How seven Eastside business founders rose above the competition to create lasting companies

You’ve developed the next life-changing product, you think you can fill a vital void in the market, and you definitely want to be your own boss. Now what?

Most likely, struggles.

In an effort to help aspiring entrepreneurs, we reached out to seven of the Eastside’s most successful business founders to see what they believe it takes to become a thriving entrepreneur.

These leaders combined commercial savviness with unique skill sets to create and build companies that today help drive the Eastside economy. They come from a variety of industries and faced diverse challenges to get to where they are.

We hope the stories they shared with us — key excerpts of which are published in the following pages — help paint a picture of what it takes to become a successful entrepreneur.

Measure The Market, Don’t Overspend

From Sunny Gupta, Apptio

When I built iConclude back in 2005, the thought process was never to sell it (to Opsware in 2007). I’ve always regretted that decision. I felt like we were on to something pretty big and we could have built a pretty large company. Post-acquisition, I had a couple choices to make. One was to work at Madrona (Venture Group), but I was in my late 30s and I felt like my work had not been done as an entrepreneur, as a technology leader.

I’m one of the entrepreneurs who really validates the market before the product is built. I ended up talking to 40 IT managers who basically said there’s no business management system for the CIO. The VP of sales has Salesforce, the CFO has a finance system, but the CIO has none. I knew IT was pretty horizontal, and this was a ubiquitous need.

There are a lot of people who write technology just for the sake of technology, without any validation of the market. I spent two to three months really talking to customers and making sure this was a need and something they’d spend money on.

People aren’t close enough to the customer. There are many people who try to create a product sitting in their offices, or they talk to two customers and think they have a customer perspective. I think you learn a lot more when customers say “no” than when they say “yes,” because you learn what their objections are. There are a lot of entrepreneurs who say they are close to the customer, but do they have the ability to listen to the customer and change their strategy based on the customers? On the flip side of that, I see entrepreneurs who make changes based on the input of just one customer. So you have to have a balance.

IConclude started Day One with less than a half-million dollars, and some of that was my own money. With Apptio (which received $7 million in Series A funding in 2007), my investors had familiarity and they also believed in the team. … So when it came to writing that first $7 million check, it was really not a problem.

Ours is a culture of frugality. I deeply believe that every dollar invested in the business demands a return. So I told the investors, “You may be investing $7 million, but I’m going to be as frugal as I was at iConclude in developing the product.” Money in the bank does not mean that you get to spend it.

It’s pretty seductive having $7 million in your cash account, but when the other founders and I were traveling, we were using Hotwire and Priceline and living dirt cheap. … We came out with our (version 1) service with less than a million dollars spent.

Rajeev Singh, Concur Technologies. Photo by Rachel Coward

Rajeev Singh, Concur Technologies. Photo by Rachel Coward

Prioritize Adaptability, Believe in Your Product

From Rajeev Singh, Concur Technologies

Don’t go get money until you have a product, or until you’re close enough to having a product that you can prove the concept will add value to your customers’ lives. You should feel very ready to go get capital when you have customers that believe in the product and you’re ready to start to amplify either the investment in the product or in marketing to reach more customers.

There should be no intimidation out there. The venture capitalist on the other side of that table is seeking a return on capital, so he or she is as interested in you and your business idea as you are in pitching the idea. There’s no charity involved here.

(Concur has) been around for 21 years now, so we’ve had the opportunity to reinvent our company. We started off building software that we sold on store shelves, then we moved to the Web, then we moved to the cloud.

In 2001 (when we moved to the cloud), we were a relatively small company. We believe fundamentally that if you know what the right answer is for the customer, and you’re the company to deliver it, you will on occasion be placed in a position where you have to bet on your own understanding of the market and your ability to execute. When faced with that opportunity, you bet on yourself and your team every single time.

It happens all the time that you have a high-performing employee who isn’t used to the culture of the business, but once they’re made aware of the way the company behaves, they adjust their behavior. … If you have a high-performing employee who just doesn’t fit, those people just have to go.

The first reason a lot of businesses fail is the size of the opportunity isn’t as great as they had hoped. We’re super lucky at Concur in that travel and expense reporting is a problem that every single company has, and we were lucky enough to be the first one there and innovate fast enough to stay ahead.

You have to be very, very nimble around your capacity to reinvent yourself. Your first idea is usually not the idea that will build your company. It’s somewhere in the neighborhood, but you have to have the capacity to look at all the data the market is giving you and say, I’ll adjust. Too often, founders get too wed to their original ideas.

(Editor’s note: SAP purchased Concur on Sept. 18 for $8.3 billion. The deal is awaiting regulatory approval before it is finalized.)

John Howie, John Howie Restaurants. Photo courtesy John Howie Restaurants

John Howie, John Howie Restaurants. Photo courtesy John Howie Restaurants

Build Your Brand, Monitor Cash Flow

From John Howie, John Howie Restaurants

When we started working on Seastar (in Bellevue), it was during the dot-com boom. We opened it right during the dot-com bust. Six months after 9/11. Every day for the first 90 days, I thought we were going to fail. I had everything I owned on the line with this restaurant.

What I didn’t do was panic and start taking away service. That would have been a huge mistake. I spoke to my management team and said we have to continue to do things the way we planned on doing them. If we’re going to go down, we’re going to go down doing it the right way.

The same thing happened from 2008-2010. We didn’t take any services away; in fact, we added services and products. And I didn’t lay off a single person. We lowered some people’s hours. I had some servers come to me and say, “We really wish you’d lay off some of the newer people so we can work full-time.” I said I understand where you’re going, but I think you’ll survive and they’ll survive, and we’ll all come out of this together.

I had to discount things to get guests in the door, but I got a lot of guests in the door. We didn’t make any money for three years. But we stayed busy and relevant.

In fine dining, you can’t cut (service). If you do, you’re giving a mixed message of who you are, and that’s the worst thing you can do to your brand. Customers want to know that they’re going to receive excellent hospitality.

There’s a tendency to become complacent if you’ve been in a job for years and years. We can’t do that. If somebody’s not meeting expectations, we have to deal with it. We have to coach it, teach it. Do that, the culture stays strong. Don’t do that, culture erodes.

Cash flow can be a huge issue. You can have a good sales projection that you believe you’re going to hit. What you should do is take 50 percent of that sales projection and calculate what happens to your cash flow. Look at that and see how long you can survive without having to change what you’re doing or lay people off.

Andrea Heuston, Artitudes Design. Photo by Rachel Coward

Andrea Heuston, Artitudes Design. Photo by Rachel Coward

Delegate, Hire Wisely

From Andrea Heuston, Artitudes Design

When I started the company I did everything, because I could do it better and faster than everyone else. Every job that came in the door, I’d touch 85 percent of the work, which meant 80-hour-plus weeks. On June 2, 2008, I went into a coma as a result of a surgery that went wrong. I was in a coma for three weeks. When I came out, I was in a wheelchair, and then I was in a walker. I was away from my company for eight months. But what that taught me is that I can’t control everything. At the end of our fiscal year, we had not lost money.

I realized I could rely on other people to do their jobs. Hire good people, tell them what you want to do — clear
goals and expectations — and let them go.

For an A-type personality, that’s one of the hardest things. You have to learn to trust people and delegate. It’s a hard mind switch.

One thing that is always a red flag for me is when a CEO says I would never let my people do anything I wouldn’t do myself. I don’t believe in that. There are so many people here who are much more talented than I am, and I want to honor and value that.

There’s an element of luck to being an entrepreneur. There’s an element of stupidity, too. You have to be blind to some things in order to succeed, because you have to be a risk-taker.

I’ve made some really bad hiring decisions. My first employee stole from me. I had an employee, my third employee, she threw a chair at a contractor. So I’ve learned from those. Now, we hire based on character and cultural fit. You can’t teach character; you can teach a skill set.

I want employees who push me. I don’t want employees who come to me with a problem but don’t have a solution. It’s a rule around here — you are welcome into my office any time. If you have a problem, bring me a solution.

 

Brent Frei, Smartsheet. Photo by Rachel Coward

Brent Frei, Smartsheet. Photo by Rachel Coward

Carefully Choose Your Partners, Be Prepared to Pull the Trigger

From Brent Frei, Smartsheet

I was working at Microsoft, and it was great … but I just didn’t feel like I was a big-company guy. It was very much about having an opportunity to sink or swim at my own merit and work with people you want to work with.

If you get the right people in place, you can really accomplish anything. Having good ideas is important, but there are lots of good ideas. You’ve got to have a great team.

At the very beginning of Onyx, we kept saying we weren’t ready to ship (our product). We were going to add this feature and that feature. Finally, one of our board members said to just ship it and start making revenue on it. Once it’s out in the wild, the customers will start telling you what’s important and what they’ll pay more for.

People will come and say, “Well, how should I set up finance, and what accounting system should I use, and how should I hire people?” I say you don’t have to do any of that stuff. You don’t even have to have an accounting system. All you have to do is build a prototype of your service or product and you have to get it in front of somebody, and that person has to say, “If you build that, I will give you this much money.”

You’re successful, and you won’t fail at something that’s important to you. So is this important to you? Because if it is, you won’t fail.

It’s always easier to start a company with partners, but really consider how things would evolve. Even though you’re really good friends right now and you’re all pitching in the same amount, life changes. Your personal lives will change. Your company changes, and as it grows and scales, the requirements of the jobs change.

It’s generally good to decide how things are decided, and if one person is fundamentally in charge, that’s a good thing too. When we started Onyx, there were three people. We were equally endowed with powers, and that created plenty of challenges as we grew into an 800-person company. When we started Smartsheet, four of us started it, but I was in charge. That was very clear and it eliminated a lot of extra hassles.

 

Clint and Shelly Morse, The Mosaic Company. Photo by Rachel Coward

Clint and Shelly Morse, The Mosaic Company. Photo by Rachel Coward

Complement Your Partner, Find Your Calling

From Clint & Shelly Morse, The Mosaic Company

CLINT: I had to start some kind of business just because of who I am as a person. I had to work for myself, that’s kind of how I’m driven. … We were both destined to do something on our own. Mosaic was about finding something where we could have our own business instead of being compelled to fill a need. It could have been another type of business.

Focusing on oil and gas was opportunistic. … Those businesses are very interconnected, and we realized it was easy to get referrals. They don’t naturally compete with each other. As we did more and more work in that industry, we became experts. We weren’t industry-specific for 10 years. The more we narrowed our focus, the more successful we became.

SHELLY: You don’t really pick a business partner when you’re already married to him. I don’t think this would work for everybody. We have mutual respect. There are no gender issues. There are different things we bring to everything, from business to family. There are things Clint’s good at, and things I’m good at, and I get his help when I need it.

Make sure you get a team around you who complements you as a person. You need someone who can do it, sell it, and then know the financial end of it. There’s no one person who can do it all on their own.

CLINT: We didn’t have an end goal — not making a certain amount of money or achieving a certain size. We like the process of it all. So when I fail, Shelly’s not all tied up into me being successful in a certain way, so it doesn’t create personal stress for us. … Some of the very lowest points in our business career, where from the outside it looks like it’s caving in, we’ve been almost at our happiest. That’s because we’re not super tied into results.

SHELLY: It’s about knowing who you are, what you’re called to do, what you’re passionate about and doing it. That’s where the satisfaction comes from. You need to pay attention every day to what gives you energy, and what is sucking it out of you. Pay attention to what you love.

CLINT: Do you really love what the business is? Do you really love cutting flowers or programming or whatever it is?

SHELLY: Could you live not doing this? It’s the same question you ask when you’re getting married. If you can live without this person, maybe you shouldn’t be getting married. You better make sure you’re going to die if you don’t start this business, because you’re going to need that kind of backup when things get tough. It’s just like being married. When things get tough, if you can’t remember why you’re with that person, you’re not going to last very long.