Interview: Chip Paucek and 2U’s Launch

After the 2U IPO, Startup Grind Hosts Founder Chip Paucek

It’s been a big summer for the DC community with the arrival of the much anticipated 2U IPO. Startup Grind DC was lucky to host one of the company’s founders, Chip Paucek just after the IPO and hear his experience in taking a technology start-up from a few guys with an idea, to a publicly traded company.

Like many DCites, Chip arrived in DC as a student at George Washington University. Born and raised in South Florida, he was the first person in his family to go to college, and consequently supported himself through his undergrad. Of education he says, “GWU fundamentally changed my life in every way. I wouldn’t be here without [my education].”

Bleeding Entrepreneurship

His first entrepreneurial experience was at 12, selling comic books he earned working in a store to neighborhood kids. In 1993 he founded Cerebellum Corporation, an educational tv production company, which he ran in between doing political work. He went on to be the CEO of Hooked on Phonics, while founding and running the Sylvan Learning Center.

Surprisingly, he says of 2U, “Of all my entrepreneurial experiences, 2U is the only one that’s worked.” He remembers harder lessons with Cerebellum, where he had the unfortunate experience of laying off 80% of his workforce when the company wasn’t meeting valuation expectations on its 14 million dollars of venture capital. “It was like trying to get blood from a stone.”

Stay Focused, and Treasure Good Ideas

“I look back on my Standard Deviants (Cerebellum) and Hooked on Phonics experiences as real lessons in focus,” he said to the Startup Grind audience. “Entrepreneurs, you’re bred to constantly look for the new angle. Any bright shiny new object is super attractive to entreprenuers. You can easily convince yourself any idea is one you should pursue.”

While he humbly shares 2U’s success with two cofounders and the company’s 700 hardworking employees, he “will take credit for the company’s focus”. “We put the world’s best university programs online. Period. That is it. That is what we do.”

To entrepreneurs he says, “Once you find a business you have some traction in, treasure it. They are difficult, they are hard to find.”

2U, Inc. trades on the NASDAQ as TWOU. As of this writing it is trading at $15 a share, $2 over the estimated offering price. Startup Grind does not offer investment advice….just awesome entrepreneurs.

Content originally published in October 2014 for Startup Grind.

Congresswoman Delbene on Starting Drugstore.com

This May DC’s Startup Grind chapter joined chapters around the world in committing to host a female speaker, Congresswoman Suzane Delbene. (Actually, this was our second female in a row, and second congressperson.) Congresswoman Debene represents the 1st district of the state of Washington, but her career began in 1989 at Microsoft.

After ten years building Microsoft’s marketing she went on to help found Drugstore.com. She was CEO for Nimble Technology, overseeing its acquisition to Actuate in 2003. She then returned to Microsoft before beginning a new career in nonprofits, and now public service.

Female Role Models Start at Home

Delbene’s life was ripe with female entrepreneurship potential. Her story hit a personal note with me, as the daughter of a working mother. She was from middle America background: the youngest of five, born in Selma, Alabama, her parents divorced when she was young. Delbene was lucky in that her “single mother” was a leader, and able to support her family: She was a pilot and became a university professor. Delbene calls her mother a “pioneer”, with a STEM background and drive that inspired her daughter.

Her mother remarried another pilot; Delbene almost ran out fingers naming the states she grew up in. When her stepfather lost his job, her mother decided the family should start a toy store in Colorado, first inspiring her entrepreneurship.

When Everyone Thinks Your Wrong

Asked about her experience as a football reference, “in a white, male dominated field”, she answered, “It was some of my best training for life. You do the best you can, and if someone doesn’t like it, you usually get a loud response – but you have to decide. You’re in the position, you make the best decision you can. You don’t always have perfect data, but you have to make a decision. This is where people often go wrong, in the legislative process too, they don’t make a decision.”

After working in biotech, Delbene made the move to technology rather surreptitiously through an MBA program: She was a Microsoft summer intern. During her career there she worked on firsts like “electronic messaging”, Windows ’95 and the first Internet Explorer. “You got to focus on products, and understanding customer needs.” She also worked on embedded devices, learning about the software products running everything from sewing machines to gas station pumps.

The Perfect Mix for Entrepreneurship Success

Speaking about her inspiration for founding Drugstore.com she says, “At that time, folks were looking at how technology could change commerce. One of the places people go to buy things is the drugstore. It’s all one of the places people don’t want to go.

On her successes, she cites the “bubble market”, where it was easy to get financial backing and her team. “My boss and I, at Microsoft, we went together to help start Drugstore.com, and we had a great team in pharmacy, in technology and in retail, and it was that great combination we needed.” Brian cited Aileen Li’s research on former coworkers being a factor in creating “unicorn” companies.

On funding she says, “It was a time when things were moving very quickly. It was really the concept. We didn’t even have a temporary website or anything like that. The concept was there, people understood the opportunities there, but also knew other people might think of that idea. At that time it was really who could get to market first with ideas. There was an impatience at the time.”

Asked about whether it takes an “ex-Googler, the equivalent of an ex-Microsofter at the time”, to gain credibility in today’s startup market, she answers simply, “It’s all about having great people. You don’t get a ton of people when you’re starting up a company, so you need great people.”

For the full interview, watch the video.

Traits of a Self-Refreshing Biz Dev Exec

In my last post I wrote about the potential expiration date business development execs and sales people face. My conclusion is this position is still vital in many companies, but businesses need to be careful when hiring.

Here is what I’ve observed as makes a great business development person:

  1. They are attractive.You can fill in whatever that means to you – I’m not writing about gender politics or lookism here, just stating what I’ve seen work. This can mean they wear nice clothes, tailored, well accessorized, they are genetically blessed, they own a gym membership, they smile a lot and tell funny jokes – whatever it is, they are someone people like to see more of.
  2. They are confident.
    This can be wrongly confused with egoism. It’s not about being the badass business school/Ivy league grad with high self value. It’s more about being able to enter a crowded room and not feel self-conscious. To walk about to anyone, introduce yourself, and start up a conversation knowing they will like you.
  3. They “own” your company.
    This doesn’t need to mean a literal ownership. It means they identify, believe in, and can rattle off your company’s mission, core offerings and differentiators at the drop of a hat. They are a citizen of your company before they are an “ambassador”.
  4. They like people.
    Barbara Streisand may have sung it, but the bottom line proves it. Bus dev is based on networking – and creating a “pipeline”. People who don’t like people may be able to do this job for awhile, but as Blank pointed out, they will burn out eventually.
  5. They can make the ask.

    That point when the cocktails run dry and prep school jokes segway to “in all serious though”, does your business development person have the confidence to make the ask? To look rejection from their new “friend” in the face, and to put a number on the table.
  6. They can close.
    This seems obvious, but I put all the weight on this skill as the “ring to rule them all”. What Blank pointed out about the ever pumping sales pipeline is that the number one failing of sales execs was closing a deal. If your bus devver is fresh, that first close may determine their worth. If you’re hiring for experience, my suggestion is asking them “what is the biggest deal you’ve ever personally closed?” Somewhere between the hot lead and getting a signed contract, is where your exec will add the most value.
  7. It’s about the game, not the money.

    In Wall Street 2 the main character asks the villian “What’s your number?”, meaning how much could you make and retire happily. The villian answers, “More.” It’s not about the money with people like Elon Musk of Tesla or Warren Buffet. It’s about the thrill of the chase. Your bus dev people should feel the same thrill, so even when they’ve hit their goals, made their bonus and are ready to take a well-deserved vacation, they will already be looking forward to Q3.

For more insights and help with getting your own business launched, visit me at Onertia.com. Onertia is a marketing and business strategy consulting practice for early venture companies.

Does Your Biz Dev Rep Have an Expiration Date?

Recently I wrote a post about Alex Hawkinson, founder of SmartThings, where I quoted him as saying “I was worried I would put my shingle out and no one would show up.” A common worry for any entrepreneur is that “no one will show up” when he or she takes the big risk and goes out to start a business.

For most founders, that lovely shortened title “Biz Dev”, business development, doesn’t yet exist. They are their own business development team, leveraging their friends, family, former coworkers, gym buddies – anyone and everyone to make those first few sales that turn a company from an idea into a business. This is why VCs are evolving into “accelerators”, and startups are often more interested in a potential investors connections than their bank account.

But when the founders begin to get busier, or find they need to focus more on the core product, or “the big picture”, sales begins to be delegated out to smiley, polished, attractive talkers, with resumes reading like a New York socialite: interned at Fortune 500 company, B.A. in Liberal Arts, people skills, raised $XX, worked on Senator So-And-So’s campaign. These charming people are cheerfully willing to do a job no one else wants to do, to look rejection dead in the face and to push-push-push!

When Biz Dev People Expire

Lean Startup teacher Steve Blank has an interesting take on these people. He talks about new ventures hiring VPs of sales on high promises, only to fire them a few months later when the sales weren’t coming in. Joking about common conversations between aggressive CEO/Founders and their freshly minted VP of Sales, he said they would ask what’s going on?  The VP of Sales would answer ‘We have this and this in the pipeline’. The answer was always in the pipeline, until the CEO/founder decided they “needed to pivot. The way we used to pivot in the old days was firing executives.”

Then Where Do We Get Sales?

I’m not going so far as to imply all VP of sales/business development people are full of hot air. There are some amazing go getters out there –  I woefully turned down an opportunity to work for one DC VP of Sales who I will say is probably one of the most connected people in the U.S. But I am suggesting businesses need to reassess what qualities they are looking for in hiring for this high salaried position.

One interesting alternative to sales comes from Salesforce founder, Marc Benioff. On his blog he writes, “We did not have a formal sales organization at this time so in our quest for early customers, everyone on the salesforce.com team was encouraged to contact anyone he or she knew in any industry, or at any start-up.” This approach taps on the network of every employee, creating an interesting ownership for employees with the revenue being generated, as well leveraging the company’s reach.

While Marc’s view is everyone is “sales”, Seth Godin’s boldly claims in “Rework” that “Marketing is Not a Department”. As the manager of a marketing department, I’m not going to pretend that didn’t throw me off, but in practice I see his point. In a software company the customer service team is “marketing” when they resolve customer issues. In a service company the consultants are creating relationships and taking advantage of opportunities to “upsell”, adding on products or services based on needs they identify.

So Are Bus Dev Execs Obsolete?

The answer to that question is no. While it’s important to train your customer service team to be able to create sustainable relationships and inform about additional benefits and services, as well as leverage all your employee networks, having someone devoted to the constant work of prospecting and “closing” new deals is still essential to building bigger, better companies.

Mostly, in hiring business development execs I would urge businesses to be careful. Think about clear objectives for the new person, what will make you “happy”? Try to understand the needs for the position, maybe even working it for yourself, before you hire someone into it. This is something that worked well for many founders – even if they weren’t the most qualified in a position, at least by trying the work themselves, they understood the challenges and skill set the position would require.

For more insights and help with getting your own business launched, visit me at Onertia.com. Onertia is a marketing and business strategy consulting practice for early venture companies.

Fireside Chat with SmartThings Founder Alex Hawkinson

There’s this thing everyone in tech is talking about, this “Internet of Things, this idea where suddenly everything we touch and use and see and turn on is connected. This “Internet of Things” is supposed to be the next wave, and surfing high on that wave was our January speaker, Alex Hawkinson.

$300 to Live Like Bill Gates

SmartThings is billed as a “smarter home” solution. Imagine this: You are laying in bed and as you awaken, your Jawbone wristlet sends a signal to your home center. The blinds open gently. You’re greeted by a voice letting you know your coffee is brewing, the towel warmer is heated, but your kids are still sleeping soundly. At $55 million Bill Gates spared no cost for his smarter home. SmartThings is revolutionizing the market charging only $300 for a DIY version.

The SmartThings kit isn’t a “smart home” plug-in – it’s more like a kit that turns your home into a computer. “There is a hub device, like a Babblefish”, explained Alex. “There are all these ‘things’ in your home, that can somehow talk to our platform. There’s about a thousand things that can talk to our platform: Lights, locks, switches, sensors of every type. There’s our cloud and app platform, like a Facebook of things. Then we have a mobile app, which sits in the palm of your hand.”

SmartThings was never conceived as a one-off solution, but “as a platform for anyone to connect the everyday objects in their life, and an open platform that developers could contribute to.” Aka, a hacker’s dream.

Born to Be an Entrepreneur

A neuro AND computer science graduate from Carnegie Mellon, Alex was a smarter thing from the start. In fact, he’s in good company with our own Startup Grind director, Brian Park, also a Carnegie grad. Maybe there’s something to CMU grads and entrepreneurship?

The way Alex tells it, becoming an entrepreneur was a birthright; His family, his mother’s family was “filled with entrepreneurs” and he was “left to raise himself on the floor of startups”. SmartThings was hardly the beginning for Alex; In fact SmartThings is his fourth startup. Others include Mural Consulting, Physical Graph Corp, SMB Live.

“SMB live was the Hubspot that didn’t make it to Hubspot level”. The modest Midwesterner talks about his digital marketing company humbly, considering it “was serving about 400,000 small businesses” and “sold for about 15 million”.

And SmartThings? “It’s definitely the One. Through your life you look for the right combination, the right experience for you, and a chance to change the world. This one feels like it.”

Frustration is the Mother of Invention

While Alex shares his “One” with six other cofounders, he said the inspiration for SmartThings came from a personal disaster when his rustic mountain cabin was flooded from pipe bursts after a power outage. Water rotted the cabin for months before they found it. “I just couldn’t stand it”, he explained. “We live in this mobile world, where information is at your fingertips, and I was how did we not know?”

“This became a personal mission to install a sensor…so we started building this sensor box.” After a few months he began to notice how things were changing;  Fitbit, Nest, the word was becoming more connected, “but there was no platform that was connecting it all together.”

Asked about other failed “smart homes” projects, Alex answered he called it the blessing of “entrepreneurial naiveté. “I had no idea about Microsoft’s failed X10 – or whatever – I just thought it was crazy that no one else had made it easy to solve this thing that would have saved me and my family a hundred grand.”

“You can’t overanalyze it at the beginning. You have to go all in. And as you start to get traction, and then look around and realize the ways you can be different the idea hits you sometimes, and you just know.”

Crowdfunding a Startup Successfully

To his wildly successful Kickstarter fundraising strategy, Alex said, “My biggest fear was we were going to hang the shingle out there and no one was going to want it. We were talking to investors, but then no one had signed up. But we thought ‘It’s still really good’, so we put the threshold up higher – $250,000.”

“The secret was you leverage your own network in the first few days. Then you got to capture some media attention – and CNN picked us up.” After that it became a task of managing the “investors”. “We put up this one post and it got 2,000 responses in 24 hours. It took four full-time people to interact with the community just as we were getting going.”

“What’s something you got wrong early on?”, asked on audience member. Alex laughed, “In our hub, somehow somebody made the decision its status light should flash red until it went black. You won’t believe how many calls we got in the first weeks. ‘It’s broken!’ they said. Then they ripped the cord out and it was totally broken.”

No surprise on his answer the to Brian’s question “What would be the number one thing in building a successful consumer electronics products startup?” he answered “Ease of use.” Next question, “What do you look for in a great engineer?” “You look for the athlete over the skills. It’s the person over whether they know C++.”

Why DC for Your Company?

The SmartThings development center is still located in Minneapolis, which makes it harder for Alex to interview candidates. I’ve always had a special place in my heart for the mythical Garrison Keillor men of Minnesota, so I was on the edge of my seat when Brian asked his most important question: “Why did you pick and to set up shop here in DC?”

“Well part of it was my wife…” Alex chuckles. “Honestly, I wouldn’t have been able to build my career here if it wasn’t possible in a lot of ways. As SmartThings has done well, we’ve had people push us to move to the Valley. What really matters is building the right core team of people that are getting work done day to day. It’s not the other consumer electronics people that we’re networking with – it’s the talent pool here. The talent pool has been really good.”

Originally written for Startup Grind DC.