StartOut - Building and Supporting Gay and Lesbian Entrepreneurship

Malin+Goetz

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Matthew Malin and Andrew Goetz are founders of Malin+Goetz apothecary and lab, an international skin care and perfume company that started out in New York in 2004.

Jim Sherman

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Jim Sherman, founder of ShermansTravel Media, LLC launched the online business in 2002 to help travelers find the best travel deals and provide people with travel advice. Not a booking site, ShermansTravel editors aggregate, screen and publish the best travel sales and specials from hundreds of providers. The deals include both bargains and values, and the site also provides expert destination advice and trip ideas for research and planning a vacation.

Gabe Zichermann

(Click here for more clips from this interview) Gabe Zichermann is an entrepreneur, author and public speaker who coined the term “Funware” to describe the use of game mechanics in non-game contexts. As co-founder and CEO of mobile software startup rmbrME, Gabe is helping to rewrite the rules for networking in a smartphone world. Additionally, as co-author of the upcoming books “The Engaging Web” (Manning, 2009) and “Game-Based Marketing” (Wiley, 2010), Zichermann makes a compelling case for the use of games and game mechanics in everyday life, the web and business. A native of Canada and resident of NYC, Gabe frequently muses about games and the world at http://funwareblog.com

Ian Reisner

Reisner co-founded Parkview Developers with partner Mati Weiderpass in 2003. Reisner had a 15 year career on Wall Street with Salomon Brothers and then Bank of America where he was a Managing Director running a $200 million derivatives business. Mr. Reisner was also the Co-Founder and Vice President of Watch World International, a nationwide chain of 119 specialty stores that was sold to Sunglass Hut International in June 2000. Watch World was as much a real estate as it was a retail play. All 119 stores were planned, designed and constructed by Mr. Reisner and Mr. Weiderpass.

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Peter Sisson

Peter Sisson, CEO of Line2, is an entrepreneur and VoIP pioneer whose last company, Teleo, was acquired by Microsoft in 2005. He has been on the forefront of the Internet industry for 15 years, starting four companies and nurturing many others through advisory roles. Here he talks to StartOut about getting venture funding.

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Lorenzo Thione

Lorenzo Thione founded Powerset, Inc., an innovative search startup, in 2005 with the vision of bringing to consumers a more natural and effective type of Internet search than conventional keyword search. Funded by notable Silicon Valley VCs and angel investors, Powerset was acquired by Microsoft Corp. in 2008 to complement and innovate its own search technology and offering. Currently, he is a Principal Program Manager in charge of the Powerset division of Bing, Microsoft’s innovative “Decision Engine”.

In addition, Lorenzo is an investor, board observer and advisor to Dolores Labs, an exciting and energetic San Francisco startup building a scalable platform for human-based computing and crowdsourcing.

Lorenzo holds a M.S. in Computer Engineering from the University of Texas at Austin and has co-authored several publications in Computational Linguistics. He is a named inventor on 3 issued and over 20 pending patents in the US and world-wide. He lives in San Francisco with his husband, David Palmer.

Q: What inspired you to start Powerset in the first place?

A: Powerset was my first startup. It was definitely part inspiration, part opportunity. I had been thinking about search technology and working on the fundamentals of Powerset’s technology for a few years prior to the founding of Powerset while I was a researcher at Fuji-Xerox/Xerox PARC, and had arrived at the same conclusions about the staleness of innovation in Search that my co-founder Barney Pell had reached while an entrepreneur in residence at the Mayfield Fund, an important Silicon Valley venture capital firm. When he and I met we clicked. I recognized the opportunity to do something new and exciting, and at the same time something uncomfortable, something I had not done before. I always approach any new endeavor in the same way: the more I can learn new things, the more satisfaction I get out of it. Being innovative - being an entrepreneur - means to step out of your comfort zone and take risks, do new things, learn a new lesson every day. I primarily looked at founding Powerset as an opportunity to learn what it meant to start a business from scratch, raise funding, help it grow, and trying to build new, exciting technology, with a lot of execution risk. That was scary.

Q: What was the most challenging thing you faced in starting up Powerset?

A: There were many challenging things, which is the way it should be, since challenges are part of building something new, building something that no one has before quite in the same way. I would say the most challenging aspect of starting and growing a business was to deal with the complexities of a growing company that was rushing like mad through the various phases of growth: from the founding team, to the first few employees, to the organizational pains of building management, oversight and accountability. The human complexities of a growing company were something I was not prepared for: from learning how to be a good manager, to exercising effective leadership, to how to endure and survive conflict, intellectual and emotional. In any growing company you’ll find a lot of that.

The technical challenges were never something I felt too worried about: one lesson I learned early on is you think about your plan and your strategy early, not because your plan or strategy will be right – as a matter of fact it will almost always be wrong – but because that thinking process allows you to be able to adapt when new information is available. I feel proud of the Powerset team and the technology we built, even as there were many adjustments.

Market forces, on the other hand, are truly unpredictable. As a pre-revenue company we depended on our execution and on the venture market to provide us with enough life-blood to get to where we needed in order to advance to the next stage. I spent more than one sleepless night worrying about that. But that’s just part of the game. Ultimately, our timing was good in teaming up with Microsoft, but of course we didn’t quite know that at the time. It was the right decision, and a success for the company, but that wasn’t always clear to us then.

Q: What was the best lesson you learned in the process of building up the company?

A: I would say there are two lessons that I hold really dear. They’re related, but slightly different. First, that a company’s success is determined 95% by the team. Build a strong team from the beginning, with no weak links, and you’ll be building a strong company, a support system for yourself, and ultimately a company that is able to adapt to changed conditions, and new information, to be dynamic. Seems obvious maybe, but it’s really important. Spend twice as much time as you would naturally do interviewing your team and figuring out if the fit is right. Use try-out periods if you must and never be afraid of undoing a wrong decision.

The second lesson is more private to the psyche of a founder: I personally would always start a new company or venture with at least one other co-founder. My two Powerset co-founders, Barney Pell and Steve Newcomb, are both great guys who were invaluable mentors to me. But more than just than looking for someone you can learn from, having a co-founder means having a partner someone else who shares the highest level of emotional involvement in your startup. Having doubts and insecurities is normal and unavoidable, and it turns out that your co-founder will have some as well, but luck will most likely have it that your doubts will be different and you will be able to rely on each other for support. The job can get pretty lonely and having someone to lean on makes getting through the difficult moments all the much easier. Also, as you build your team from the ground up, build a culture you like and you believe in because it will stick, forever.

Q: How did you go about raising capital for the company in its early stages?

A: We raised money in two stages like many technology startups do. We initially raised a seed-stage angel round. The market and the fundamentals of the company were strong so we were able to do this as a convertible bridge loan, which meant delaying the question of valuation to a later time, when the company’s strength and prospects would be clearer. This is not always possible, depending on the company and the market conditions, but when it is, it can help in maximizing the value of the equity in your company. A few months later, with a stronger team, our technology licensing in place and a clearer technology roadmap, we raised our Series A from two established venture firms in San Francisco. Raising money is not only about money though. When money is hard to come by you take what you can, as it can make the difference between growing your company, or packing up and going home. When money is abundant, as it sometimes is, and if you’re lucky enough to be starting a hot company, then it becomes all about partnership. For us, raising our series A was as much guaranteeing ourselves the financial stability to go after the hard problems we had set for ourselves, as much as it was about finding the right partners, the right people to sit at the table with us and make the hard decisions. Either way you’ll usually end up pitching a lot of investors, but the lesson I have learned is that that’s a great time to make it not just about you pitching to them, but also an opportunity for you to interview your future board members, as they will have a huge impact on how you run your business.

Raising angel or seed money, in the very infancy of a company, is more about the strengths of your network. My co-founders had a strong network and we were able to reach the right people at the right time. My advice would be to use your connections and get introductions to as many potentially interested parties as possible: it will not only be good to raise money for your business, but it will strengthen your network, should the need arise again, and usually once you do this once, you want to do it over and over again.

Q: What traits do you look for in either a business partner or an employee?

A: This is going to sound cliché, but here are the primary traits in order of importance: dynamism, flexibility, curiosity, smarts, experience, proven track record. I avoid high-maintenance types and prima donnas. In a business partner I look for someone I can trust and depend on and whom I can learn from. In an employee I look for someone who won’t need too much direction, a self-starter, who understands and shares the vision and is willing to pull up his sleeves and do what it takes to achieve his goals.

Q: I understand that your passions extend beyond technology companies to other types of start-ups. Tell us about that.

I have always had a strong passion for the arts, especially theater. In the last year or so I have had the chance to learn more about the commercial theater industry and it’s fascinatingly full of entrepreneurial opportunities. Much of it is run as a small business, but there is so much about the theater industry that is still stuck in last century. I am currently and increasingly more involved in the industry and while the future is hard to predict, I can only imagine that I will be more so in the months and years to come, rather than less.

I run a small theater non-profit in San Francisco, the San Francisco New Theater Workshop, of which I am the managing director, and which is dedicated to discovering and producing new promising works in musical theater. I have also co-founded Sing Out, Louise! Productions, a theatrical production and investment company, and my business partner Jay Kuo and I are currently busy bringing several new works to the national stage. Producing theater is a surprisingly entrepreneurial business. The fundamentals are the same of any startup company: find a product you believe in and that can succeed in the marketplace, assemble the team who is going to execute, raise the funds that are going to make it possible and be the best possible steward of the ship in bringing that product to market and market it successfully to your audience. That’s very exciting to me, and when the product (the theater shows in this case) have an emotional resonance with you or your audience then the satisfaction is even greater.

Q: Who has inspired you the most?

A: Too many different people have inspired me in too many different respects to mention them all here. Amongst them, I would count many teachers and many colleagues, as well as many friends. Ultimately I have learned so much from the people I have worked with at Powerset that I would first and foremost mention my co-founders, and the executive management team there. They are a phenomenal team, made of many individuals whom I respect and look up to. Our investors too, and our board of directors, from whom I have learned tremendous lessons – regardless of whether or not we always agreed (we didn’t, of course, always agree).

Q: Who is your favorite gay icon and why?

A: Finding a gay icon that has had a lot of influence or impact on me is something I had to spend quite some time thinking about. Maybe it’s because of the very reality that we’re trying to change with StartOut. As an entrepreneur, I’ve often looked up to successful businessmen and entrepreneurs as role models, and - with the exception of the entertainment and design industries - there just aren’t that many names that come to mind when thinking of out and outspoken LGBT entrepreneurs.

One of the people I do admire, who has had the courage to be himself at a time when he was just starting his career and had much to lose, is Matthew Mitchum - the 21-year-old Australian Olympic diver who became the first openly gay Australian to go to the Olympics. That’s leadership, self-confidence, courage, and talent all rolled into one. The professional sports industry, like many parts of the business world, is another example in which the leaders and role models of today still feel like they have to hide their identity in order not to suffer adverse professional consequences. And ultimately, that’s one of the core reasons that StartOut is so important - to make that a thing of the past.

Q: If you could give one single piece of advice to entrepreneurs starting businesses, what would that be?

A: At the cost of sounding like a Nike commercial – when opportunity knocks - when you’ve got an idea, or find the right team - if you’re set on being an entrepreneur, on building a great business you’ve got to take the risk. Thinking and mulling it over ad infinitum won’t help, it will just make it look increasingly like a bad idea. I remember being in exactly that situation: give up a stable job for uncertainty, risk and the certainty of long hours and working weekends. But I would do it all over again. So, don’t hesitate forever. Just do it.