|Gunil Chung Interview|
|More of This Feature|
1: Sources of Inspiration
Part 3: Volunteering & Networking
|Elsewhere on the Web|
M/C Venture Partners
NFTE (National Foundation for Teaching Entrepreneurship)
KASE (Korean-American Society of Entrepreneurs)
Gunil's Ryze Profile
SA: You founded Empact Solutions and were the CEO for the startup phase, but you've moved to Director of Product Management and now Director of Deployment. What's the story there?
GC: I was the founding CEO of Empact. When we started, there were 6 founders. I worked as CEO until last year, when we got funding. It was my goal to get us to that stage, and then to step down, so that a more experienced CEO can take us to the next stage. So I moved to product management and now to deployment (and I do a bunch of other things).
SA: Where was your initial funding from?
GC: Initial funding came from the founders and the family and friends who believed in us. Then we self-funded the company by doing a lot of IT consulting while we refined our business strategy. We received additional investment from angel investors along the way and received our big investment last year when our business model was refined and crystalized.
SA: But it was your plan all along to step down as soon as you got institutional funding?
GC: Yes, definitely. I knew that (1) I wanted to take the company to funding, and (2) I wanted to step down and not let my ego get in the way of the company's success. I had very clear and strong feelings about that.
SA: Where and how did you find your new CEO? And what were the selection criteria?
GC: Good questions! Well, I worked with the VCs and a fellow co-founder, hired an executive search firm, and selected the best available candidate. Selection criteria were: (1) lots of operational experience to run a tight ship and grow the company, (2) strong industry experience so that he/she "gets" what we're all about and is able to articulate the vision to everyone, and (3) a good fit with the company and its team. Personally, I wanted to learn from this person, and fortunately, I believe we have such a person and he's been great about mentoring and helping us to grow.
SA: So the
VC didn't just hand you a name and say, "Here's your new CEO"? I've
heard a lot of horror stories about that.
GC: Oh no, M/C Ventures has been great to work with. They've been involved closely as advisors and helpers
and worked with us every step of the way. They always exert a strong influence on our decisions, but they are careful to never force a decision. They ask great questions (the right questions), provide good feedback, and leave the execution to us.
SA: It's nice to hear that kind of success story. VCs have gotten a pretty bad rap among the tech community lately.
SA: You went straight into a startup right out of college, one that was highly successful, going public in four years and then acquired by Borland. That was right during the hey-day of the technology boom, but the economic landscape is totally different today. What lessons did you learn from that success that are still applicable today?
(1) Hire great people.
We were fortunate to have very, very smart people straight out of college and grad school who were hungry to change the world a little for the better, and in the process, make a name for themselves. There is a saying, "you can buy my arms and legs, but you cannot buy my heart and back." Everyone there believed in the company and the vision, and we gave it all. The energy was incredible. I still have very strong friendships from that crew.
(2) Don't get money unless you need to, and get it before you need to.
We were self-funded through a large IT consulting team. It also helped that we had the backing of an existing company (Cambridge Technology Group) to help us with leads and investments. But the IT consulting that we did really helped us to grow without having to spend a lot of time and effort in seeking funding.
(3) Have a solid business model, with paying customers.
It's all about having a real product that delivers real value to real customers. That, more than ever, is true today. OEC got started in the early 90's when the tech market actually was not that great. We survived by having real reference customers that spoke well of us.
SA: So you used the consulting as a way to build reputation and a mailing list until the product was ready?
GC: Yes. And consulting led to product sales, and product sales led to consulting work. It was a nice cycle, one used by many vendors today. A lot of IT sales is actually consultative sales, where the solution you provide is a combination of products and consulting. In middleware (which is what we built), that's very true.
SA: What do you think of the market now for existing or would-be entrepreneurs?
GC: Tough, challenging, but full of opportunities. It's tough because funding is scarce and good people are very reluctant to move and take risks. So two of your most important assets are tough to acquire. It's also tough because IT budgets are tight. So if your business venture wants to sell to Fortune 500 types of companies, you're going to have a hard time closing the deal. But this means that the landscape is wide open for people with a strong team, a solid business plan, and perhaps an ability to survive for the next year or so to really take a leadership position in the marketplace.
SA: In other words, those that succeed will have staying power? (I agree completely, by the way)
GC: Yes, exactly. It's almost all or nothing. If your business and idea are compelling and real enough, you will have no trouble attracting funding and people, because they're out there! But the threshold for success is higher than before.
SA: Back to the funding... how do you recommend finding a good VC?
GC: I guess if you're a new entrepreneur and it's your first time around the VC circuit.....
(1) Know yourself and know what you're selling.
(2) Know the VCs, their portfolio companies, investment strategies, and what they're likely to be interested in.
(3) Do research (ask people) and find out which VCs have a "good" reputation. Which ones are good to work with, etc., and
(4) Network like crazy so you can meet them.
We met M/C at a conference in Boston serendipitously, did some research later, and found out that we were either a great fit, or a very bad fit. Turned out to be the former.
SA: Sage advice! Where do you see innovation happening in the future?
GC: Most likely in places I did not expect! But I'm intrigued by what's going on in developing countries. For example, I read that the government of Argentina has decided to standardize on open source software rather than off-the-shelf software because it made more sense to them economically. And other countries such as Bangladesh and India are doing similar things, if not at the government level, then at the grass-roots or even corporate level. With all these nations building software to solve real-world problems using open source tools and technologies, I expect that there will be a deluge of new innovation in that space in the next decade or so.
SA: I happen to agree. Any given software market segment commoditizes over time, and as it matures, bundling from the larger vendors and open source alternatives tend to squeeze the middle. I think there's a very short window of opportunity (2-3 years in current market conditions) for an innovative company to make a profit. If they don't almost completely dominate that segment within that time frame, they're destined for either an unfavorable acquisition or failure. Or they have to reinvent themselves.
GC: I think that's an astute observation. You have a lot of factors that affect that window...
(1) Value proposition must remain current. If you don't solve it in that timeframe, others will, and you'll be squeezed out
(2) As you point out, larger vendors and open source alternatives will come up with solutions, especially if your idea is a good one.
(3) If you don't turn a profit in that timeframe, you'll most certainly run out of cash and will have a tough time raising additional capital, which will doom you to the fates you mentioned.