“In my position, I have occasion to meet just about everyone in this field,” writes Jesse Berst, who literally served as the Internet’s first “Anchor Man” when he penned the daily “Anchor Desk” dispatches for Ziff-Davis each morning during the Net’s formative years. “How would I sum up Paladin Partners?” he asks. “Paladin Partners is the best. Period. Throw away your Palm. Don’t bother with your PIM. Paladin founder and managing partner, Janis Machala, is a human rolodex. Her strategic guidance is top-notch. Her connections are to the right people. They underpromise. They overdeliver.”
Berst’s opinion seems to be unanimous among Seattle’s technorati and business development community. A skilled management consultant, financial advisor, operational thinker and marketing communicator, Janis has helped foster such Northwest success stories as Captura, Chili!Soft, Capital Stream, Performant, LiveBid and AllRecipes.com. So it was a special privilege when Seattle24x7 got to spend a few minutes with Ms. Machala at this pivotal juncture — a point in time when we could ask Janis to reflect on the recent ebb cycles in the marketplace — and discern what she feels is the best advice for anyone running or growing a tech business today.
Seattle24x7: Janis, you began your career in software marketing before coming to the Northwest. Where did you get started?
Machala: My first foray into software was actually at Addison-Wesley where I ran marketing services. I was responsible for launching software products for them in the very early 80’s. At that time, we had a product called TrueBasic which was the commercial attempt by Kemeny and Kurtz (who invented the Basic programming language) and also TEX (pronounced “Tech”) by Donald Knuth. It was around the time of Pascal.
Seattle24x7: Were you taken with the idea of launching new software?
Machala: Absolutely. I was bitten by both the software and technology bugs. I moved on to run the Office Systems Group at Wang in the mid-eighties. That was in the days when product management was entire life-cycle management, from conceiving a product all the way through end of life. It was both product marketing as well as program management, meaning you interacted with developers, development managers and the field sales force. It was a much broader scope of what product management tends to look like today.
From there I got a call from a friend who had gone to this little company called Sun Microsystems. I went to work at Sun where my role there was industry marketing, working with vendors and the industry infrastructure around a specific vertical. In that case, it was a publishing vertical which, at the time, was about 18% of Sun’s business. We had P&L responsibility and it was a lot like running your own business. After Sun reorganized into what they called “planets,” I ended up in SunSoft as part of the reorganization and I ran the Technology Evangelism Group. I was on an airplane a lot.
Seattle24x7: How did your plane eventually touch down in the Northwest?
Machala: I got a call one day from a Microsoft recruiter who had positions they wanted to talk me about. The Microsoft job was too interesting to pass up and it also gave me an opportunity to live and work in the same place at last. At Microsoft, I ran the corporate account marketing function which is now called the Enterprise Customer Unit. That Group was responsible for everything to do with the Fortune 1000 market, from executive events, a CIO summit, and the Executive Briefing Center, to all of the telesales programs for getting corporations to try out Microsoft software as well as vertical marketing and commercial systems integrators like Anderson, EDS, DEC, and the partner level of the just launched Solution Provider Program.
Seattle24x7: How much of a culture shock was it between Sun and Microsoft?
Machala: Sun and Microsoft are really different. As it turned out, Microsoft wasn’t the right corporate culture for me. I had decided that both these companies had gotten too big. I thought Microsoft wouldn’t feel as big as Sun but it did. Yes, they try and break the product groups up into small units, but when you’re in a corporate function, it still feels very big. I really wanted to have more direct control over the broader strategy and to make a bigger impact (which is where my real affinity with smaller companies came in). I ended up moving into a CEO position here in town for a company called Pinnacle Publishing and then into a new start-up venture.
Seattle24x7: Soon after, Paladin came into being?
Machala: The idea for Paladin came about when it became pretty clear to me that the infrastructure for starting companies in Seattle needed work. And that I could have a bigger impact on the industry by mentoring and coaching companies and helping more than one company grow than to do one myself.
Seattle24x7: Where are we today in terms of the new order of things for starting and growing a new business venture? Have the rules fundamentally changed?
Machala: I call it “Back to the Future.” Think about 1995, ’96, and ’97. They were very much like today. I think the somewhat different story today is that investors are having to put more money into their existing portfolio companies and so there is a dearth of seed capital whereas in ’95-’97, most of the deals that were getting done were early stage deals. So the percentages have shifted.
But what I would say about the sea change is that real entrepreneurism has not changed. If you have an idea, if you’re passionate about what you’re doing, if you truly are meeting a customer need, if there’s real “pain” in what you’re addressing, you’re going to be successful. You’re going to find funding or you’re going to get customers to pay you for it and be able to bootstrap. I think what the sea change did was to flush out what I’d call the “get rich quick” crowd.
Seattle24x7: “Bootstrapping” seems like the operative term. Is the best way to grow a business in stages?
Machala: I think so. The reason is that less money forces clarity. It forces you to listen and to be really in tune with your market. Lots of money makes you start believing your own message and it gets you farther out ahead of what the customers are telling you. There are some ideas or technologies that aren’t practically done via bootstrapping, however. The key to both bootstrapping or raising capital is what is the minimal product that can get me into the market selling to customers and meeting an unmet need.
At present, corporations have slowed down from a software perspective or from an IT purchasing cycle. We’re not in that era of frenzy that the Y2K era propagated. Therefore, there’s more time in general. Customers are taking longer to make decisions. They’re more thoughtful in their implementation of technology. There are not as many competitors out there.
Think about it, there were, what, 8 or 10 pet dot-coms? How many pet food dot-coms do you need really (if any at all)? Today, the competitive environment is a lot more rational for companies and they can take the time to evolve through those stages more organically.
Seattle24x7: Is competition vital to a new business entity or category? Or do you have to totally differentiate and play your own niche?
Machala: Well, I think there have to be competitors. If you don’t have competition, it’s not clear you have a market. And yet you can segment the market so there’s differentiation. It could be a psychographic profile, if you’re in the consumer space. Or, it could be an actual business target such as marketing to the medium-sized business or the large business. Or, breaking it down in other ways, such as only going after companies with some kind of installation of technology.
I think competition also helps sales know what to go after because you don’t have the resources to go after every Fortune 1000 company. So you need to understand what the profile of your Fortune 1000 customer really looks like.
Maybe it’s taking a specific vertical that has the greater pain for you. Maybe it’s deciding that your prospect has to implement something internally before they’re ready for your technology. I think that’s really important from the standpoint of “How do you not spend a fortune on marketing?” And “how do you not spend a fortune on a direct sales organization.” Otherwise you’re going to have to raise $50 million dollars to try and go after the world and likely fail. Partnerships are also increasingly important for startups as the right ones help legitimize you. I don’t mean a start up doing a deal with another startup (I call that “Barney business development” because it’s “I love you and you love me” but without any real impact on your revenue or selling ability.).
Seattle24x7: Many in the venture community believe that building a technology company begins and ends with people. There is an executive search side of your business at Paladin. What is your view?
Machala: I think it’s three-legged stool. The market’s got to have all the dynamics for what makes a fundable market. It’s the technology underlying it – if you’re dealing with an IT play. Or, it could be the brand development if you’re dealing with a consumer play — and then people.
I tend to focus on the people because if you’ve got an “A team,” if you’ve got the right passion and experience, if you’ve got the right reasons for why you’re doing a company, then even if your people don’t have the right idea initially, they’ll get to the right idea. They can take a “B” idea and turn it into an “A” or come up with an “A.” If you take a “B” or a”C” team, they’re not going to increase the value of that idea. They’re probably going to push the status quo. So, I do think it’s all about people in one sense. But in the other sense, if you don’t have the other factors, it’s not going to happen appropriately.
Seattle24x7: Leadership is clearly important.
Machala: I think what you need at the core is at least one or two or three really passionate founders who will walk on coals, who will sleep on the floor without furniture, who will not to be afraid to beg their parents for money to make it happen! I think you need that “I will do anything to make this idea successful and I am totally driven about it” piece. If you don’t have somebody who has the leadership skills, who people are willing to follow off the pier then it’s very hard to sustain an early stage company. So I look for that passion.
Seattle24x7: What about the new business principle that you need more than a singular idea or aspect to be successful, that you need to have multiple product applications, executions or markets to move into?
Machala: Absolutely. Because your first pick, where you think you’re going to get your traction, is probably wrong. So it is important, I believe, to have a technology that has enough legs in order to take it in multiple directions. Not because you’re going to follow every direction though, because focus is obviously a critical issue for start-ups.
A great example is a company I’m working with right now which has a core technology and has probably about eight markets that we can take it into. What we’re doing is pretty systematically going through and doing customer interviews in each market to look at what’s the pain, where’s the money, and who’s the competition, and we’re throwing a lot up on the wall, to see what sticks. Those conversations have led us to a much improved path.
Seattle24x7: In the most recent UW Business Plan Competition, the winners were commended for their extensive use of graphics and the way the Plan communicated. Are we entering a new mode in how new business ideas need to be presented? What do you look for in a business plan?
Machala: Well, I do think a picture says a thousand words. Some people are very graphically and visually focused. Some people are more analytical and number focused. Some people are much more word focused. When you’re writing a business plan, or when you’re doing an investor PowerPoint set of slides, or when you’re doing an executive summary it’s important to speak to those three types of audiences.
So I’ve always encouraged entrepreneurs to try and use schematics, to visually show how their competitive landscape looks, how their workflow will look. Anytime you look at a business plan that’s just dense with words, it’s very intimidating and people find it very hard to read. People learn and absorb information in different ways and you’ve got to address that. I think good pedagogical skills are really what it’s all about.
Seattle24x7: What do you feel is the most glaring omission and the most important takeaway from the Business Plan?
Machala: Unfortunately you do see a lot of plans that don’t put that time or thought into how the company packages themselves, how they express themselves. It takes a lot of work. Entrepreneurs are way too quick to say, ‘just give me the money.’ They think that if they write something down on paper, and they get it in front of an investor, they can get that investor to write a check. T here’s a lot more thought and preparation and planning that needs to go into how you present to an investor than entrepreneurs often times want to take the time to do.
The best entrepreneurs understand that they’re marketing equity and that it’s all about packaging and positioning and messaging much as it is the same way for the product they’re going to launch. We went through a period of time where you didn’t need a business plan. Where it was “PowerPoint funding.” I call it “drive-by funding.” You throw PowerPoint slides at an investor and they throw back money at you. Obviously, gone are those days (thank goodness!).
I think what’s different today is that investors want to see a business plan, not just for the sake of a business plan. It’s not just understanding what the operational details are for the company. They want to know that this team understands how to execute against their plan, not just that they’ve got a great vision. Ultimately, it is 10% the brilliant idea, and 90% the ability to execute against that idea.
Seattle24x7: Thanks, Janis. We look forward to keeping in touch.[24×7]
Larry Sivitz is the Managing Editor of Seattle24x7.
