Â鶹´«Ã½

CSE Alumni Brief Students on Profits, Perils in Tech Startups

San Diego, Calif., April 8, 2015 -- Justin Allen worked for Teradata after graduation, then joined a Bay Area startup called WebAction in 2014. He now works remotely from San Diego on purpose-built analytics applications in the growing real-time data streaming space. “I’m still a field engineer but I’m working on analytics applications and I get to live in San Diego while working for a startup,” said Allen. “It’s the best of both worlds.”

He was one of six alumni taking part to a panel moderated by Lindsey Fowler (BS ’05), president of the CSE Alumni Advisory Board, April 2. The alumni were joined by Jay Kunin, executive director of the Moxie Center for Student Entrepreneurship at Â鶹´«Ã½. The five other participants were Taner Halicioglu (BS ’96), Jennifer Arguello (BS ’00), Chris Schulte (MS ’05), Aaron Liao (BS ’05) and Erik Buchanan (BS ‘07).

Arguello worked at four startups over the course of eight years. The last one (Tellme Networks) was acquired by Microsoft, where she worked for nearly five years before becoming a product manager at Mozilla. She says that she found a unique opportunity in a hybrid venture, combining some for-profit venture capital with non-profit activities to create positive social impact (along with economic value). Arguello calls her current employer, the Kapor Center for Social Impact, a “non-profit, social-good startup,” where she is a Senior Tech Advisor. Asked whether doing a non-profit startup is different from a for-profit venture, Arguello first points to what they have in common. “In both cases you’re begging for money,” she says, only half-jokingly.  “In fact, social entrepreneurism can be even more flexible and easier to do if it’s for profit.” Arguello also sits on the advisory boards of organizations that promote programming education, including Yes We Code, and Globaloria.

When it comes to startups, advised the Moxie Center’s Kunin, both non-profits and for-profit companies need money in the bank. “Either way,” he said, “you need some kind of revenue model.”

Schulte was working at SAIC when he began to think about starting a company. “I was able to work on a startup in my spare time, mainly in the evening, while I was also working full-time for SAIC,” said Schulte. He became CTO and cofounder of MyCase, Inc., which made management software for law practices. Schulte stayed on when the company was acquired in 2012 by AppFolio. Recently, he left the company to think about the future. “Now I’m on an unspecified vacation,” he told the CSE students.

Alumni Board president Fowler, who works for online retail giant Amazon, warned students to be careful about working on a startup from the comfort of a full-time company job: “You have to make sure that your employer doesn’t have any claim on your idea,” said Fowler, “especially if the future business is in some way related to your current job.”

After graduating with a major in computer engineering, Aaron Liao worked at Microsoft for six years. He is currently the “evangelism director” at BitTorrent, and once again, he’s “starting to look for new startup opportunities.” Liao and others were asked about the biggest difference between working for a startup and working at a large, established company. “In a startup you wear many hats,” said Liao. “At Microsoft my job was very defined.”

“A startup company also means that you really own the company’s success or failure – you’re more invested in what happens,” added Erik Buchanan, engineering lead and “startup entrepreneur” at Connectifier, who worked at multiple large enterprises before the startup, including Microsoft, Intuit, and Google. “What happens at a big company still matters, but you don’t feel it so personally.”

One student asked about the wisdom of starting a company with friends. “It’s the founder’s dilemma,” said Moxie Center executive director Kunin. “Your best chance is founding a company with people you have worked with before – not friends, not family.”

Schulte added that it’s important to bring together a diverse group of people, which looks better to investors when they are evaluating a startup’s potential. Allen said that company founders also “look for maturity on the part of other founders, especially evidence that they have been involved with a good startup previously.”

However, warned Liao, “past performance is not a predictor of future success.” He says many startups run into trouble if their product differentiation is not sufficient.

“You also have to look for a solid monetization plan,” added Allen, “as well as details about the startup’s burn rate [how fast it is running through whatever funding is available], the valuation of shares outstanding, and whether it’s clear how the company is spending its money. You’ll also want a reasonable base pay, but sometimes it’s important to other founders that you also have skin in the game.”

One student asked whether it makes sense to try a startup outside of Silicon Valley. “Maybe they’re more organized there, but San Diego is really growing in venture capital and startups,” said Halicioglu, a startup advisor and angel investor, who worked at two of the most successful startups ever, eBay and Facebook, and now lectures in CSE. “You may have to approach angel investors in the Bay Area as well, but they are likely to appreciate that the cost of starting a business is generally cheaper in San Diego.”

Liao, said the best way to ensure that you’re not at a disadvantage starting a company in San Diego is to “just be everywhere,” especially via networking opportunities in the region and in northern California. Liao said that he tries to be “at every meeting and networking opportunity, regardless of location” to sign up new providers, and it shows: the number of developers jumped from 1,400 to over 7,000 since he joined BitTorrent a year ago.

The alumni speakers generally felt that graduate school can be a plus for those working in a startup, but it’s not obligatory. “You learn soft skills in grad school that may make you more successful in the company,” said Buchanan. “But it’s what you can do that really matters.”

Students also asked whether it made sense for a computer scientist or engineer to go back to school to earn an MBA before trying to do a startup. Some thought it worthwhile, if only to establish a business network. The consensus, however, appeared to be that company founders could be successful as long as they know how to pull together the right team to deal with the ups and downs of starting a business.

“What you do today may change,” said Halicioglu, “but if you have a strong team, that’s the most important thing.”