Teresa Esser - The Venture Caf?: Secrets, Strategies, and Stories from Americas High-Tech Entrepreneurs

Copyright 2002 by Teresa A. Esser

All rights reserved.

Warner Books

Hachette Book Group

237 Park Avenue

New York, NY 10017

Visit our website at www.HachetteBookGroup.com.

ISBN: 978-0-7595-2712-6

First eBook Edition: March 2002

For my family:
Gloria, Ambrose, Diane, Mike, and Fred Esser

This publication is designed to provide general information regarding the subject matter covered. Laws and practices often vary from state to state and at the federal level and are subject to change, and because each factual situation is different, specific advice should be tailored to the particular circumstances. The reader is advised to consult with legal and financial advisers regarding specific situations. The author and publisher specifically disclaim any liability that is incurred from the use or application of the contents of this book.

T his is a story about a kid from North Dakota who went to MIT on financial aid and dropped out, four years into a five-year masters program, to turn a class project into a new high-tech company. The kid was not a straight-A student. In fact, he got a B on the class project. But he was excited about the device he had built and had the sense that he might be able to do something with it, maybe, if he talked to the right people.

As it turned out, the kid was right. Three years after Pehr Anderson dropped out of MIT to start NBX Corporation the little Ethernet telephone prototype had grown into a ninety-person business that was eventually acquired by 3Com Corporation for approximately $90 million.

I wrote this book because I am intimately acquainted with the story of NBX Corporation and because I believe that people can benefit from reading about some of the things that Pehr, his cofounders, and entrepreneurs like them go through when struggling to build their companies. I was engaged to Pehr Anderson during the time that he, Chris Gadda, and Alex Laats were starting NBX, and I am married to him now. My position as Pehrs fiance gave me a unique vantage point from which to view the entrepreneurial process.

At the time that Pehr decided to drop out of school and start NBX Corporation, my student loans were beginning to come due, and our joint finances were rather strained. When I first heard that Pehr wanted to drop out of school and start a company, I became extremely frustrated, since I was doing my best just to make rent payments on our extremely modest apartment. I didnt believe in playing the lottery, and I certainly didnt believe that the strange little device that Pehr and Chris had wired together was ever going to turn into a multimillion-dollar success story.

When Pehr tried to tell me about the amazing future of NBX Corporation, I would go into the other room, spread the months bills out on my desk, and try to figure out whether we would be able to pay them. Pehr would follow me to my desk and try to distract me from this reality by telling stories about the other Ethernet telephone companywhich was not as good as his, of coursethat had already been sold for $150 million!

That sort of talk made me uncomfortable, because it seemed to me that Pehr had moved way beyond simple pie-in-the sky dreaming and into the land of pure insanity. When he started talking like this, I would shut my eyes and plug my ears and wait for him to go away.

Fortunately, when Pehr got into one of these moods, there was a place where he could go.

About once a month Pehr would get an E-mail from a man named Joost Bonsen, asking him to come to a bar on the MIT campus known as the Muddy Charles Pub for some beer, pizza, and informal conversation. Bonsens networking events were good for Pehr because they gave him a chance to wave his arms and float his ideas in a relatively safe environment. The other people that Bonsen invited to this event were entrepreneurs, too, and they knew that the boastful talk was an important part of the entrepreneurial process. And some of thema fair number of them, actuallysuspected that Pehrs company might wind up being as successful as it eventually proved to be.

The Muddy Charles Pub isnt a pretentious place. Its charter doesnt allow advertising of any kind (or even hanging a sign out front to let people know where it is), and the people who come to the pub like it that way. They like sitting in the heavy oak chairs, buying forty-cent bags of Cheez Doodles, and entertaining one another by sticking plastic finger puppets (shaped like Kenny from the South Park television show) into the jaw of a Victor mousetrap.

During the day, people come to the pub to eat dollar slices of pizza, drink eight-five-cent cups of Budweiser, and watch the sailboats float past on the Charles River. Evenings arent much different: People go there to play cribbage, do group-oriented homework assignments, or tell gossip about the people who work there. The pubs manager, Joe Contrada, tells me that the woman checking IDs in the entryway had to get a replacement last week so she could take one of her experiments up in the zero-gravity airplane. And it looks like theyre going to have to get another bartender soon, because the woman who brought me my ginger ale has just gotten her Ph.D. in aerospace engineering, and she is about to join the faculty.

On most evenings, the pub is the kind of place where janitors and engineering professors can sit elbow to elbow and shoot the breeze. But one evening each month, when Bonsen sends out his invitations, the pub is transformed into a place where folks who are trying to decide whether to quit their jobs and start new high-tech companies can ask entrepreneurs what its like on the front lines.

Bonsen holds his networking events at the Muddy Charles Pub because the beers are cheap, the atmosphere is conducive to enthusiastic conversations, and the bar has been a second home for entrepreneurs ever since it began in the late 1970s. This is not a new thing for us, Joe Contrada tells me. Its always been a great place for people to hang out and talk about baseball, their love lives, or how they are going to make their next million. And its all very parallel. You always do your best stuff when youre comfortable and not under pressure to do something that has a very tiny vested interest. You have a little bit more brainstorming, a little bit more What if? kind of stuff.

Because Bonsens goal is to make entrepreneurs feel comfortable about what they are doing, he goes out of his way to ensure that the people he invites are truly interested in sharing their stories. All too often, Bonsen tells me, a person who does not understand the rules of entrepreneurial etiquette will try to profit from the experience of others without saying what they themselves are hoping to accomplish.

Somebody says, I have this great idea, Bonsen says. Well, what is it? I cant tell you. Well, all right. Hmm. When faced with this, I usually try to be charitable and say, Well, okay. No problem, no problem. Whats the general area that you are trying to address? And then they look at me kind of blank. Well, what do you mean? For example, is it industrial or agricultural? And they say, Well, I cant tell you; that would give it away.

You know, please.

Sometimes Im harsh, and Ill tell them, Dont waste my time. Other times, Im much kinder and I say, Listen, Id be happy to think about this further. Send me a one-page summary of what youre up to. And the fact is, thats a useful thing for anybody to do. But its especially good advice for somebody who I think has been smoking a little too much of the Jamaican stuff or has a natural supply, intracranial. Under these conditions I say, Well, put it on one pagenot very much, just the essentialsand send me an E-mail. Ninety-nine percent of the time they dont send me anything.