sure couldn’t afford it, so who could? What’s the point?

It was these questions, and my secret desire from my lifeguard days to be the boss, that led me to seek an MBA. My boss at Intel was all for it, and Intel paid for my MBA at the University of Texas at Austin. At first, I thought my MBA classes were boring and useless. The math was insanely easy compared to engineering school, and I felt like I was not getting my money’s worth—that is, until my last semester when I took the New Venture Creation course. This class brought all the other classes together as a whole, and suddenly, I found entrepreneurship, and my new love: starting companies.

Bigfoot Networks, Inc.

Bigfoot Networks, Inc. was born during my New Venture Creation course at the University of Texas. It was my idea—my crazy idea. I’ll explain a bit more about ideation in Chapter 2, but needless to say, I didn’t really know at all if Bigfoot was a good idea or not. That didn’t stop me from pitching it to the class and recruiting my two co founders, Bob Grim and Michael Cubbage. I chose them because they had marketing experience (Bob from Advanced Micro Devices) and finance experience (Mike from Dell), two skills I did not have at the time.

My pitch, which didn’t change even as we were raising our second $8,000,000 round, was simple. I wanted to end all lag in online games, and I knew how to do it. Did I really know how to do it? Yes, sort of. I had become an expert in network technology while working at Intel, and I had a master plan for how to actually end lag. The big idea: a network interface card, the thing your network wire plugs into. What? Yes, a network card for gamers that not only reduced lag in all games, but it could also potentially end all lag in games that were optimized for our network card. How? Simple: Put the server into the card, and ta da! No more lag.

I thought that this was a billion dollar idea and the next big thing. It almost was: This book will tell the rest of the Bigfoot story, as well as the story of more than 12 other startups that I’ve been involved with in some way.

Even at the start of Bigfoot, I knew that a billion dollars was not needed to make me happy. In fact, money has never been a big motivator for me. In my surveys and interactions with students (mostly millennials), I have found that money is only needed up until a point. We all want to feel safe and secure, not like we are scraping the bottom of our check each month (like my parents did). Beyond that, we often value other things more. Once Bigfoot Networks started shipping products and making money, I started to think deeply about my one billion dollar goal. I was already pretty darn happy, actually. My salary was more than sufficient, my family was happy, and I really did like the people I was working with. I started calculating how much money it would take for me to truly feel safe. For me, it turned out to be two years’ salary. That’s it. My salary was around $150K at that time, so $300K in my bank account was my number. Why two years? I could not imagine not being able to get a job in two years of looking.

You might fail where I failed with Bigfoot Networks around this time. I knew that a billion dollars was not necessary to make me feel happy. Unfortunately, my goal for Bigfoot Networks was still to make one billion dollars. The failure with the goal of my startup not aligning with what made me happy was that when push came to shove, as you will read in later chapters, I made some bad decisions chasing that billion dollar dream. My other goals—to change the world, to be the boss, to enjoy my co workers—were constantly at risk of being sacrificed. Ultimately, I was unwilling to sacrifice people and my morals just to make a buck, even a billion of them.

How was it a failure to not understand what success looked like? Well, I had already achieved success and didn’t know it. In fact, I blew right past it.

The Launching of the Killer NIC

It was a gorgeous San Francisco day in 2006, and the line outside the convention center was already long. People were queued up, their desktop computers sitting at their feet. These people, these gamers, seemed a little crazy to most. They were wearing Call of Duty t shirts, chugging Mountain Dew, and lugging 50 pounds of computer equipment, all for who knows what reason. They were there for LAN-Fest 2K6, one of the largest computer LAN parties of the day. It was set to be a big party, and the top sponsor, Bigfoot Networks, was making their formal launch of the Killer Network Interface Card at the event. To the gamers, being at LANFest 2K6 meant seeing the latest and greatest technologies, discovering a way to get an edge or advantage, and probably getting some free swag too.

A few hours later, and there I was on stage, about to formally announce the Killer NIC, Bigfoot Networks’ first product, available at Newegg, the world’s largest gaming hardware retailer. My ad agency had put together a great promotional video, we had hired models, and we had swag like no other. We were handing out necklaces made of real metallic heatsinks in the shape of the letter K, for Killer, which we used on the actual product as well. They looked cool as hell, and gamers loved...

Table of contents

• Cover
• Title Page
• Copyright
• Dedication
• Contents
• Chapter 1: Introduction—Why do you want to launch a startup, anyway?
• Chapter 2: Failing to Start—What’s stopping you?
• Chapter 3: Your Idea Sucks—How would you know?
• Chapter 4: Failing to Ship—Again, what’s stopping you?
• Chapter 5: Nobody Cares—What can you do about it?
• Chapter 6: Somebody Cares—Yippee! Now what?
• Chapter 7: Oops, We Ran Out of Money—Funding and finance
• Chapter 8: I Got Sued—It can happen to you
• Chapter 9: Help, I’m Sinking—Controlling growth
• Chapter 10: The Press Hates Me—Bad reviews
• Chapter 11: I’m Bankrupt—Saving costs and finding profits
• Chapter 12: I Got Fired and I’m the Founder—How?
• Chapter 13: Sold!—Now what?
• Index