Kocialski - Startup from the ground up : practical insights for entrepreneurs : how to go from an idea to a new business

I have been involved in more than twenty-four start-ups over the past 15 years. All of these start-ups have been acquired for almost $20 billion. In addition to founding several companies, I have held positions such as COO for start-ups and have served on the advisory board for established companies such as Cypress Semiconductor. I am involved in numerous start-up organizations and groups. I meet with many entrepreneurs about their start-ups and have seen what works and what doesnt. More importantly, the start-up community is ever changing and what worked a few years ago might not work today. The principles of starting a new business stay the same, but the nuances change. Entrepreneurs need to keep in touch not only with their customers and the markets but with the start-up ecosystem.

I did not plan to become a tech entrepreneur, but just like the products involved in all start-ups, my career evolved. I went to graduate school at the University of Virginia. I received two masters degrees in engineering. After several years of teaching computer science to undergraduates and living an academic life, I wanted a more practical application of my field in industry. Upon graduation, my goal was executive engineering management. There was a visiting professor from IBM at the university and he convinced me that IBM would be an excellent place to start my career. In my years at IBM, I worked in three locations developing products from financial software to multi-processor computer systems to components for computer graphics and digital video.

At IBM, I gained expertise in software and hardware development, technical marketing, strategic planning, developing partnerships, conducting business globally before it was trendy, and managing engineering groups. Still, two distinct moments at IBM made it clear that IBM was not the company for me. The first was when I worked for an executive R&D manager in the midst of accelerating his corporate career through extreme political maneuverings. I knew I was more of a performance and results oriented person and far less of an office politician. A short time later, the second moment occurred when my product line was re-organized under a new division. As the person responsible for strategic product planning and representing my product line with the new division, it was clear that the new division had no interest in it. My group was unwanted and placed on hold until its fate could be determined. At that point, the entrepreneurial path became a necessity. It was time to move on.

I convinced eight other IBMers to join me in a new venture. These were the key architect, engineers, and programmers. The key architect and I spent six months contacting companies and flying around the country looking for funding. The team knew digital video, a hot commodity at the beginning of MPEG technology. I contacted the President of Micron Computer and one day received a phone call from him. He told me that although Micron wasnt interested, he had mentioned our proposals to the president of another tech company, and they were interested. I had eliminated this company as a possibility because they were outside the U.S. Here was the chance occurrence that got us the deal with Matrox Electronics. It was my next start-up that made me realize how lucky I had gotten with this oneI had put together the right team with management, marketing and engineering experience in the advent of an emerging technology. I was not so lucky with the next start-up.

Eventually the startup settled me back into the role of an employee, as General Manager for an established corporationa routine, mundane, 9-5 position. I missed the challenge of creating something from nothing. So once again I headed off and co-founded another venture. This time it was a fabless semiconductor company producing low-cost optical networking components. A strategic partnership with FORE Systems, a recent technology IPO and a darling of Wall Street launched this start-up. This start-up only lasted 18 months. It was an enlightening failure. The demise was caused by Gigabit Ethernet; the SONET optical market stalled as everyone waited to see how Gigabit Ethernet would fare in the marketplace. Customers put their orders on hold and investors lost interest. Unfortunately, we had waited to raise more funding until we reached a critical milestone. By then, Gigabit Ethernet was hyped as the one size fits all technology and our start-up ran out of money. Afterwards I realized what we did right as a matter of chance and luck, and what went wrong due to inexperience and purposeful choices. I vowed not to make the same mistakes again. One of my big lessons was to never fight the trend. Instead, embrace the trend and find the opportunity within it.

Afterwards I spent a brief stint as a consultant as a subject matter expert in optical technologies. As the networking and telecom revolution heated up again, the promise of Gigabit Ethernet becoming the end all technology faded and optical networking was hot again. I founded a bootstrapped software company offering networking software to the same customers as the previous start-up. It was a fun ride, lasting seven years until the telecom bubble burst, and the industry plunged into the so-called telecom depression.

The sad truth is there are thousands of start-ups out there and most entrepreneurs create a company that is just a bigger version of the lemonade stand. Heres an illustration of the simple mistakes made over and over again by start-ups. This companys name is Lemon Squeeze, a corner lemonade stand. The budding entrepreneurs have a wonderful idea: provide passersby with lemonade on street corners. Why this idea? Because the entrepreneurs saw someone else do it, and thought I can do that too and Ill have an easier time because we have a 40 year old lemon tree in the backyard with too many lemons. A lemonade stand is built quickly with whatever building materials are readily available. But thats not enough; they need more supplies. Simple! The budding entrepreneurs ask their parents for the funds. Once everything is in place, they add a cardboard business sign with the offering, move onto a street corner, and wait for customers. Its an exciting moment when the first customer arrives. This is proof of demand! The lemonade is given away free to anyone who asks. If it was located on a busy street corner on a hot day, keeping up with requests would be difficult. The workers would become overwhelmed making and serving the drinks. The solution is to find more friends to help, but demand would still outstrip production. They are running out of supplies. Now what? Ask Mom and Dad for more funding! But oh nothey are not willing to pay anymore for an operation thats not self-sufficient. So the entrepreneurs decide to sell lemonade sips for a quarter because it seems like a nice amount. The price is set on a whim. This is great! Paying customers are even better proof of demand, so they ask for more funding from their parents. The young entrepreneurs are making money, but it isnt enough to cover the cost of goods sold or operating expenses, not to mention paying back Mom and Dad. And Mom and Dad are still not willing to put any more into the operation. Eventually, the lemonade stand runs out of supplies and shuts down operation. The Lemon Squeeze was the brainchild of my first grade daughter.

This book is about making the entrepreneurial dream a reality. It shows an entrepreneur how to go from a product idea to launching a start-upand not one that is just a lemon stand. I have also been that dreamer. Each time I begin, I believe I can do it better because I have learned from my mistakes and know more about how to avoid the pitfalls.