Are you a budding entrepreneur Are you interested starting your own start-up? Do you think that you have the skills to manage a large business? This class is for you! Welcome hustlers to our class. I’m [your name]This class will show you how you can launch a start up and help you to succeed in business. We will see some learnings from the book ”the hard things about hard things’. Author Ben Horowitz shares his personal experiences, from a failed startup to a successful deal at Hewlett Packard. Read about Horowitz’s struggles and triumphs, and take advice from this successful CEO of “Opsware” as he guides you on our way to the top!
Here’s what you will learn:
- The CEO should be the first one to shout when shit hits the fan.
- There are 2 types CEOs.
- Great CEOs need to learn to be comfortable being in the uncomfortable.
Let’s look at the what and why of these lessons!
From Communist to Venture Capitalist
I was raised in Berkeley, California by my grandparents who were communists. I then moved to Los Angeles to live with my father. We made dinner, but the dates never came. I called one woman and convinced her to come, even though she was late. Ninety minutes later, Felicia arrived: she was so pretty, and we had a good time, despite that she almost didn’t come. Felicia and I have been happily marital for twenty-five year and have three kids. Roselie had a startup and she hired me. I was having a hard time in my personal and professional life, so I decided to quit.
Marc Andreessen interviewed for me for a job with Netscape a few weeks later. Marc Andreessen asked me to share my technical knowledge, and that was the beginning our friendship. Marc and I have been friends and business associates for over 18 years. Netscape faced fierce competition from Microsoft. Netscape was threatened when Microsoft announced Windows 95’s free release. Microsoft held a monopoly in the market for Operating System sales. Netscape was then able to profit from web servers.
Microsoft released an early version, Internet Information Server, (IIS), of their web server. It had more features than Netscape’s, and I realized that we only had five months to come up with a solution before Microsoft released IIS. Mike Homer was my Department Head. He was a workaholic, and would work even harder during anxious times. We launched Netscape SuiteSpot in the following months. SuiteSpot grew rapidly over the following years. America Online (AOL), ultimately bought Netscape. AOL was more focused on technology than media. Marc and me thought of starting a company, so we decided to focus on a cloud computing platform. We added more members to our team: Timothy Hower was the co-inventor of the Lightweight Directory Access Protocol and Sik Rheeco-founded ‘Kiva Systems’. Together, our team launched ‘Loudcloud’ in 1999.
I Will Survive
Loudcloud was my dream job. Marc Andreessen would work as a “full-time chairman of the board”, while Timothy Howes would serve as the chief technology officer.Due to Netscape’s success, Marc knew investors. Through his connections, he was able to get in touch with Andy Rachleff from Benchmark Capital. Marc was to invest $6 million and they were going to invest $45 millions. Loudcloud quickly set up the cloud structure and estimated that the Company’s total value was $66 million. We hired qualified workers and moved into a huge place to start working. The company was profitable within nine months.
Then came what is called the ‘Dot-Com Crash’ of 1995. A stock market bubble led to massive speculation in internet-based activities, which caused panic and resulted in a stock market crash. Microsoft was soon declared a monopoly within the tech industry. Startups, like our Loudcloud, saw huge losses. Loudcloud needed to raise substantial funds in order to keep its place in the competition. The situation kept worsening, so we decided to sell the company’s stocks to the general public.I thought it would be hard to convince one of our board members, Bill Campbell, who had previously been the CEO of a public company, to sell our stocks, but eventually, he agreed and the Loudcloud decided to go public.
The reputation of Loudcloud in the general public wasn’t accurate. The Press repeatedly reported about our company’s losses, so we decided to reverse split stock. The reverse split stock was a merger of shares to create a smaller number of shares but a higher value. These decisions were resisted by investors and employees. Loudcloud was in danger of going bankrupt.
I was so tense that I couldn’t sleep, and I wasn’t even aware of what I was wearing and wore mismatched clothes. I started to think about what I would do in the event of a bankruptcies. Opsware was the new software company that I had in mind. Opsware was the software that ran on Loudcloud. I thought about separating Ospware and Loudcloud and so we set ten engineers to work. It took nine months to complete the task. Loudcloud also had potential buyers in IBM and EDS. EDS bought Loudcloud in a $63.5 million deal. My team and me continued to own Opsware, and we started our own software company. These decisions were good for our company but we had to let go of some employees and send them to EDS as part the sale.
This Time with Feeling
Our company was still struggling after the deal with EDS. I had to make difficult decisions. So I took my employees out to dinner and explained the entire situation of the company. I told the employees and my co-workers frankly that if they didn’t believe our company would succeed, then they could walk off with no hard feelings. Opsware was built for Loudcloud. Two out of eighty employees left that day. This meant that it lacked excellent features and wasn’t ready to be sold.
EDS was not satisfied with the contract and wanted to end it. Opsware would lose 90 per cent of its total revenue if the contract was ended. I took immediate action: I called Jason Rosenthal and Anthony Wright for a meeting, and I made Jason in charge of EDS deployment and Anthony the relationship manager. They met Frank Johnson (name was changed) from EDS and convinced him that we would have sixty days to solve our problems.
Anthony told me that EDS used Tangram products, which Frank Johnson loved. However, because of EDS’s settlement with Computer Associates, EDS had to use a different product instead, one that Frank did not like. This led to the idea of buying Tangram and selling it with our software. Tangram was a small business, headed by CEO Norm Pephelps.
Frank Johnson was delighted when Tangram was purchased for $10 million. Although we had exceeded his expectations with this venture, we still had to decide what to make of Tangram and its employees. The CFO, John Nelli, lost his job and over the following months, his health deteriorated: he was diagnosed with brain cancer. He was not going to be an Opsware employee, so he was not eligible insurance and would have been subject to huge medical bills. I decided to pay his medical expenses. Unfortunately, John passed a few months later, and I received a letter from John’s wife, saying that she was grateful for my help.
Back to business, BladeLogic presented some competition to our company. Marc had also decided to start a company called Ning. We were losing (and battling) BladeLogic deals. The next six months were difficult for the company. I encouraged my employees to work harder. I encouraged them to speak to their families and tell them that I needed the support of my workers more than ever. We worked all week, from 8 a.m. – 10 p.m.
We eventually purchased Rendition Networks at $33 million. Then we landed a deal to sell Opsware to Cisco Systems. We were also encouraged to sell by the board. We signed a deal to Hewlett Packard. We were offered $1.65 billion in cash. At first, I was very sad. I would wake up in sweats and then cry because I thought I had sold eight years worth of hard work. I realized how smart my decision was, and was proud that our team had built a business worth $1.65 trillion from scratch.
This Time with Feeling
Our company was still struggling after the deal with EDS. I had to make tough decisions so I took my employees to dinner and explained the entire situation of the company. I told the employees and my co-workers frankly that if they didn’t believe our company would succeed, then they could walk off with no hard feelings. Two out of eighty employees quit on that day. Opsware was designed to run on Loudcloud.
This meant that it lacked excellent features and wasn’t ready to be sold.EDS was not satisfied and wanted to end the contract. Opsware would lose 90% of its overall revenue if the contract was terminated. I took immediate action: I called Jason Rosenthal and Anthony Wright for a meeting, and I made Jason in charge of EDS deployment and Anthony the relationship manager. They met Frank Johnson (name was changed) from EDS and convinced him that we would have sixty days to solve our problems.
Anthony told me that EDS used Tangram products, which Frank Johnson loved. However, because of EDS’s settlement with Computer Associates, EDS had to use a different product instead, one that Frank did not like. We were inspired to purchase Tangram and make it our own software. Tangram was a small company led by CEO NormPhelps. Frank Johnson was delighted when we bought Tangram for $10million. Although we had exceeded his expectations, we had to decide what to do about Tangram and its employees.
The CFO, John Nelli, lost his job and over the following months, his health deteriorated: he was diagnosed with brain cancer. He was not going to be an Opsware employee, so he was not eligible insurance and would have been subject to huge medical bills. I decided to pay his medical expenses. Unfortunately, John passed a few months later, and I received a letter from John’s wife, saying that she was grateful for my help.
BladeLogic, a new competitor, presented some challenges for our company. Marc also founded Ning. We were losing (and battling) BladeLogic deals. I advised my employees to work harder over the next six months. I encouraged them to speak to their families and tell them that I needed the support of my workers more than ever.
We worked all week, from 8 a.m. – 10 p.m.We eventually bought Rendition Networks for $33 million and landed a deal with Cisco Systems to sell our product.Many potential buyers approached us, but I would always say Opsware was not for sale. We were encouraged by the board to sell. Finally, we signed a contract with Hewlett Packard. We were offered $1.65 billion in cash. I was initially sad. I would wake up with sweaty eyes and cry thinking that I had sold eight years of hard labor. I realized how smart it was, and I was proud to see our team build a $1.65 billion business from scratch.
Concerning the Going Concern
Clarity in a company’s policies and decisions is important. Someone brought up an issue about obscene languages in a meeting. These allegations were directed towards me. Some employees were comfortable communicating with me, while others were uncomfortable. Other companies such as Intel and Microsoft were known to be extremely profane so I decided to allow employees the use of obscenities.
Though it shouldn’t be encouraged, forbidding it seemed to be unrealistic, too. It was also necessary for us to inform our employees that profanity shouldn’t be used as an excuse for sexual harassment. I gave a speech at a meeting where I stated that we could either ban or accept profanity; there was no middle ground. Because I felt that a ban on profanity could reduce our productivity, I allowed the use obscene language. There were no complaints after that. Sometimes, a solution isn’t needed. All one needs in a company is clarity on what has to be done and what shouldn’t be done.
Politics should not be excessive. Politics in a company means moving forward with one’s plan or career without earning it. Hire ambitious people to minimize politics in your company. You should not promote anyone without a written contract. A promotion to one worker can lead to others feeling less valued and less appreciated. This usually happens if the person who received the promotion didn’t deserve it. The promotion process should be formalized and transparent.
Sometimes, even the most qualified and intelligent people in a company can be terrible employees. They might be the best at their job but they may not want to work. These employees can be retained if you want to keep them happy, but they can also slow down the company. Senior employees might need to see their families more than the younger generation and they will bring their habits and values which might not match the environment of your company. Their experiences may be a valuable asset to your company. You should not be afraid to take risks in order to gain the best talent and knowledge for your company.
How To Lead Even When You Don’t Know Where You’re Going
Loudcloud was sold by EDS to investors, who then sold all Opsware shares. This resulted in a fall in stock prices. A board meeting was called to discuss possible solutions. Though the board was sympathetic and open to all suggestions, we couldn’t find a solution. The circumstances lead Marc and I to arrive at the Allen & Company Office in Manhattan. Herb Allen was gracious and humble. He listened to what we had to say and promised to help. Allen & Company bought Opsware stock, and the stock price increased from $0.35 to $3 per share. Several clients from Allen & Company also became major investors of Opsware.
Years after the deal, I asked Herb why he decided to invest in a company nobody else believed in, especially when Allen & Company wasn’t even technology-oriented. He replied that even though he didn’t understand our business, he saw our determination and courage and he trusted our belief to succeed.
Thus, I realised that it’s important to focus on what can be done right. There’s no merit in thinking about wrongs done in the past or fearing what could go wrong.For a CEO to be successful, they must have good leadership qualities. They must create a positive environment for employees. This makes employees believe that the company belongs to them, as well and they will work better.There are three things a CEO must know: first is to know what they’re doing. This includes knowing finance, product strategy and marketing. The second is to get the company to do what the CEO wants it to and to execute the vision of CEO. The third is to get results.
The First Rule of Entrepreneurship
HP initially offered Opsware $14 per share in exchange for selling it. BM raised the bid by $14.05. HP finally countered both companies with $14.25. All of our three deals contained what was known as the “CA Clause.” It was named after the business practices of the software company, Computer Associates. CA tricked its customers by promising them free updates for their products. They changed the names of the products later and charged customers for upgrades that were supposed to be free. So customers included the “CA clause” in their contracts. It stated that if new products were launched with the same functions and a few additional features, they would be covered by the existing contract without any additional charges. Our Ernst & Young national audit partner asked us to restate revenue guidance over the next forty-eight hours. This meant that it should be restated in the customer’s contracts as well. We were unable to get the three large banks to renew the contract within such a short period of time.
I tried to contact every person I could to find out if they had any influence. We worked late into the night to amend the contracts in twenty-four hours. BM gave up on us, and while HP didn’t lose confidence, they did drop their offer to $13.
75 per share due to the “taint” in the deal. Our board met to discuss the plan. They thought we should accept the offer, but I disagreed. I went back to Hewlett Packard to tell them that we wanted to stick with the original offer. This was at a critical time for our company. At times like these, you should accept the situation and not argue if it’s right or wrong, but try to find a solution to the problems instead.
A CEO must decide whether to sell their company. If the company has the potential for growth and has created space in a large market quickly, they should not sell it. Google received offers of more than $1 billion. These were big offers, but Google was suitable to a larger market. It was an invincible product with the potential to rise to the top. If they plan to sell their company, they should be mentally and emotionally prepared.
This class offered insights from Ben Horowitz – entrepreneur and cofounder of Opsware – on his journey as one of the most accomplished CEOs. You will learn about his personal journey and how he used his failures to help him move forward. This class will teach you how to manage various business problems. From ambitious employees to promoting and demoralizing coworkers. You also learned how to properly train employees and how you can fire an executive. This class taught you the skills that a CEO needs to have for smooth operation of a company. Your startup will be a success with the help of Ben Horowitz’s tips and advice.
The job of a CEO is unnatural in so many ways and often you’ll have to go against what your instincts tell you, so one of the best things you can do is practicing to leave your comfort zone in advance.
The magic happens far from your comfort zone..
Now, go make magic! and I’ll see your magic in next class. Byye