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| Home - Venture Profile - Sep 04 Issue |
Venture Profile: Stu Schuster, Novus Ventures
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In the early days of Sybase, I saw how we could get to $100 million but I didn’t know how we would get to a billion. Larry Ellison was hoping to build a profitable, successful $50 million software company in those days. He had no idea that this thing would become a $15 billion a year company. When I was negotiating and working with Microsoft, they were between $100 million and $300 million… they probably saw themselves maybe getting to a billion by then but I don’t know if anybody saw how big and how pervasive Microsoft would be. When I was at Intel they were a $300 million company. They were worrying about how they would get to a billion. Getting to $30 billion or $50 billion or wherever they are now was probably way beyond their wildest dreams.
All these people know they’re doing something significant, but seldom if ever do they believe it’s going to get as big as it does. Maybe Steve Ballmer is an exception, but certainly I always kept more modest goals. For me, it was about focusing on killing the competition. I had no idea how big Sybase was - all I wanted to do was to try to crush Oracle.
So in answer to your question, the hits are predictable in that the winners seem to have some basic things in common, but how big those hits are going to be, you never know.
Angel Mehta: Why do you think the climate is so difficult for enterprise software companies, even with the economy having recovered?
Stu Schuster: For as long as I can remember, the process of growing a company has been the Geoffrey Moore, ‘Crossing the Chasm’ approach. When taking technology to market, find the innovators first who buy the technology, and then you go through the early adopters and late adopters, etc. This process, I think, all good high-tech marketers understood.
Throughout my entire career, there were always people who wanted to do something for their organizations that they believed would be a leap forward and would make a name for themselves. Call these the entrepreneurial Chief Information Officer… they were at companies like FedEx or Wal-Mart. They would try to do something with technology that would give the entire company a competitive edge.
After the technology crash, the focus became so oriented around cost-cutting that the entrepreneurial CIO was replaced with a financial CIO. There are so few entrepreneurial CIO’s out there that today everything has to be easy to implement, available by the drink, with very short time to ROI. The innovative buyer, the entrepreneurial CIO has been terminated out of the industry.
Eventually, it’ll cycle again because people will eventually feel that they’ll need a competitive advantage and will look to technology to do that. But today, it’s brutal. It’s amazing how hard it is to find people who are willing to take a chance on a new company or new technology. Fear dominates every IT department. As a result, growing an early stage software company is just harder than ever.
That’s why I place so much more emphasis on the people-side of the equation these days. It doesn’t matter how great the technology is – if the right people aren’t in place, you’ll never convince customers to take a chance.
Angel Mehta: Let’s talk about evaluating executive talent. When evaluating a CEO candidate or a VP Sales or whatever, how do you separate a candidate’s personal achievements from market momentum? How do you know what they created, and what they just took credit for?
Stu Schuster: Very good question. Of course as an Executive Recruiter you know that it’s via a combination of thorough interviewing, by multiple people on your team, and then deep reference checking. I remember interviewing Oracle people, when I was hiring at Sybase, and it was amazing how many people came in and took credit for some aspect of Oracle’s success when you knew they were just being swept along. Without fail, when you start to probe deeply, you could tell that they maybe had five years of experience at Oracle but it was one year five times as opposed to five really rich, deep contributing years. That’s the only way I know how to do it – probe forever.
One pet peeve I have when hiring or evaluating an entrepreneur is when they don’t know the competition. I figure they don’t know what the hell they’re talking about. I’m not going to put my analysts or expend my time trying to figure out who their competition is – they’d better know before they come to me. The bogus answer is, ‘We have no competition’ and entrepreneurs think that venture guys like to hear that, but they don’t. It’s BS – there is ALWAYS competition. So if you can’t tell us where the threat is coming from, I’m probably not interested.
Angel Mehta: Do you find a correlation between entrepreneurs or executives that have done time with large, market leading companies and the ability to succeed?
Stu Schuster: I think a young person who has spent some time in a quality organization can learn a lot and make a mark. I think they learn something about process, learn something about depth, because the bigger companies tend to do things with a fair degree of depth. Then again, everybody always talks about the first time someone leaves IBM to become an entrepreneur – they’re almost guaranteed to fail. They don’ t have the army, navy, and the marines behind them to help take out the garbage – they’re not used to it.
Stu Schuster is a general partner at Novus Ventures. ,He served as both a Venture Partner at Brentwood Venture Capital and an independent investor since 1995, specializing in enterprise software. Stu's extensive investing experience spans more than 15 companies, many of whom went public or were successfully acquired. Prior to his venture experience, Stu served as executive vice president of marketing at Sybase, Inc. For article feedback you can contact Stu at: sschuster@novusventures.com.
Angel Mehta is Managing Director at Sterling-Hoffman, a retained executive search firm focused on VP Sales, VP Marketing, and CEO searches for enterprise software companies. He can be reached for feedback at: amehta@sterlinghoffman.net
 
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