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June 4, 2003
Hyatt Regency Reston 


phillip merrick: don’t give up

 

Thank you, Kathy. This is quite an honor to be here tonight, particularly up on the podium with giants such as these folks next to me and the ones that will follow. Including Mark Walsh.

           I am absolutely certain of one thing: I am the least intelligent person you will hear from tonight.

           That was too much laughter, by the way.

           It's because I am the only person that you'll hear from tonight who is still the CEO of a public technology company. Let's say it's changed a little since we went public back in early 2000.

           What I thought I would do is share with you some of the things that we learned over the years. I was thinking back to when we founded webMethods. I'm an engineer by training. Well, not a real one, I'm a computer scientist. When it came to founding webMethods, I did what every engineer does, I read all the books and talked to as many people as I could. Well, maybe not all engineers do the talking part. I discovered that there's not a whole lot of consensus as to what you should do when you're founding a business. There is a lot of consensus on all the things you shouldn't do when you found a business, so I've compiled a list of all of the don'ts, and I thought I would share it with you tonight. As I compiled the list, I realized that we violated just about every single one of them.

           One thing Caren and I heard many, many times was: Don't try to start a business as a husband and wife team. People said, “Your marriage will end in divorce.” Thankfully, it didn't. They said, “The business will be a failure, and it will be a real struggle to get venture capital.” Actually, they were right about that last part. We would say, “But what about Cisco?” They would say, “Yeah, but they're divorced.”

           It certainly worked for us. There's nothing more motivating when you're working on version 0.9 of the Java prototype product and it's got to be ready by tomorrow and you know that if you don't have it ready you're going to have to answer to your wife. That's pretty motivating.

           I actually got permission to use that.

           The next don't is: Don't take money from family members.

           Struggling to get venture capital—refer to point one—we didn't have a whole lot of choice in the beginning, so that's exactly what we did. Speaking about motivation, my brother-in-law is six-foot-six, so thinking about the possibility of the business failing and your six-foot-six brother-in-law is pretty helpful.

           Another one: Don't run out of cash. We didn't do that. We got down to $31 in the bank account. We didn't run out of cash, but we did have a $30,000 payroll. Now we're a $200 million company, so our payroll is fairly large, but it doesn't look nearly as daunting as a $30,000 payroll when you've got $31 in the bank. For a couple of months we did something really radical, we sold software. I learned that it's actually much more enjoyable selling software than selling equity in your company.

           The next is one of my personal favorites: “Phillip, don't try to be the CEO. You're not really qualified; you've been an engineer.” You know, if you really don't want to be CEO, if you don't think that's something you want to do, that's fine, but don't accept that line at face value. You've got the passion, you've got the integrity, you've got the knowledge of what you're trying to do. You don't have to hand it on to somebody else if you don't want to. And you know what? Maybe folks who were here 10 years ago working in this kind of environment know what it takes, but it's a different world out there, and maybe you can learn that world as easily as anybody else.

           “Don't try to start a technology business in the Washington, DC area. You've got to be in the Valley, man.” We heard that a lot. I don't know what entrepreneurs who are approaching venture capitalists outside the area are hearing these days, but my suspicion is that you don't hear that nearly as much as we did. You don't hear it nearly as much because of companies like Proxicom and America Online and UUNet, and, to some extent, webMethods. Not all innovation happens in Silicon Valley. This area has some tremendous resources, and it turns out that we are right next to the largest buyer of information technology on the planet. That is a huge advantage, and we're figuring out how to tap into it.

           The don't that really made the difference for us, and the best advice: Don't give up. When we were starting the company, I talked to an entrepreneur, a gentleman who was about 72 years old. He had just come out of his last startup experience and he said, “Phillip, the number one thing is, no matter what, no matter how bleak things get, don't give up.” That's proven to be the best advice.

           The year 2001 was a tough one for a lot of people for a lot of reasons that we're all familiar with. Towards the end of 2001 after the downturn hit, after 9-11, and so forth, as a management team we got together and said, “We're not going to let this drive our business backwards. We're just not going to let it happen.” We did $200 million in 2000, we did $200 million or thereabouts in 2001, and we did $200 million last year in 2002. We've stayed static. CEOs are not supposed to be proud of staying static, but every other enterprise software company went backwards, and I think it’s because we refused to give up.

           Finally, and Raul touched on this, we heard a lot of people say: “Don't try to start a business like this, like what you're contemplating now. It's done.” We started webMethods in 1996, and people said, “What are you doing a Web company for? Netscape has gone public, Yahoo is out there, as well as a whole lot of startups, Vignette and so on. Why are you starting a business like this now?”

           We actually hit upon something. We had something new and different. Everybody else was focused on using the Web and Web protocols for the browser; we thought the Web and Web protocols could be used to ease communication between computer systems. That's where the term “webMethods” came from, and it's actually pioneered a new area called “Web services,” which some of you might know something about. If you think I'm making this up, look in the documentation for Microsoft's .Net and you will see that they refer to a Web service as a “Web method,” which is maybe an interesting back-handed compliment in the only way Microsoft knows how.

           Or perhaps it's merely a trademark violation.

           As Raul said, now is a great time to be starting a business. It wasn't the best time to start a business at the peak. If you believe in buying low and selling high, now is the time. Now is the time when you can build a company that will have lasting value. As entrepreneurs, that's something that should really excite us.

           Over to you, Caren.

 

 

caren dewitt: the best and brightest

 

Thanks, Phillip. Well, I wanted to keep it simple, so whether you are thinking about starting a company, or joining a new company, or you're happy at your present company and you're recruiting and building teams, I have one simple piece of advice for you: Seek out the best and brightest people you can find.

           Now, by best and brightest I don't mean the most intelligent or clever. That's actually the easy part. There are so many smart people. What I mean by best and brightest are those people who are really smart, excellent at what they do, successful at what they do, but they're also passionate. Some of our other speakers have talked about this as well—not just smart and passionate, but also compassionate, and people of very high character and unquestionable integrity. If you seek the best and brightest people and you make this a priority, you will have the advantage regardless of what happens in the economy.

           At webMethods and at the webMethods Foundation, we have some of the best and brightest, and I want to give you a good example of that. Flash back to webMethods' IPO in February of 2000. It was an historic IPO. We actually had the largest first day gain of any software company in history. We filed at between $9 and $12, we priced at $35, we opened on the NASDAQ at $195, we closed at $212, and within a few weeks we were trading at $300. I must say, there were several evenings when Phillip and I sat across the kitchen table and just scratched our heads because we said, “We love this company. We know this is going to be a great company, but we know that we haven't earned this valuation.”

           We had the traditional IPO party in Fairfax, Virginia, the night of the IPO. In those days it was not uncommon for Silicon Valley Internet companies to have employees driving up in their shiny new Maseratis and Porches at their IPO parties. At webMethods' IPO party we didn't have any shiny new Maseratis, we had something else that Phillip and I felt was rather remarkable. People came up to Phillip and said, “All right, webMethods has created an extraordinary amount of wealth. How is the company going to use that in the community?” So, coming off this historic IPO, we came back with our team and said, “We're going to use this wealth that we're very grateful for to build this incredible company, but we're also going to start exploring how we're going to make a difference in our community.” The vision for the webMethods Foundation started there and within months we had launched the Foundation.

           webMethods, Inc. is a company that focuses on business infrastructure software; the webMethods Foundation focuses on social infrastructure. We want to help working poor families achieve their God-given potential, and we aim to do that by helping nonprofits who are on the front lines helping working poor families in the areas of housing, education, and healthcare. We believe that if you can stabilize housing, education, and healthcare for people who are underprivileged, you've leveled the playing field for them.

           The other unique aspect about the webMethods Foundation is, first and foremost, that it's funded with webMethods shares, so everyone at the company is motivated through the Foundation as well, not only to be a great business, but they know that the wealth is going to be making communities better. People who work at webMethods also volunteer to serve on grant teams. They're looking at grant applications, doing due diligence and interviews with nonprofits, and they're making recommendations on who gets the grants. In the two-and-a-half years since we founded the webMethods Foundation, we've made grants of over $2 million to over 50 nonprofits, primarily in this region and also in Silicon Valley. That's a reflection on the culture we sought to establish at webMethods and the kind of people who work there. We're building a great software company, the leading integration software company in the category, and we're also seeking to make a big difference in the communities where we do business. One person who has volunteered on a couple of the grant teams so far said it best: “I know I'm good at my job, I want to be good at my life.” Thank you.

 

Ms. Bushkin: Phillip, thank you for doing a little bit of Microsoft bashing. The evening would not have been complete without it.

           On to our next entrepreneur, John Sidgmore. John wouldn't brag or anything, but he says that he was such an enterprising young man that he not only mowed lawns, he delivered 100 papers a day, the most in his county. Of course, that wasn't the only time he delivered. Way back in the early days of the Internet, UUNet was there, and it delivered big time with a first day pop of nearly 100% when it got started.

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