In part two of this series I wrote about how I believe that founding CEOs who are deep domain experts are the best at getting to product-market fit in a capital efficient way. I profiled ServiceChannel’s CEO’s 30+ year history solving problems in the contractor and facility management space.
In this post I will profile a few additional company examples that emphasize the strengths of a domain expert founder.
Wayne Lam has been in the storage management software industry for 28 years. He graduated from Copper Union in 1987. While in college, he became the co-founder and director of engineering for Advanced Graphic Applications, a startup building document imaging applications. The biggest challenge in implementing any document imaging application is how to deal with the large amounts of storage required to handle the large image files these applications have to store. So, out of necessity, Wayne used optical disk storage because it was a safer and less expensive way to store and archive these images.
Recognizing an opportunity, Wayne started Applied Programming Technologies (APT) in 1989 to build large storage systems utilizing optical disk storage. While efficient, these systems were very difficult to deploy. Wayne would often spend all night at customer sites making these systems work.
I met Wayne in 1992, when I joined APT as VP of Sales and Marketing and acting CFO. We sold APT to Cheyenne Software in 1993. Cheyenne developed software to backup networks and was great at selling complex technology through a reseller channel. Wayne and I held a variety of roles within the company – I was on the management side while Wayne focused on product development, deployment, and support, eventually we each became General Managers of different divisions of the company.
CA Technologies (formerly Computer Associates) acquired Cheyenne in the late 90’s. Wayne went on to serve as VP of R&D. He was laser focused on leveraging the skills he learned at Cheyenne to make CA’s enterprise software deployable and was put in charge of productization, packaging, and licensing of CA’s network management products. He knew first hand from his late nights in the data center the difficulty IT executives had deploying enterprise scale technology and made sure his design and documentation eliminated needless steps and confusion.
In 2000, Wayne co-founded Falconstor Software with ReiJane Huai. I was an angel investor in the seed round and an institutional investor through my fund at the time, Odeon Capital Partners. Wayne was responsible for product vision, deployment services, and customer support, training, and advocacy. Wayne became “the fixer,” and over 11 years, he spent a significant amount of his time managing the largest and most difficult deployments. He was on the front line of customer complaints and frustrations.
Wayne reminded me that:
“The lesson learned, over and over again, is that when you cater to too many specific feature requirements to the point that the added complexity compromises quality of the product, trouble always follows. It is simple math: more feature means less test for all features, given that QA resources are often a fixed constant. And for an Enterprise customer, a low quality product is less deployable, and NOT one that he/she will recommend to other customers, and the product is forever stuck deep in the Chasm.”
After 25 years of dealing with difficult enterprise storage deployments, Wayne decided to solve the problem once and for all and founded Cirrus Data Solutions in 2012. Cirrus developed enabling technology called the Transparent Datapath Intercept (TDI) to make the deployment of enterprise storage and caching systems as simple as plugging in a few cables – a huge advancement to the way enterprise storage is currently deployed!
Wayne is an engineer and by every measure a technical founder, although his brother Wei is the CTO. However the problem space identification and the enabling TDI technology came not from programming brilliance or a deep technical feat, but from the nuances learned from doing difficult enterprise deployments over a 28 year period.
_________________________________
Jeff Schuer was a high school English teacher for eight years. In his estimation, he graded over 15,000 English papers, painstakingly correcting grammar mistakes with red ink, only to watch students throw the paper out and make the same mistakes all over again. Realizing that by the time he handed the paper back, students had already shifted focus to the next assignment, Jeff started NoRedInk, a software service that teachers use to help students improve their grammar and become better writers.
I wasn’t in touch with Jeff when he was raising money, so I didn’t get the opportunity to invest, but I had the chance to advise him over a few meetings we had when he was just starting out. NoRedInk was built on Jeff’s experience as a teacher. He knew that students needed immediate feedback and a fun, interactive way to practice and get better. NoRedInk uses each student’s favorite celebrities, personal interests, and Facebook friends to generate grammar questions. The system adapts to each learner’s strengths/weaknesses, and it displays color-coded heat maps to help students and teachers track progress.
Jeff attributed his early traction to the following:
“I think it helped that I was solving my own problem. I had seen the same issues on students’ papers so many times, and I knew that feedback would be a lot more useful to them if it were instant and if they had the opportunity to practice working on specific skills right away. Most teachers have a deep appreciation for how central motivation is to achievement, so building a learning engine that utilized fun and personalized material was always a given. It was essential, though, to not only address students’ misconceptions, but to do so in a way that allowed them to play with language in structured ways, rather than measuring their skills through the limited lens of multiple choice assessments. I think teachers have adopted NoRedInk both because it helps them differentiate instruction and because their students respond to it”.
Jeff’s solution was a function of his teaching experience. In addition to the core tenants of the solution, Jeff also knew how teachers buy, what school districts will and won’t do, and how to drive a teacher referral loop to increase the product’s virility.
In comparison, I advise another EdTech company that is solving a similar, but perhaps even bigger problem. That founder’s education and professional background is in an unrelated space. While I believe he will be equally successful in the long run, this founder has to research or rely on learning though a serendipitous conversation or trial and error, key points that Jeff knew intuitively. And that uses up a lot of cycles that can best used elsewhere.
_____________________________________
However, just because you are a deep domain expert or a technical founder, doesn’t mean you are, or can grow to be, an execution CEO. That takes different skills.
I just returned from VCs on Skis, a 300 person event produced by the law firm Reitler, Kailas and Rosenblatt and Reitler Advisory,(where I conduct my startup coaching). The keynote speaker was Chris Barrow, CEO of EagleView Technologies. EagleView takes the time, and cost (and danger) out of the process of giving roofing estimates via a Saas service that builds 3d models from aerial photography. Imagine, no more climbing up ladders and walking across steep, slippery roofs with measuring tools to provide a cost estimate. And that is exactly the problem, the founder, a roofer, pinpointed to solve, when he founded the company. Chris was recruited to be CEO, shortly thereafter, when the founding team had problems executing. Under Chris’s leadership, the company grew organically, made a major acquisition and just agreed to be acquired by Verisk Technologies for $650 million. The company raised less than $7 million.
Ben Horowitz has written about this in many of his blog posts. But, in the beginning, the CEO’s chief role, in addition to making sure the company has enough cash, is to be the chief product guy, owning customer requirements. So for the race to product-market-fit, pre-scale, I think founders who are deep domain experts get there in the most financially efficient way.
So, what do you think? Do deep domain experts have an edge in getting to product-market-fit? In what sectors are deep domain experts less import as founders?