Isn’t it funny how a guy can found companies like Symantec, tell you his story and you will learn more from his mistakes and missteps than his successes?
So it was with Denis Coleman, serial entrepreneur and investor, who was visiting Dublin from Silicon Valley last week. Speaking at the Science Gallery (@sciencegallery) last Thursday, he said his aim was to inspire and inform entrepreneurs rather than talk about himself.
Coleman got his start in 1978 when he wrote a text book that made him half as much again as he made teaching. Since then, he has been involved with 14 start ups and has lectured at Stanford University, fabled for its role in the entrepreneurial Silicon Valley culture. His debut piece of software was Spellguard, the first PC spell checker. He would later go on to co-found Visioneer and Symantec. Meanwhile, ventures like Gator.com did not fare so well.
Originally from Toronto, Coleman is now based in Silicon Valley. On a tour of several countries, he was looking for investment opportunities and giving talks to inspire and guide local entrepreneurs.
Coleman’s first job was in 1955 selling newspapers as a kid. He enjoyed making money and he had an “aha! moment” in 1978 when he and Prof. Al Edge at the University of Hawaii wrote a text book that was soon in use in 100 other universities.
Coleman said his next break came while working as a management consultant — “and not a very good one, I might add.” Writing reports in the late 70s, he found he could do with some help on his spelling and so developed SpellGuard. He bought a $400 ad in a computer magazine in 1979 and had sales of $24,000 in his first month.
Not all of his ventures succeeded, however.
One project took up three years of his time, $400,000 of his money, $5 million of his friends’ and returned nothing. One key factor was his failure to do due diligence and being overly friendly with investors.
Another involved five years of hard work, shouting matches, firings, “cuts to no pay,” cold sweats and passive-aggressive behavior. It ended with the IPO of Symantec. Although it led to an independent lifestyle, Coleman said he could have made four times as much if he had followed his own advice and timed the sale of his shares better. You can just as easily find the bottom if you are looking for the top, he said.
A third project involved 24 hours of work, eight hours of due diligence and quarterly lunches for three years. It yielded more cash than Symantec but yet one of his co-investing friends managed to avoid that win. He was too competitive and wanted to get a better price for his stock than Coleman did. However, prices fell and never recovered.
Coleman is now part of the Band of Angels investment group in Menlo Park, Calif. They screen around 150 proposals a month but make around 18 investments a year. They have provided $196 million in funds since 1997, and have seen 9 initial public offerings (IPOs).
On his Irish trip, Coleman said he saw 10 projects and invited seven back. Happy with the quality of what he saw, Coleman said, “I wish Dublin was a little closer [to California].”
Coleman gave entrepreneurs some tips when talking to investors:
- Ask them, “Who else should we talk to?” If they won’t say, they either like your idea too much or you don’t want to deal with them, Coleman said.
- Ask, “What would it take to make you invest?” Silicon Valley is target rich, Coleman said. “You don’t want to talk to Cinderella until you have danced with some ugly stepsisters and learned to dance,” he said.
- Ask them, “What do you see as the biggest risk?” Coleman said you could start “an unseen dialog.”
- Ask, “What have you seen competitive?” The issue of competition should be tackled up front. You won’t get investment until they are comfortable with who they are challenging in the marketplace.
- Ask, “What was your best deal?” This will show you “how much ego was involved and how much control was involved,” Coleman said. “Maybe you don’t want to deal with somebody who acts like that.’
Investors, meanwhile, will look at:
- Energy levels
- Is the entrepreneur a good listener?
- How you allocated the limited time allowed for your pitch. Coleman said he saw one seemingly good idea but the entrepreneur wasted eight of his 20 minutes on an introduction. Worse still, he found he had gotten himself off base.
- Sometimes investors will like ent but not the business plan.
- How did the pitcher not handle his team? One group came in with a good idea, but was ruled out when the prospective CEO refused to allow his team to address questions.
Although he concentrates on the American market, Coleman outlined some possible areas of opportunity for entrepreneurs.
- Government regulation: This is constantly changing and companies are driven by ‘greed and fear’ when it comes to compliance. Coleman said he found fear is much more effective.
- Education: He described this as “broken in the US.” Not a fan of teachers unions, which seem to believe more money will solve problems, Coleman said “technology is finally get us out of this paradigm which doesn’t work.” He suggested artificial intelligence could come in to play.
- Healthcare: “Also broken” in the U.S. It is very difficult to get new products through the FDA, Coleman said. Many companies are now launching in Europe or smaller European markets before attempting the U.S.
- The US market itself can be tough to crack. Again, some companies are looking to launch in Europe or parts of Europe first.
- White collar automation: The recent success of IBM’s ‘Watson’ on the American TV show, Jeopardy, shows the potential. Coleman acknowledged the supercomputer “made a cpl of hilarious mistakes” but it still beat the all-time Jeopardy champs. Call-center jobs could be automated, Coleman suggested.
- Mobile: “It took years before people used a PC to buy things,” he said. That activity started almost immediately with smart phones. Now, “Steve Jobs makes the same thing better, calls it a tablet and sells you 2 things at once.”
During the Q&A, Coleman fielded some interesting questions.
He was asked how hard an entrepreneur should work and the impact on his or her personal life. The person needs to be committed but if it causes distress in their family life, they should think about cutting back, Coleman said. Techies who work through the night coding should also be careful since their judgment will be affected.
Asked if people should to ask friends or family for money, Coleman advised caution. “If I am going to accept money from friends, they have to be able to afford to lose it all,” he said. During Visoneer’s start-up phase, employees put in money because it was doing well. However, a setback followed by lay offs caused real pain for the employees. It also presented the management team with a dilemma: If they gave the money back to employees, would the other investors demand the same? “You don’t know what $1,000 or $5,000 means to a person,” he said.
Asked if we were in another tech bubble, Coleman guessed we were. Wages have been climbing in the Valley. He recently heard of one company that offered a graduate two years out of college $110k. Coleman said he was lured by another company for $160k.
Photo of Symantec sign courtesy Martin McKeay on Flickr.