David Gardner is a serial entrepreneur and angel investor based in Cary. He sold ProviderLink to Compuware for $12 million in 2006. Four years later, he sold Peopleclick to a New York private equity firm for $100 million. Among his portfolio of 25 local startups are FilterEasy, Stealz, Validic, ArchiveSocial, FotoSwipe and Fortnight Brewing. He had two exits in 2013: Magnus Health (after it raised a round) and ChannelAdvisor.
Gardner wrote The Startup Hats over Christmas 2013 and expects to publish it. In the meantime, he shares it with ExitEvent readers in 13 installments, beginning with this introduction.
With degrees in philosophy and dead languages, I have often said that the best thing higher education did for me was to leave me with absolutely no marketable skills. I don’t say this in jest. The reality is that had I graduated with a useful engineering or finance degree, the odds are that I would have immediately gotten a job, gotten a mortgage and lived out the rest of my days without ever considering starting my own ventures. Since no one would hire me, I stumbled into entrepreneurship simply as a means to service a mountain of student loan debt. Because I didn’t know what I should know, I assumed everything was knowable if I just jumped in, thrashed around and didn’t give up.
Over the last 25 years, I’ve had the privilege and heartache of founding or co-founding several technology companies and investing in and advising dozens of other startups from enterprise software platforms to breweries. I made a lot of mistakes, arrogantly blew a couple of big exits and occasionally sold at just the right time. I had the good fortune to have seven of my own startups successfully acquired. The largest sold for $100 million in cash and the briefest lasted only 11 months before being acquired for $12 million.
Don’t worry. This is not going to be about me. It’s really about you. The last thing we need is another academic textbook or one of those auto-boast-agraphies where each chapter begins with some variation on “and then my brilliance was further demonstrated by”. In fact, I don’t think I’m even a good role model. I did almost everything wrong for way too long before eventually figuring it out, always the hard way. To this day, I have no excuse for the generously given pearls of wisdom that languished at my door step.
So why should you listen to me? Because, most of you that are arrogant enough to think you know enough to defy the odds and build your own success venture from the ground up are me or at least a lot like who I’ve been. You should listen to me, not because I’m great or wise but because I vividly remember every self-discovered truth and painful lesson endured. You should listen to me because I have a good memory, I’m honest and I’m willing to tell you.
Even though this isn’t about me, it would probably be helpful for you to know a little something about how I became an accidental entrepreneur. Being the first person to obtain a degree from either side of my family, I received little guidance concerning majors or career options heading off to college. I assumed that everyone studied whatever subjects they found most interesting without a thought to its marketability or income potential. For me this was history, ancient languages and philosophy.
Although I had no money for college, student loans were readily available. I finished my undergraduate in three years by taking heavy class loads that always exceeded 20 credit hours per semester while working nearly full-time. For me, this was simply a matter of economics. Full-time students paid the same amount regardless of whether they took 12 credit hours or 20, so why not take 20 and save the cost of a full year of college? In hindsight, although this was good economics, I forfeited much of the college experience never to be relived. This was my first lesson in how things can look great in theory but not play out so well in practice.
After graduating, I started a Master’s of Divinity program at Southeastern Seminary and completely by accident discovered a love for computers. I wanted to write my master’s thesis in ancient Greek but there was a requirement that it be typed. Typewriters for dead language are in obvious short supply but I had heard of something called a “word processor” that might enable me to accomplish this task. I took advantage of a special sale going on at the book store and purchased an IBM portable PC. I learned that “portable” can be a very subjective term! This monster was the size of a suitcase and twice as heavy. It had no hard drive, only a 360K five-inch floppy drive and a built-in six-inch amber monochrome monitor.
In those days, IBM shipped every computer with full documentation i.e. a DOS operating manual and a BASIC programming language manual and disks. I found the on switch. It booted up in the BASIC interpreter screen and a curser began mocking me. I found and opened the BASIC programming manual to the first page which happened to explain a BASIC command called “BEEP”. So I typed in the letters “B-E-E-P” and pressed the return key. I will never forget my excitement as I heard a distinctive beep sound come from its little speaker stuck to the side of its humming power supply. My eyes widened at this unexpected epiphany, “you can tell it to do stuff?”
I began experimenting with other commands, IF-THEN statements, GOTO statements and FOR-NEXT loops. My mind raced. The possibilities seemed endless. Before long I was drawing graphical objects on the screen, erasing and redrawing them so as to create the illusion of things flying around in space. For no reason, I began writing my first big program, a spaceship game. It would be considered amazingly simplistic by today’s standards, but in the early eighties, the state of the industry was a black and white 2D ping pong ball bouncing back and forth between line paddles.
I began reading computer hobbyists’ magazines to pick up coding tips. I even figured out how to install more memory and a second floppy drive so I could compile my code without having to laboriously switch floppy disks dozens of times. My code was horrible. If I had had even a rudimentary understanding of calculus at the time I could have replaced pages of IF-THEN statements with a single equation, but it worked and it was really fun to play.
So I spent my days reading Nietzsche and Bonhoeffer and translating manuscripts, but in truth, I couldn’t wait to get back to my room and to the world I was creating on my little amber screen.
In those days, we called open-source programs “shareware,” which was comprised mostly of games and simple utility programs. I decided to send my game into one of the computer hobbyists magazine publishers for review. A few weeks later, I received a letter in the mail. I will never forget my second computer epiphany as I read the letter. They wanted to include my program on one of the shareware floppy disks that were distributed inside of their magazine and they were willing me pay me for it! My eyes widen again, “you can make money doing this?”
As soon as the semester was over, I enrolled at North Carolina State University. My goal was to complete a master’s degree in information science, but I had a lot of remedial math and science classes to make up. It was difficult but really refreshing to see right and wrong answers on tests rather than just essay questions regarding the conflicting opinions of others.
I was making ends meet by writing simple programs for small local businesses. I developed several custom point-of-sale and inventory control applications. At that time, an information technology solution was very comprehensive. I wrote the code, built the computers from mail-ordered parts and even set up the local area network before training the staff and providing them with on-going support. I read a lot of manuals. The great thing in those days was that you didn’t have to know much to look like a real genius because very few people even owned a computer or understood software’s potential for transforming their business.
By the end of my second year at NCSU I invoiced over $1 million dollars and found myself predominately hiring other students to actually do most of the work. I rented some space and started a computer retail store. A year later, at $6 million in revenue and 27 employees, I dropped out of my third year at NCSU figuring it was better to make payroll than to do homework assignments.
I sold my computer store and began working with a friend to build a software-only projects development company. Computer hardware margins were heading south but the client-server computing model was in full swing as companies moved applications off of their mainframes and onto more cost-effective and user-friendly personal computers.
Over the next few years I sold, designed and managed literally hundreds of custom software development projects predominately for Fortune 1000 companies. My teams developed the very first online banking application for BB&T and a massive admissions system for Duke University. I did not appreciate it at the time but now realize how this services-based company exposed me to almost every industry and aspect of business. From manufacturing lines and sales force automation to part eleven compliant pharmaceutical document tracking, we cranked out the projects and grew to nearly 200 employees.
Although custom projects were fun and lucrative, I slowly began to realize what all small services-based companies learn. If I were to ever stop working as hard as I was working, the revenue would dry up. The companies that could scale up quickly and get huge exit multiples were the ones with intellectual property i.e. products. It became clear to me that I needed to stop developing software for hire and start building my own products. Fortunately, working daily with dozens of chief information officers and IT managers had put me in a good position to recognize which new software product offerings might have the most potential and demand.
I spent the next couple of decades founding software product companies. Each of the startups I founded was in a different industry vertical, from human resources to healthcare to education. I loved designing transformational software to solve business problems and I was utterly fascinated by how unique each market segment and sales cycle was.
Business for me was like an enjoyable puzzle. At first, I thought that all I had to do was design products that would create the right value propositions to solve the most painful problems I could discover. There was so much more I needed to know about business, people and myself. The trouble with experience is that she gives you the test and then the lesson.
Unfortunately, I wasn’t a great listener, so I had to learn most of my lessons the hard way. But I only had to learn them once.
Starting companies is not for the faint of heart. No matter how much you love what you do, consistently working 12- and 15-hour days will take a toll on you. When I sold my last company, I promised my wonderful and patient wife that the next time I had a new software product idea that I would lay down until it was totally forgotten.
As a startup entrepreneur constantly climbing the face of the mountain, no matter how busy I was with my own ventures, I always took the time to speak with new entrepreneurs seeking advice. I saw it as my duty, something that was owed because of those who had helped me along the way.
So when I retired, I began to focus all of my energy on mentoring young entrepreneurs. Local entrepreneurs came to know me as the advisor who consulted for coffee or beer but you had to pay while the services were being rendered! I’d estimate that literally hundreds of entrepreneurs have sat on my back deck overlooking my lake with me discussing their go-to-market strategy, staffing problems or Nietzsche.
Although every venture is unique, I found myself giving certain advice over and over again and hearing back how beneficial it was. I encapsulated some of this advice into a short document to share with new entrepreneurs mainly as a time saver. It really surprised me how popular that document became as entrepreneurs began sharing it with each other and discussing it among themselves. Several entrepreneurs, angel investors and venture capitalists have encouraged me to expand on that document and make it available to a wider audience. My first attempt here at book writing is my effort to do so.
If you have the time and money to complete an MBA, I am sure that you would learn a lot more than I can communicate here but if you do not then you may find this book a very practical summary of the things that I found most important when starting a venture. If you already have an MBA or business experience, you may still find what I have to say very practical. In my experience, it’s not the stuff we don’t know that screws us up nearly as much as all the stuff we did learn but somehow forgot to implement. I specifically focus on software business-to-business (B2B) startups but most of this book is applicable to business-to-consumer (B2C) and non-software related ventures as well.
Unlike most professions that require you to wear only one hat really well, successful entrepreneurship dictates that you wear many very different hats all reasonably well. In fact, your typical day will be a flurry of putting on and taking off your diverse hats, each encompassing a role you must fulfill in order for your startup to survive and thrive. Depending on your strengths and personality, you will gravitate towards and feel more comfortable with some hats than others, but ignore any of them at your peril.
You will notice that each of the hats discussed here can also be viewed as a stage or step in building your startup. Each step rests upon and is dependent on the ones that came before it. In a startup, you rarely have the luxury of choosing which hats you want to wear or spend time under. You have to wear them all and to short change one hat is to sabotage them all.
If you are an aspiring entrepreneur living by your wits, taking the leaps of faith, dodging the bullets and clenching relentlessly to your dream then I want you to know that my respect for you is immense and this book is all about you. I think people, who aren’t a little scared every morning when they wake up, are at best unchallenged and at worst not fully alive.
Whether you succeed or fail is not nearly as important as the fact that you experienced the journey. If you embrace it, your venture will shape you even as you are shaping it. I hope this book serves you well on that journey and that you are a much better listener and faster learner than me.
Next up: The Entrepreneur Hat
