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MLN Consulting

Best Supporting ActorA non-Founder’s Career in Tech Startups

Mike NagyJuly 24, 2012

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MLN CONSULTING, INCInvent… Develop… Deploy!

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Like the world of music, the world of startups has many solid players, but few superstars.

This presentation gives the perspective of a non-founder, non-CEO who is having a great career in startups.

A “Series of Gigs”?


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Whether you have a career or a series of gigs depends on whether you’re growing...

Big or Small?


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BigCo Startup

Long Term Average $$ ++ +

Potential for Huge $$ ― +

Awareness of the Big Picture ― +

Significance of My Team’s Work + +

Significance of My Contribution ― +

Opportunities in “Big Tech” + ―

Getting Credit ― +

Dodging Blame + ―

Fewer Unproductive Politics ― +

Job Security ― ―

Emotional Intensity ― +

Get the PhD?

• Are they always smarter / better than MS? no

• On average, you make more $$ with MS

• In BigCo’s / Institutions:

– Lab Rat or Bureaucrat

– better payscale, but some prejudice

• In Startups, a very handy credential

– investors / grantors require it (“IBM syndrome”)

– name of school / advisor very important

– if you don’t have one, plan on hiring one


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Technical or Management?

• Engineers are smarter than managers, and yet we’re not

• Do not ignore the “other side”• Management newbie pitfalls: (1) tyrant; (2) one

of the boys; (3) micromanager; (4) clueless manager


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"Technology is dominated by two types of people: those who understand what they do not manage, and those who manage what they do not understand."

—Archibald Putt, Putt’s Law

Where Will You Live?

• US Startup Life is very Geographical

• Two “1st tier” hubs for tech startups: Silicon Valley and BOS

• Several 2nd tier hubs: MSP for medical, SEA / AUS for software, etc

• Investors will pressure you to move

– Correct answer is “yes”

– But only if you mean it

• Hubs have:

– investors

– good startup culture

– resources and jobs

– high cost of living

• You can have a great startup outside the big hubs, but it’s harder


7http://www.geekwire.com/2012/top-25-startup-ecosystems-world/

Who Are the Supporting Actors?

• We are all leaders in some contexts and followers in others• Know when to lead and when to stay out of other leaders’ way• Other key roles:

– CTO– CFO or VP Finance– VP Engr– COO – Full Time Technical Staff– Full Time Operations Staff– Full Time Sales & Marketing– Part Timers and Contractors– Legal Counsel (IP and Corporate)– Advisors (tech and business)


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Growing Pains

• Different company phases have different rockstars• Investors often bring in their own rockstars• Job completion is often “rewarded” with dismissal• Past performance is rarely rewarded! Stay relevant or plan

your exit


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How To Stay Relevant?

• Understand that all roles in development have a beginning, a middle, and an END

• Know when it’s time to change roles

– and when it’s time to leave the stage

• Be a Teacher, not a Hoarder of skills and knowledge


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PRODUCT Focus

• Companies exist to make MONEY

• Don’t fall in love with technology

• When you have a “working” prototype, you are not 90% done – you are about 5% done!

• Write a product spec early

• Always ask “so what?” and “who cares?”


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My CustomersMy Customers

My CustomersMy Customers

My Customers’ CustomersMy Customers’ Customers

Know Your Value Proposition

• EVERYBODY IN THE CHAIN HAS TO MAKE REAL MONEY

• Know the val prop early

• Have detailed, researched valprop by time of 1st funding

• This includes knowledge of competitive landscape

• EVERYONE in your company needs at least basic understanding of this


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My Company

My Customers

My Customers’ Customers

My Suppliers

My Suppliers’ SuppliersMy Customers’ CustomersMy Suppliers’ Suppliers

What Kind of Startup?

• Hardware, software, services, or combination? • Brick & Mortar or Virtual?• US or Global?• Know your sector BEFORE you dive in too deep


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Have a Plan

• Clearly defined value-inflection milestones• Technical milestones are means, not ends• Possible exit points• How much will you have to raise and when?MLN CONSULTING, INCInvent… Develop… Deploy!

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$

$0.2M $2.5M $6M

Full Spec Protos

Proof of Concept 1st Sales

Profitability

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q 15

3Q15

4Q15

Exit Points:

Cash Needs:

$14M

$$ $$$

Know Your Money!

• Know your present & future Money– Who owns the money?– Who manages the money?– Why are they giving it to you?

• Grants & Loans– Federal: SBIR, STTR, etc want to see technologies used

& create jobs– State: GRA, University, etc want to create jobs

• Equity– Venture Capital wants big returns & big buzz– Angel Groups want returns & local involvement– Individuals variety of reasons, often philanthropic


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If I were a 25-year-old grad student, I’d:

• Not worry so much about salary (yet)

• See the world – places

– jobs / roles / market sectors

– different kinds of companies

• Build a network– mentors (good and bad)

– contacts

• Then decide what I want to do when I grow up


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...and if I wanted to do a GA startup, I’d:

1. Research my idea (tech AND market) & file provisional patents

2. Talk to the Venture Catalyst advisors at ATDC www.atdc.org

3. Get a GRA phase 1 grant for $50k to make a proof-of-concept prototype www.gra.org

4. Use the proto to get Angel or VC fundinga. and a matching GRA phase 2 grant ($100k + $100k)

b. find Angels on www.gust.com and www.angelcapitalassociation.org

5. Check out ATDC and other local incubators (ISC) www.intelsys.com

6. Use my biz plan to tell me what other kind of funding I need: big VC, small Angel , SBIR, etc

7. When ready, get a GRA phase 3 low interest loan for $250k


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http://www.atdc.org/

http://www.gra.org/

http://www.gust.com/

Family vs Work

• A Zero-Sum Game

• Talk a lot

• Be where you are

• Organize / plan / warn

• Marry a steady salary if you can

• And if all else fails: get divorced before you get rich


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Ethics

• Engineering IS an ethical act

• Do not wait for the moment of ethical crisis to start thinking about ethics

• Avoid “I deserve it” syndrome

• Money changes people

• Don’t get desperate


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Summary

• Engineering is a big place: there are all kinds of careers.

• You can have a great career in startups without being a founder or CEO.

• Know who you are. Know what you want. Go get it! Repeat...


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Find me at:

Michael NagyMLN Consulting, Inc.

(770) 634 [email protected]

http://www.linkedin.com/in/mlnconsulting


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mailto:[email protected]

http://www.linkedin.com/in/mlnconsulting

Backup Slides

Following are slides that were cut from the main presentation, but may be of interest...


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The Biggest Part Of Your Life

• “Job” = Selling hours of your life to someone else

• You will spend more waking hours doing your job than you will any other activity in life

• Being an engineer is very different from being an engineering student

• The good news: If you don’t like it, it’s a great springboard into other areas


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The Risk Spectrum

Mortgage your house

Invest Years of Life

Rack Up Debt


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Gov or School Institution

Tenure

Stay Put

Big Company / Institution

Startup

• Startups have a wide risk spectrum – even though most people only think of the extreme end

• You can move around on the spectrum

A Case (Western) Study


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Nick’s CommentsOn PhD: Upside: Great marketing tool. People assume you are technically

capable. Downside: Costs you 5-7 of your most energetic years

On Living in SFO: Upside: Very satisfying to live in a culture where everyone is fighting to change the world. Downside: Your community tends to be your industry, not your neighbors.

On Being a Founder: Risky, likely to fail... but having a shot at doing something great is worth it. You will get autonomy, fast pace, much responsibility, work with motivated people.

Mike Nagy• MSEE Case Western ’96

• took the MS and ran• engr lead, now consultant

• based in CLE and ATL

Nick Mourlas• MSEE Case Western ‘96• PhDEE Stanford• founder, CEO• based in SFO

A Note on Advisors

• Surround yourself with people who are smarter than you• Listen critically: even bad advice can be useful• Everyone speaks from their experience: some do not realize

there are other ways than theirs• Know parasites from good advisors


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Hires And Contractors

• Full time hires– Cost more overall

– Burn money when they’re idle

– Care more

• Contractors– don’t charge you when there’s no work to do

– are sometimes less available

– bring infrastructure, network, experience

• Only hire a FT when it’s PAINFUL not to

• In all cases: DEFINE THE JOB well, and stay connected


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Who Makes the Best Founder?

• Business or technical?

– Should be a business person, but with good understanding of the tech

– Tech people tend fall in love with technology

• Advice to young founders / CEOs:

– When you can afford one, get a trusted greyhair to advise you

– Investors like young founders because they’re “coachable”, but sometimes they take advantage of you; get 3rd party data on what a fair cut is

– Always understand your legal obligations, from YOUR OWN attorney!

• Leaving the Stage

– Investors often bring in their own management team

– Make sure your exit terms are covered in writing before accepting money

– Make sure you are emotionally ready for “the Talk”


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Pitching• Know your audience – research the individuals

• Cover the “Standard” bases

• Tell your company’s story from founding (past) to future (profitability)

• Be able to defend EVERYTHING you say– backup slides, spreadsheets, etc

– 3rd party data

– backup experts present or on phone

• Tailor your pitch– to the audience, time limit

– to the purpose (know what you want when you walk out of the meeting)

• Never be surprised!– anticipate and “game out” all possible questions – be ready with answers

– don’t contradict one another: be careful whom you bring and coach them

• Listen to them: don’t text; don’t interrupt; answer questions directly

• Address objections without being defensiveMLN CONSULTING, INCInvent… Develop… Deploy!

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Disclaimer

Observations are based on my personal, anecdotal, unscientific experience.

Some names and details have been changed to protect the guilty.


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