By Tom Imerito
As the global economy continues to evolve, scientific discovery, technological invention and commercial innovation are fast becoming the hallmarks of our socioeconomic well-being. Although, transforming science into technology can be fraught with intimidating doses of hard work and hard thinking, the hard truth of the matter is that bringing technology to the marketplace is just as essential to wringing out social benefits from science and technology as the discoveries and inventions were in the first place. However, in contrast to the advanced knowledge it takes to develop new products, it takes age-old personality traits such as vision, leadership, self-confidence and intestinal fortitude to bring bright ideas to the light of day. Those among us who do the things that bring the benefits of technology to people are that separate breed of individuals we call entrepreneurs.
What Makes an Entrepreneur Tick?
In response to innovation’s newfound importance, entrepreneurship has become a star of the first magnitude within academic, industrial and economic development circles these days. Industrial psychologist, Dr. Gary Williamson of Pittsburgh’s PSP Metrics, cites an array of desirable behaviors and personality traits sought by his company’s industrial clients in search of entrepreneurial job candidates.
“Companies that have asked us to measure entrepreneurial factors in management candidates want to know if they have passion,” Williamson said. “Are they true believers who can make a commitment to a project? They want to know if they have initiative. Can they get the ball rolling? Do they have risk tolerance? Do they have the ability to handle difficult circumstances, to bounce back from adversity? So resilience and tenacity would be part of the package. Most of our companies looking for entrepreneurial candidates want people who have high energy and stamina. They want people who are persuasive, who can sell their ideas. They want them to have self-confidence. People who are optimists. Who have
a can-do spirit,” he said
From the candidate’s perspective, creativity and independence are major motivational factors for people seeking jobs with entrepreneurial responsibilities. “We're finding out that entrepreneurs are motivated by the desire to create and grow something, as well as a desire for freedom and autonomy,” Williamson said.
The Difference Is in the Person
Paul Petrovich, CPA, deals with entrepreneurs every day in his position as Senior Technology and SBIR Consultant for the Small Business Develop-ment Center at the University of Pittsburgh’s Institute for Entrepreneurial Excellence. Petrovich says that entrepreneurs defy demographic profiling. “They come from every sector of society and every walk of life.” Commenting on the behavioral factors that differentiate entrepreneurs from the rest of the pack, Petrovich said, “The ones who become successful entrepreneurs are people who make things happen.” He also stressed the ability to imagine an idea at work before it has been realized. Comparing entrepreneurial vision to artistic imagination, Petrovich said, “An entrepreneur sees the vision, sees the market, sees the people using the product, understands the value proposition and how it benefits people and then does whatever it takes to make it happen.”
Professor Arthur A. Boni of Carnegie Mellon’s Tepper School of Business is a serial entrepreneur who recognizes his strength as a founder of businesses. Boni, who began his career as a professor of engineering at Yale, went on to establish four companies, returning to Pittsburgh in 1996 to establish the University of Pittsburgh’s Office of Technology Management. Today, Boni is CMU’s John R. Thorne Chair of Entrepreneurship and serves as Director of the Tepper School’s Donald H. Jones Center for Entrepreneurship.
Professor Boni discovered his penchant for starting businesses during the 1970s and 1980s, while working for Science Applications International Corporation (SAIC, where as part of the senior leadership team he contributed to growing the company from $5 million to $700 million in sales over a period of a decade. “I learned how to be an entrepreneur there.” Boni said. “I found that I was really good at early stage development. I liked starting things up, finding opportunities and building teams. By now, I’m addicted to entrepreneurship,” he said with a laugh.
Professor Boni breaks entrepreneurship down into three essential components: opportunity, resources and teambuilding. “An entrepreneur identifies an opportunity, finds the necessary resources to exploit it and puts together the team required to do it,” he said. “The entrepreneur’s job is to get it done. Some people are great at getting things started and others are great at taking it forward, but they're still entrepreneurs, because there's a level of risk involved at each level as a company evolves. The risk may be a technical risk, a market risk or a risk of execution, which is the team. If you look at where the failures occur, the team is the biggest failure mode. I would say that 50 to 70 percent of failures occur as a result of team malfunction.”
One of Pittsburgh’s legendary successful teams is comprised of Glen Meakem and David Becker, former leaders of Pittsburgh’s FreeMarkets, now known as Ariba, and founders of Meakem Becker Venture Capital. Meakem and Becker met in 1989 when they were first-year students at Harvard Business School. One reason they hit it off at Harvard was that each had been an officer in the United States Army Reserve. Now, years later, they have fought their way down the entrepreneurial path together more than once. In the mid 1990s, while working in a series of high-level consulting and management jobs, Meakem came upon the idea of the reverse, real time, online auction, for industrial purchasing. The idea evolved into the phenomenally successful dot.com prodigy, FreeMarkets, where Meakem, Becker and their partners learned how to build a large company and become wealthy at an early age.
Although today the idea of real-time, global, reverse auctions hardly provokes an extra blink of an eye, in 1995, when Meakem and his co-founder, Sam Kinney, started FreeMarkets, the idea was mind-boggling. “People thought we were crazy because they didn't understand the Internet and they didn't understand the idea of on-line auctions. Even the people who began to understand hated the intense competition we were creating.” Meakem said.
Not that success depended on waiting for the business world to catch on to the Internet. In the summer of 1996, Meakem recruited his friend, Dave Becker, to FreeMarkets and to Pittsburgh to help run the company. Challenges included continuing to develop the company’s software, improving customer service and other business operations, building a sales force and getting the revenue model right. By the winter of 1997 the company found itself almost out of cash because it was charging sellers for the software and services, rather than buyers, who were the chief beneficiaries of the on-line sourcing process, including reverse auctions. In response to the persistent cash problem and customer feedback, FreeMarkets began charging buyers instead of sellers, and the company’s sales skyrocketed from $16K in 1995, to $182 million in 2002.
Success wasn’t easy. Both Meakem and Becker tell of leaving high-paying corporate jobs for 16-hour days, dipping into precious savings, borrowing from family and friends, moving to where the business was, selling houses and renting apartments and working without paychecks for periods of time.
Today, in what Dave Becker terms “a logical extension of skill sets acquired during their previous experience,” the pair leverages both their wealth and their entrepreneurial savvy to fund early stage start-up companies very much like FreeMarkets was a decade ago. Although the differences between founding a revolutionary Web company for which no previous model existed and starting a venture capital firm for which operational models abound, Meakem and Becker take their own hard-won advice by offering exceptional value to an underserved market throughout the Eastern and Midwestern United States. “The problem with venture capital today is that the venture firms are too large,” Meakem said. “The people in them are great, but they’re not entrepreneurs. We are finding that as venture capitalists, we are very attractive to entrepreneurs, because we have been, and continue to be, entrepreneurs.”
Meakem and Becker look at entrepreneurship from both the macro and micro-economic views. “Entrepreneurship is key because people who pursue their own interests in trying to create a new company and create wealth also create a lot of benefits for a lot of people and society in general,” Meakem said. “Twenty years ago, when I graduated from college, I wanted a career in business, but I didn't want to go out and work for somebody. Because I needed to get training and knowledge, I worked in a series of good jobs, but my plan was to start and run my own business as soon as I found a big enough idea. If you have the right skills and find that great idea, one way to create a lot of personal wealth, and have a positive impact on society, is to successfully start and build a business.”
Dave Becker, whom Meakem credits as the critical intellectual partner in their mutual success, augmented his co-founder’s comment. “… And control your own destiny,” he added. “Working for a large company, you don't necessarily have control of your own destiny. The only way to do that is to take control and form your own company.”
Today, as venture capitalists assessing businesses for early stage funding, Meakem and Becker employ a set of eight criteria, most of which center on the behavioral traits of entrepreneurs. They are:
1) Compelling Idea – The product must create compelling value for businesses or people.
2) Big End Market – If a great idea only benefits a small group, it can’t become a big, valuable business.
3) Very Strong Team – A mediocre group of people will screw up even the best idea. But a great group of people can take a good idea and make it into a great business.
4) Initiative, Energy, Tenacity – Meakem and Becker want to see entrepreneurs who can get off the ground under their own power. People who are going to be successful entrepreneurs find a way to make things happen. They fight through the obstacles. They don't complain about them.
5) Sound Economics – You must be able to price the product or service so you can make money on it. If you can't make a margin, you can't be in business.
6) Available Market Space – The competitive environment has to be receptive to a new product or service. It would make no sense to launch a company that made new word processing software today, although you might have gotten rich with one 30 years ago.
7) Deal Valuation and Terms – The deal has to be set up so that it makes sense for the investors, founders and the company.
8) Team Play – Everybody on the team has to be on the same sheet of music in terms of the business strategy and objectives.
Meakem and Becker like to stress one final thing. For successful entrepreneurs, the fun and rewards are in the journey, in the adventure. The partners encourage anyone with creativity, energy and drive to find and seize an entrepreneurial opportunity.
Making It Happen, Here and Now
An exemplary illustration of entrepreneurship working at its best may be found in a 5-year-old Pittsburgh company named Apangea Learning. The company provides Web-based tutoring services for students in grades 5-12 for the astonishingly low cost of $50 per student per year.
Company Co-Founders, Louis Piconi and Stephan Mueller, based their company not on a product, but on a social need. The need was a suspected lack of access to tutoring services among many school-age students. Initial research proved their suspicion to be true. “When we looked at the U.S tutoring market, we found that only about 20 percent of the kids who really need tutoring ever get it. Pricing kept the other 80 percent from gaining access,” Piconi said.
With their original thinking, reinforced by background research, they began to analyze the problem and search for a solution. “We had this idea, but we didn't want to do 10 years’ worth of research before acting on it,” Piconi said. “We found one article about a U.S. Air Force intelligent tutoring program. It took a lot of digging to find out who owned what and where it was.”
What they found was a rudimentary intelligent tutoring software program and about $13 million worth of government research that had been developed by the U.S. Air Force and that was available for licensing. The intellectual property includes math, writing and science modules. But that discovery only meant the beginning of their work. “The software, as licensed, was not nearly good enough to sell,” Piconi said. “The tutorial process and the feedback mechanism were good. But the software was not good at communicating with kids. It didn't have a flexible response mechanism that allowed student-differentiated instruction to take place. We've taken the basic platform and added several levels of communication and intervention on top of it,” Piconi said.
Apangea Learning tutorials work within a user-friendly, real-time computer environment in which students receive instruction and practice for math problems with computer help as needed in response to the student’s answers. When the student answers incorrectly, the software analyzes the nature of the learning problem and selects the most appropriate instructional path. It then invokes an animated character, called an avatar, to offer vocal assistance. In the event the student becomes hopelessly mired in the problem, the software alerts a live Apangea Learning tutor, who intervenes by keyboard and VoIP to help the student understand how to solve the problem.
Today, the Apangea Learning Web-based tutoring experience is highly engaging, if not astonishing. However, just a couple of years ago it was all but impossible. “In 2002, when we founded Apangea, nobody was doing this, and no one was interested in funding an education technology company,” Piconi said. “So we had to go out and prove that it could work.”
In order to prove the validity of their idea, the founding partners started a tutoring program in Pittsburgh, using the Air Force program as they had purchased it. After 18 paycheck-free months, they had enough data to begin re-configuring the original software to meet the needs of school students. “We got foundations involved. We began to get investors involved. And we began to take everything we had learned in the tutoring sessions, and we began to rebuild the software. It speaks eight languages. Students get to choose among eight avatars,” Piconi said with obvious pride.
“Future versions will have the ability to assess when a student is having a problem with a concept, as opposed to an operation or method. In addition, we will be adding a performance incentive system, so kids will get points for successful completion of a lesson that can be redeemed for rewards.”
Commenting on the essential ingredients of entrepreneurship, Piconi said: “To be an entrepreneur, you have to be willing to sacrifice pretty substantially. God bless my wife. She waited until month 18 to ask, ‘Do you think you're ever going to get paid?’”
Summarizing the company’s efforts and successes to date, Piconi said, “Five years ago, nobody had done what we were doing before, so when we told people we were mixing intelligent tutoring with human beings, we did not receive a lot of support. Neither schools nor parents had the resources to pay for tutoring for their kids, but both had really good reasons to want to do it. So we put together an intelligent tutoring system with human features, and now we can really reshape the economics of the situation.”
Tom Imerito is president of Science Communications, a Pittsburgh technology communications consultancy. He can be reached at 412-833-4932 or firstname.lastname@example.org.
To learn more about Science Communications, please visit www.science-communications.com.