1. What do you think it means to be an entrepreneur?
It means starting your own business. It means taking your own idea and running with it. It means you are in control of your own destiny. In the case of a small business like ours, it also means a huge amount of responsibilities. We had started a two-person company. That meant that we were the management; we were the engineers; we were the legal department, the advertising department, the personnel department, and the custodians.
2. What is something you didn't expect to happen when you stated out?
We had three significant challenges:
1. Poor market research: We had assumed that our target market would eagerly buy our product. We would be really happy making money by burning CDs with our software and getting paid for each copy. Our original target market (architects) was impressed and excited by our product, but they did not want to spend money on a tool they were not likely to use a large percentage of the time, and in a lot of cases, they did not want to invest the extra effort to use the tool. Perhaps this could have been overcome with better marketing of our product, but we did not have the skills to design that marketing nor the funds to hire an outside firm to do it.
2. Economic shift: We had started our company in 2000, in the midst of the stock market downturn due to the dot-com bubble burst. Because we were a self-funded company (no outside investors), we had to pay for our business and personal (family) expenses out of our own funds. This meant dipping into our own stock market investments, and selling stock at a loss due to the state of the market. We had three very lean years where we were developing our products, but did not yet have any significant revenue from sales.
3. Paradigm shift: In addition to our problematic customer base, we had built our software to take advantage of a very cost-effective source of commercial aerial photography that was available on the Internet. The high-quality archive of aerial photos was being collected, processed, and made available by a division of Kodak. It made high-quality, low-cost aerial photos readily available to consumers, which worked very conveniently with our software (which needed a source of aerial photography), and which was good for average users because they could get good photos without needing to know a lot about aerial photography (which can otherwise be pretty technical for newcomers).
Those challenges eventually caused us to modify our original business plan and create a new one: Originally we were going to create and sell licenses to a software product. We saw that our potential customers did not feel they were in a position to capitalize on using our tools, but we knew their potential. So we modified our software from and end-user tool to a high-volume production tool, and switched from licensing seats of software to providing a production service. This meant expanding and hiring workers to do the production using our software. Now we produce data and license the data to a variety of customers. The new business model has proven to be much more successful and profitable.
We spent about 2-3 years developing our original software package, 4 years refining it and selling it, and the most recent 8 years providing data production services. Internally we still are doing continuous software development to support our production environment, and to develop new capabilities that will result in new products.
3. What do you think would be important to learn in an entrepreneurship course?
I think it would be important to understand the trade-offs of entrepreneurship. These are some:
The likelihood of striking gold is small: It can sound like a glorious undertaking, and in some cases it is; but starting a rock and roll band or working to become a professional athlete are also forms of entrepreneurship, and the likelihood of achieving a spectacular level of success is small.
There are many levels of success: For many small businesses, the monetary return may simply be adequate. But for many, the satisfaction of building something from their own ingenuity is rewarding; and being their own boss is rewarding. These days, simply being employed can be rewarding, and having the ability to provide employment for others can also be rewarding.
It may not be what you expected: For me, the personal irony is that I left my former job because the R&D opportunities were dwindling. However, as a business owner, my R&D opportunities now are frequently (mostly) overtaken by other tasks important to running the company (like keeping the network running, and making sure the employees are happy). I often miss working for a larger company with lots of resources, a great support structure, and lots of smart people to talk to and learn from; and where I could focus almost all of my energy on technology development.
We consciously chose not to follow the "fail fast" dot-com model of entrepreneurship, where one gets investors, spends venture capital like crazy, works furiously, then either explodes in a glory of success, or implodes as a spectacular failure. We are fully self-funded, so we owe nobody. We also could not take advantage of the leverage that external funding can provide. However, our approach fit our lifestyle choice. We are entering our 16th year of business, and are profitable with zero debt, so we consider it a success.
Learning about how they had to change their business strategy was really cool. I find it fascinating that Precision Lightworks, which had a good idea and product, just had to adjust their approach to appeal to their market and be successful. I was most surprised to learn that they did not need investors.It seems that acquiring investors is just part of the norm when we hear about starting a business.
Great post, Matthew. It's very true -- the story of adaptation IS the story of entrepreneurship. Very nice interview!
ReplyDelete