Experience teaches that problem recognition,
storytelling, and leadership are critically important.
Entrepreneurs are everywhere today—from Silicon Valley to incubators and tech hubs around
the world. While many startups are in
tech, others involve engineers who use
digital tools and 3-D printing to invent
new products or reinvent existing ones.
So, what should potential entrepreneurs consider before leaping? I don’t
have a definitive answer, but after 25
years of funding startups, more than
40 successful investments, and eight
initial public offerings, I see some patterns that work.
Pick the right problem. Engineers
typically love technology. But venture
capitalists crave hard problems in
markets that are big enough to turn a
technical solution into a large, profitable company.
How do you recognize the right
problem? You may encounter it through
work or from credible experts. But to
really understand it, you need to talk
with people who have the problem and
have tried to solve it.
Some problems are unrecognized
until solved. In 2009, for example,
Venrock backed a lawyer who realized
that small e-commerce businesses
faced the same cybersecurity threats
as Amazon and Google, but lacked their
powerful cybersecurity infrastructure.
Today, that firm, CloudFlare, protects
more than one million websites.
Gather a team. CloudFlare’s founder
had no technical expertise. So he partnered with a technologist and a marketer while he handled operations and
strategy. The founders of Intel, Apple,
Oracle, Google—all the great tech companies—were part of similar teams.
Tell a story. To get the attention
of VCs, tell a story. Stories are great
teaching tools, and people like them.
Your story does not have to explain
everything, because no VC will give
you millions of dollars at a first meeting. The goal of your story is to spark
enough interest to get a second, more
in-depth meeting. Expect several
meetings—and increasingly difficult
questions—before a VC funds your
Your first presentation should last
30 minutes, with no more than 15 to 18
slides. It should explain the problem,
the market, and a light version of your
solution. Include estimates of revenues
and expenses. Explain why your team
can solve this problem better than
You will probably have to teach yourself to tell a compelling story: how to
set up a problem, explain possible solutions, and provide information without
overwhelming listeners. Study well-written newspapers and magazines like
The Economist to see how they take you
deeper as the story progresses. You’ll
TECH BUZZ || ENGINEERING ENTERPRISE BY RAY A. ROTHROCK
know you’re getting it right when you
can describe the essence of your work
in 50 words or less to your parents,
spouse, or friends.
Learn to lead. Companies succeed
when founders lead. This takes many
skills, but let me focus on two.
First, leaders must often make decisions with incomplete information. Fortunately, engineers know how to make,
solve, and test assumptions. Learn to
focus on what you know, admit what
you don’t, and cut off analysis after a
reasonable amount of time. Time is a
startup’s enemy. Even a risky decision
is less risky than giving competitors
Second, leaders focus on what I call
the long ball, their vision of success.
This is harder than it sounds. Successful startups average nine years to
reach an initial public offering. Your
team must focus on the long ball and
muster the confidence and resources to
achieve its goals, even when faced with
The best entrepreneurs I’ve known
do these things well. But every engineer should learn to recognize problems, tell stories, and make decisions
with imperfect information. The way
to build these skills—and prepare for
leadership—is by doing them now. ME
RAY A. ROTHROCK is the chief executive officer
at RedSeal, Inc., in Sunnyvale, Calif., and a former
managing director of Venrock, Inc.