Dave Sifry | Confessions of Serial Entrepreneur
The transcript of the interview is provided below.
Martin: Hi today we are in San Francisco with Dave from Technorati. Dave, who are you and what do you do?
Dave: My name is Dave Sifry and I am the founder and have done a bunch of different jobs over in Technorati.
Martin: Please introduce yourself and tell us a little bit about your background, what you did before you started this company.
Dave: Sure. So, I grew up in Long Island, a suburb of New York and I grew up with just two terrific parents, both of them who were teachers. And I think that that actually brought out this – they taught something to me around the joy of watching somebody’s lights go on, like watching them when they really get something and that was really something I enjoyed. But at the same time I was also a very nervous and geeky kid.
So my dad as a teacher one summer brought home my first computer which was a commodore pet, the big metal computer with the chicklet keyboard and literally a cassette tape drive. And he said, ‘You know, I am bringing this home so it doesn’t get stolen’, because he worked Bushwick which was not a very good neighborhood. Nowadays, it’s actually great neighborhood in Brooklyn but back then it was not a terribly good neighborhood and they had security guards on the doors in the schools and so on. So he brought it home and said, ‘Go do whatever you want with it’. And I was fascinated, I mean I just took to it and it spent the entire summer just teaching myself how to program Basic. And I wrote my first programs and you can get that incredible sense of just like what does it feel like to build something by yourself and sort of be the master of that little world and that was great and I really enjoyed it and got a number of different computers.
When I got into high school, I got social again, like I really wanted to be able to go out and engage with the world. And I realized that wow, like there are all these skills, these things that I can do where I can help people, they would come to me and they was like, ‘Oh we have these consulting projects like could you build this for me or build that for me’? For them I could imagine they were probably thinking of, ‘I got this high school and he’s building this thing that I would have to spend thousands of dollars on, I give him a few hundred dollars’. And for me I was like, wow, this is fabulous, this is more money than I have seen, than my parents have ever given me. And so I got really bitten by the entrepreneurial bug.
In college I studied computer science down at Baltimore and during the summers and even during the year like I would have a computer consultant business on the side just to be able to pay the bills and pay my way through college and that was fabulous like really just enjoyed it. Just loved selling, I loved being able to help people solve their problems and it was great having a skill that for me was easy and fun and that for other people like they were getting a tremendous amount of value from it.
And when I got out of college I went to my first big company where I went to work for Mitsubishi Electric in Japan and I spent there about three and a half years being the first foreigner in my factory in 17 years so it was like me and 4,700 Japanese people. And that was a fantastic experience just in a different way to be able to see what it’s like to live in another culture and to learn to speak Japanese and to see how other people live. But also on the other side it really thought me, ‘Oh, so this is what working in a big company is like’. And I realized that that was just really unsatisfying for me. I love to be able to participate in decisions and see what I was doing and how it directly affected people.
And also this was like the early 1990s and you know you would hear about all these magical places and a place called Sunnyvale, and Oakland, and Walnut Creek or… – these places that just fired the imagination; Cupertino, Mountain View, San Francisco. Just the names of it just sounded fabulous. I knew that I wanted to come out here and went in and worked on Wall Street for about a year when I got back from Japan but that was all just a launch pad for me, like I just knew, like it was fabulous and it was great to learn something about how the market worked but all I really wanted to do was to get out here and so I came out here in 1995. My impression of Silicon Valley at the time by the way was Santa Cruz, which if you know anything about Silicon Valley, it’s sort of like, that’s way over the hill, the hippy dippy place back then. But it was great place to just at least get settled and to learn what’s going on.
I get very heavily involved in the open sourced company, particularly around Linux and other open source software. So, by getting involved with that community and then really—relatively early day, I got to know a lot of those people like, Linus Torwalds. Whenever he would come into town we would have like a user group meeting. And then as Linux was taking off, my first business it started from the consulting that I was doing, found 2 partners and we thought like let’s go and let’s go build a business together based on this, Linux based open sourced VPN system. Which now a days people think, ‘Oh, VPN sure. But back then in 1995 people were like, ‘What’s a VPN and what’s this Linux thing? And you don’t pay for it… And how you guys going to make money,…’, and sorts of big questions that no one really understood and could explain well. And that business didn’t really do well, but what we learned from it was we learned a tonne just about banging on doors and how to write a business plan. I mean, we ended up writing a business plan that was about that thick. And what I realized afterwards was: wow, we spent all this time writing a business plan and not very much time actually running a business; and that you can really get caught up in this idea of, ‘Ooh, we need to figure out who all of our customers are going to be, and what the competitive market place is, and how are we going to do product marketing’, and then not actually ever any of that stuff. So, the other half of this was to learn that the best business plans are literally ones that I can write on the back of a napkin. Because if you can articulate your value proposition that clearly you’ve probably got something that’s going to be really interesting.
But back then we didn’t know; we were kid’s; we were just figuring all this stuff out and so that business was just called Secure Remote, really just—it failed. But we got to know a lot of people in the valley
Very interestingly, so this was in around September of 1998, so my two friends and I who were pretty heavily involved in Linux community realized, ‘Wow, you know what, it’s too late, we missed the boat on this particular product’. Big companies like Cisco were coming out with competitive products and so we said, ‘How about instead—like what it is that we are 6-9 months ahead of everything else and that we think we could actually build a business around’ and so we were all kind of—like literally we were standing in the parking lot of one the VCs here on Sand Hill road and after very nicely having our hats handed to us again like, ‘We love you guys but we just don’t see what the business is’.
And one of my partners said, ‘What about service for Linux, there is nobody that is out there that’s doing Tech Support or professional services or any of that stuff for this operating system?’ He was an old Apple guy and so essentially what he said was like, ‘How come there is no Apple care for Linux’… And all three of us looked at each other, we were like, ‘Oh my God, of course’ and so on that day Linuxcare was born. And that company was the exact contract where I remember we had, I mean we spent maybe a week re-writing some of the business plan and so now the business plan is this thick. And we’re just thinking, look it’s service and support for all things Linux. We knew all of the people who were involved in the community and we went to go, ‘Okay we are going to do a big launch’. We went and talked to our first PR agency just as a vendor and right as were done the woman who ran the agency, a woman who named Melody Holler said, ‘Okay I am going to take my PR agency hat off and I’m going to put my investor hat on, are you guys looking for money?’ And we all looked at each other, we’re like, ‘Oh my God’. Like we’ve been out there for like the last 2 years trying to pitch this business and we’re not even trying to pitch you and you are trying to come and give us money and that’s the power of when you have a good idea that has real value that is timed well. A lot of that is luck and a lot of that is opportunity, like I believe that people fundamentally get the same amount of luck, I mean that’s the definition of luck, it’s random but the people who are lucky are the ones who are prepared to do something with that. And so at the time we were prepared like we had learned from that failure before, ‘Okay, here’s what we do and here’s how we jump on it’. And within a few months we had raised five and a half million dollars from Kleiner Perkins, one of the premier Venture Capital firms—
Martin: Before Launching or—
Dave: This is before launching.
Martin: Wow, not too bad…
Dave: Absolutely. We were running around, the three of us like running around with this big check book, just five and a half million dollars and hiring all of our friends, people who we knew would be really great at this and that business really took off. It did very well and to the point in fact where we were growing so fast we had so many customers that we had to bring some outside management because the three of us were just like… None of us had ever really run more than you know 5 or 6 person company at the time. So, long story short we ended up hiring a CEO who was a professional CEO who really was the wrong guy, just not the right guy for our company. And it was a good thing to learn there too around, how do you deal with a board? And when you have investors, how do you build relationships with your investors? How do you get to know your investors even before they become investors? And that was again a very common mistake I’ve learned like a lot of people make these mistakes and we need to learn then the way and the company grew from literally three of us to 480 people in 18 months.
Dave: Yeah it was crazy. And we were just out growing everything and the company was just going like gangbusters and then crash hit in April of 2001. And we had filed for our IPO, we were ready to go out and you know it was crazy. And we had a bunch of internal stuff that happened as well with that CEO and I’m not going get into all the details, but suffice to say that the company did not IPO. So, what we had to do then was go through the downsizing. While it’s an incredibly painful experience, I mean we had to personally let go of a number of people who I really deeply cared for, it’s just one of those things that you have to learn if you’re going to be build a business around. How do I set things up so that number one, the organization that we are building is going to be one that is going to be building revenue and building profits and it’s going to really sustain itself; and then number two, when business conditions change, how do you make that hard decision. So, how do you set up relationships in advance so that people will understand, ‘Look we’re friends and I love you and I want to spend time with you and I had a great time with you but also we’re in business together, so we need to be careful that—I don’t want the friendship to be destroyed because of any potential business things that happened’. So anyway, that was a great opportunity, I was CTO there and I got to meet some fabulous people who really really worked hard to build that company up. And I left there in about 2002 and took a little bit of time off, because that was a real burn out experience. I have met a lot of entrepreneurs who have been through this, where even when you have a successful exit you just get really physically, mentally and spiritually drained. And I think that’s what happened for me as well.
So, I took a bit off time of and I was like, ‘That’s it, I am done, I don’t want to be an entrepreneur anymore, I just want to go and… Really, I could barely even read a newspaper, I just wanted to be quiet somewhere. I joke about it with my wife sometimes and she’s says, ‘Yes, Dave. The crazy thing about was…’. I was like, ‘Aw, I just want to go and rest on the beach somewhere’. Well here is the problem, that 2 months later I was bouncing off the walls and my wife was like, ‘Would you get out of the house and go start another business’. You know she jokes with sometimes she’s says, ‘You know Dave like if you ever ended up on a beach somewhere, yeah that would be great for about 2 weeks and then after that you’d probably selling people umbrellas, like you’d be the guy organizing all the people on the beach for massages’. And it’s true, there comes a point where you’re just – I think as an entrepreneur that this was the sad part and it was also a really defining moment for me – was realizing that I have this curse, do you know what I mean?
Martin: I totally understand.
Dave: That you are, okay, it’s just a part of my personality that, I love people, and I love being of service to them, and like I just really have a hard time being lazy. I have a really hard time not doing anything, and I need something to keep me busy, and I love building things like this. I love getting people together and having a shared vision and building interesting things. And so that was enough to be able to then restart the next business, we built a company called Sputnik in the wifi router space and that company is still actually going strong.
Dave: And then as a side project to that like I started blogging and this was very early days of blogging, I mean this was 2003, 2004. And I remember it was over Thanksgiving weekend in 2003, that my two partners were both going off on their different adventures: one was travelling somewhere, and another going somewhere else, visiting family. And I thought, ‘Okay I’m going to take a little vacation too’. And the one thing that was always interesting to me was this idea of search and so I thought, ‘I wonder how hard it would be to build a search engine for blogs’. So I had my DSL connection back home, I think it was like a 128k ISDN connection and I had two computers that I had bought off of Ebay for like $100 each, that were sitting in my basement and I thought, ‘Okay, you know what let’s go try it out’. And literally, I was like: ‘What do I call it?’ And I went searching on network solutions, on one of the domain panes. I was looking for digerati, because you want to be able to see like what’s going with the digerati, well that one was already taken, digerati.com, .org. So I thought, ‘Well what’s some word to that, I don’t know, Technorati!’ and so there it was! Six dollars and ninety nine cents and I was like, ‘Great, Okay’ so I bought it and that’s how Technorati was born. It was literally just my little science project of, I wonder what it would be like to build a new kind of search engine, one that’s based around this real time web. It kind of surprised me like it just sort of took off to spite me. I mean I told a few friends about it and of course what happens when you tell a blogger anything and they like it, they’re going to blog about it, they’re going to yell from their rooftops, they’re going to talk about how awesome it is, and their also going to talk about it sucks and how they hate it, but it doesn’t matter, they’re going to talk right. So it’s an interesting place to be sort of that search engine where, this is the place where they all came to so that they’re yelling out into the void: Did anybody say anything? Did anybody respond back? And so it became very quickly a pretty go to service for these bloggers, a very small group. And that was cool, it was nice and weekends for me, that kind of stuff. But what happened was one day I was sitting in my basement… And just to give you an idea of my office, have you ever seen the Harry Potter Movies?
Martin: Which one?
Dave: The first one, the first Harry Potter movie. There is cupboard under the stairs that Harry lives in, like that’s his room, well that’s my office, that was my office at my house at the time. And I am down there with my dog and the two servers running off the DSL line and I get a phone call and they said, ‘Hi this is so and so from AOL’ and he says, ‘We here at AOL, we love Technorati’ and I am like, ‘Thank you’. I mean if you remember this was like when AOL had their keywords everywhere they were on billboards, I mean it was pretty crazy, they’d just bought Netscape if you remember this? And he says, ‘yeah’, he says, ‘look, we are doing this AOL blogging platform called AOL journals’ and he goes, ‘And I’d love, we’d just love for you and your team to come down and visit with us and maybe we can have a talk about doing something together’. And I am like, ‘Uhhh’ and I look down at my dog and my dog is sort of licking himself and I’m like, ‘Uh—The dog—we’re—well the team is kind of busy right now’.
Martin: But I can come alone.
Dave: But I’ll tell you what, how about I’ll come down, I’ll drive down, we’ll set up a meeting?’ He was like ‘Great, fabulous’. So I drive down there to Mountain View to the old Netscape campus which is now—I guess it was then the Facebook campus, now I am not sure what it is but—that—on Middlefield Road. I come down there and I walk in and I meet the guy from AOL, and walks in13 other people from AOL. And they’re all introducing each other, so they are all handing each other cards and I’m like ‘What is going on?’ And the guy sits down, he says, ‘Okay, this is Dave from Technorati, we are so happy and we welcome everyone, we’re going to talk about searchanable journals…’ And I notice there was like one guy there from Netscape search. Now if you remember this—but like Netscape search—these guys made Yahoo—they created Google, this was huge. And he says, ‘Yeah, so we would love to work with you on this product and we’re big fans of yours, like we want to do it’. And I am like, ‘Look no offence, right? Thank you. But that guy over there with Netscape search on his card, like he’s probably forgotten more about how to run a search engine, than I have ever learned, like why are we talking about this’. And he goes, ‘No, no, no’. He says, ‘You don’t understand’. He says, ‘Because here at AOL we don’t want to be a wild garden anymore, we want to be a part of the bloggers sphere and for that we need to be in Technorati, we need to be doing a deal with you’. And I was like, ‘Okay’.
And I came home that night, I drove home like in a fog, like driving up 280 and I am driving home going, ‘What just happened?’ like he just basically just put a business model in my lap and I realized ‘Oh my God’. This was before Amazon web services and Elastic cloud and all that stuff, it was like, ‘Oh, crap , I’m going to have to buy a lot of servers and a lot of coolers and a lot of networking, we’re going to have to like hire up. And fortunately at the time, I had a number of Venture capitalist and who at that point I’d gotten to know a little bit better and so I called up and some fabulous angels, I mean people like Reid Hoffman who was at LinkedIn, and Joe Ettore is over at the MIT media lab now, and Ester Dyson. And it’s just like ‘What do I do?’ And they’re like ‘Take some money’ and I’m like, ‘Okay’. So in that case, again, it kind of just fell into my lap in a sense. And then the process was, okay so you’ve done this before a couple of times, how do you do this in a way that’s really going to try to learn from my old mistakes but then also build something that’s going to be flexible and really have the personality that—I realized what I really wanted was—what’s the environment that I wanted to be working in for the rest of my life. Like that if I could be working here for the next 50 years that that’s the kind of place that I want to build. And I realized that like, even before I hired a single person… So we took a bunch of money I mean, the money wasn’t the problem, there were lots of money and some fabulous VCs who came on board. But I really wanted to make sure that I understood even what my value was worth and then that my investors shared the values, fabulous people like, Andreas Stavropoulos over at DFJ who just really really agreed with the values that I had, and Ryan McIntyre who was at Mobeus at the time, Ryan is over at Founder Group now. Ryan was a founder of Excite and I was like, ‘Oh great like you have done this before, you’re next entrepreneur like please let’s work together’ to be able to then talk to my investors, not the way it was back at Linux care where I felt like they were my bosses, but instead to talk to them kind of as my peers and say, ‘Look, I don’t know what to do, please help’. Because I know that that’s something that really hurt us back at Linux care was this idea of, we have to just do it right, we have to figure out whatever it is and it’s us versus the world and instead at Technorati to be able to say, ‘No no no, you know what, we’re all in this together’.
We took some money for example from some folks at August Capital. Fabulous, fabulous group of venture capitalists, really great team there. When you come in and you sort of sit down and you do this, what they call the Monday afternoon partner meeting which is sort of like that last thing where they are all sort of figuring out, do you give you money or not. And the best advice I ever got was just be honest, like tell the truth no matter what. Because I was a first time CEO, I have never done this before.
So there I am sitting at this beautiful wooden table, this huge wooden table that you are like, you put your head down on it and you’re like, ‘Oh my God, the stories that table can tell of all these amazing businesses that have gotten funded and built, I can only imagine…’ So they’re all saying, ‘Okay, so tell us about your business’. I’m like, ‘Yeah, it’s the search business and it’s taking off and could be like Google but I don’t know and yes I’m a first time CEO but I don’t know…’ And I said, ‘Look, here’s the deal’. I said, ‘ There’s really only one thing that I absolutely I am going to stand here and I’m totally going to promise you’, because I can show you all these slides that shows the number that goes up into the right and we all know it’s bullshit. Hopefully that’s exactly how things are going to go and we’ll all be like, ‘Look how smart we are’ but these are all speculation’.
So I said ‘look, there’s pretty much only one thing that I absolutely guarantee will happen sometime during the course of this business and when I am CEO of this business’. So I said look, ‘Sometime during the course of your investment I am going to screw something up really badly, like I mean a whopper, like a huge one, and probably it’s going to be, we’ll have all talked about it at the board meeting, we’ll all agree not to do it and then I’m still going to do it anyway, because I feel like it’s the right thing to do and I’m just going to mess it up.’ And am like, ‘Here is my promise, my promise is, I’m never going to lie to you, my promise is that like, I’m going to do what I say and say what I do, that I will come and we’ll talk about before hand and that if at any time you guys or I feel like it’s just not the right time for me to be CEO anymore because it’s growing or whatever, like I’m happy to step aside. But pretty much, that’s the only thing that I guarantee’.
And they all looked at me and they said, ‘Oh yeah, Dave, that’s exactly what’s going to happen’. They’re like, ‘Every single one of our successful investments that’s exactly what happens’.
And I was like, I go, ‘And by the way, chances are I am probably going to lose your money’ and they were like, ‘We know’.
And I am like, ‘Where am I? This is the craziest meeting I have ever been a part of’.
But the most wonderful thing about it was at that moment, I walked out of that room a quarter of an inch off the ground. I felt like I was walking on air because I realized that, ‘Wow, I just told these people that I was probably the worst case’. Because I knew I wasn’t going to lie, and I wasn’t going to be a criminal and I wasn’t going to do anything like that, like that I knew deeply, but the thing that I was most scared of which was failing and of making a decision and having it come back on me. They were totally okay with that. And it’s an advice that I give to all entrepreneurs is that if you’re going to be working with an investor – but even just with a team and you can’t accept that you’re going to make mistakes. I make more mistakes in a week than most people make in a year and it’s just like, that’s just the nature of what we do. And so you mess up and then you learn from it and then you quickly adapt. So it’s not about, ‘Oh my God, how am I going to make sure that I don’t make any mistakes?’ because if you don’t make any mistakes, you are not taking any risks but instead it’s about saying, ‘How do I create an environment where it’s okay, as long as I don’t make the same mistake twice’ like let’s make tons of new mistakes all the time.
My friend Ester Dyson, that’s how she says it, she says, ‘Always make new mistakes’ and I think that’s the best advice, and then to be able to hear that though—to be able to vocalize that with your investors and the people who are going to be sitting on my board and really feel comfortable like, ‘Yes, none of us know what the right answer is but we’re all going to jump into this together’ and that you trust me, that I can help to lead this, that was so empowering because I never felt like—and they talk about the CEO job being the loneliest job in the world. I never felt that, like I always felt like at anytime I could just call Andreas or call Andrew Anchor, or call David Hornic, or call Ryan McIntire, just say to them like, ‘I am totally lost I don’t know what to do’. And they would just be there to help and I think that… Again if I was talking to an entrepreneur about that I’d be like, ‘Look, I know you are scared, it’s okay’, I heard it once, fear is like a super power just take it, use it and share it and that way you’re going to be able to become so much more powerful than if you hold it all inside.
Martin: Dave, thank you very much for you time and your thoughts and your sharing of knowledge.
Dave: Sure Martin, it’s great to meet you and thanks so much for coming.
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