“If you have the right folks in the right position, you can overcome most any obstacle so long as your business plan is sound.  Most of the big problems are the result of either having the wrong folks or having them in the wrong spot.  My biggest mistakes were not letting the wrong folks go soon enough.”  Gregg Freishtat, Serial Entrepreneur, Founder of four companies and Current CEO & Chairman of Vertical Acuity

The Rich Niche Group blog interviews and enables you to hear directly from successful entrepreneurs and product managers about the steps they took to grow their businesses/products and how they were able to create, penetrate, and/or dominate their niche.  This week we interview Gregg Freishtat, the founder of four different start-ups and board member and advisor to several venture capitalist and venture-backed companies.

Why Selected:  Gregg is a four-time entrepreneur and has successfully sold three software companies over the past 10 years – Telet Communications sold to PGI in 1996, VerticalOne sold to S1 in 1999 and Proficient Systems – sold to LPSN in 2006. Gregg serves on many private company and philanthropic boards including: SONE; MarketWorks; Relevant Knowledge; Outweb; Proficient Systems; VerticalOne; Telet Communications; JDRF; and the Jewish Federation.

I had the pleasure of working with Gregg back in the late 1990’s and have always been impressed with his ability to grasp the power of new technologies, the impact they can have on the business world, and his ability to build a business around that technology.  Just as important, Gregg makes those around him better at what they do and always makes working together fun and enjoyable.

In the following interview, Gregg takes us through how he was able to build off the success of each of his start-ups and what he learned along the way.  During the interview, Gregg points out what he believes other entrepreneurs can do to help position themselves and their companies for success.  The key points you’ll take away include:

1. Maintain the flexibility to adjust (morph) your business based on customer/prospect needs. 
2. When evangelizing your business remember, “Big vision for investors; Simple and safe for customers.
3. One of the biggest keys to success and potential obstacle are: People, people, people!
4. Establish your culture early and don’t do business with or for people you don’t like. 

  

You are now on your 4th start-up, how has each of them differed from one another?

Vertical Acuity is my fourth start up as a founder/CEO.  The business model and vision for each company was based upon the learning’s of the past.  In reality, all the companies are simply an evolution of a single business vision which inevitably gets morphed once we start working with customers and succumb to the realities of producing and growing revenues.  Our first company – Telet Communications – was focused on connecting and integrating voice, email, and fax using IP.

Next, Vertical One expanded the vision of collecting “stuff” from various and disparate back end systems – connected to each other for the first time using the Internet – by aggregating personal information (credit card, bank, brokerage, sky miles, etc).  At Vertical One we began to look at how analytics could be used to better understand the account data we were aggregating and started exploring new applications that could be built by analyzing large scale and real time data on the Internet.  After the sale of Vertical One, we started Proficient Systems to continue the notion of “Real Time Data Mining”.

After the sale of Proficient, we started Vertical Acuity to explore and expand upon this vision by analyzing data (this time content) from many related sites to determine what content was/is most likely to be consumed.  We are now working on re-inventing how content is discovered and delivered.  So…all the companies have been contributing to what we are doing today.  We gather content from many back end systems, analyze what content is in demand and by whom, and deliver it.

 

 

What drove you to start your first company and what made you believe you could evangelize the concept to end users, investors and partners? 

If I had thought about having to evangelize to end users, investors and partners, I never would have started my first company.  I just thought it was obvious that the internet was connecting systems that had never talked to each other and that with a little software you could make life easier by getting stuff in one place that used to require you to go to three or four places.  I had no idea what I was getting into – I was 24.  Practicing law seemed to always be looking into the past to figure out “who struck John” and then try to make it right.  Building software seemed like “let’s make something up and push some 0’s and 1’s around until it changes how stuff works.”  Software seemed like more fun – and it is.

 

 

When evangelizing the business, I have found many entrepreneurs have the same pitch for each audience.  Can you share your experience and the need to different pitches for each target audience (investors, partners, end-users)?

That’s a good question.   Early on, I would evangelize the vision to whoever would listen.  Over time, I have learned that different constituents require different messages.   Investors need to see big opportunities, radical growth, and revolutionary change.  These things terrify most established corporate customers.  Businesses are just large collections of people doing the same thing in close proximity.  All decisions are personal – folks don’t want to risk losing their job on a “radical, revolutionary” product.  They would rather go with IBM because they won’t lose their job for doing so.  Big vision for investors; Simple and safe for customers.  None of our companies sold directly to end users so I can’t comment on that but I am sure that’s tough as well.

 

 

What were the biggest obstacles you ran into at the different stages of your companies’ growth and how did you overcome them? 

People.   People.  People.  If you have the right folks in the right position, you can overcome most any obstacle so long as your business plan is sound.  Most of the big problems are the result of either having the wrong folks or having them in the wrong spot.  My biggest mistakes were not letting the wrong folks go soon enough.

 

 

You serve on several start-ups and small business’ boards, what do you see as the most common mistake leaders of those companies are making?

Back to People.  And this odd view of dilution.  Many small companies are scared to hire folks that have the experience required to grow because they are intimidated or fearful that they will lose “control” or their role.  Roles change and management and the board’s biggest challenge in managing the change and growth required to go from a small company to a bigger one (the goal for venture backed companies) is to have proven, experienced leadership in the key roles.    The odd view of dilution comes from folks not understanding how the VC world really works and what to focus on.  If you raise $3M – the main issue is not how dilutive it is but rather how much value you can create with the cash.  Until you know both – you don’t know if it’s dilutive or accretive.

 

 

Describe how you suggest leaders of start-ups and small businesses interact and utilize their Board of Directors?  How often should executive management be interacting with board members?

Board Members serve different roles at different stages of a company’s development.  Early on it is helpful to get independent credible board members to both help guide the company and to provide credibility for potential investors.  Having an industry leading board member show that he/she is willing to put their name behind an entrepreneurs venture and, in turn, this helps attract outside capital and provides a balance to the board once investors take a seat. 

As a company develops it is key to have board members with the experience and expertise to govern.   Having great leadership and advice on audit and compensation committees helps ensure good decision making and keeps a balance between management and investors perspectives.  Early on meetings should be every month or two and as the company matures once a quarter.  The frequency of meetings should be driven by how productive they are and how much is required by the outside investors.

 

 

 

In general, what piece of advice would you give to someone who is either starting a new company or getting ready to launch a new product which they are hoping to either create and/or penetrate a niche?

Find the right people and partners.  If you don’t love working at your own start up – it’s not for you.  There is a lot of risk but even more opportunity – for enjoyment, growth, and building something of great value.  Establish your culture early and don’t do business with or for people you don’t like.  This includes partners, employees, investors, and even customers.  Everyone involved should pass the three C’s test:  Character, Competency, and Charisma.   You have pass each C to get to the next and must pass the first two C’s or you are out.