A Software Start-Up Scratches For Survival

Francisco Assis Rosa and
David Durand of Tizra

Letter From (outside) Silicon Valley


Most days around 8:00 a.m. Eastern, David G. Durand is reminded how life at a start-up is worlds away from the customs and cubicles of corporate America.

That's the time when--from his bed in a three-story, century-old Colonial outside Providence, R.I., home to fledgling software company Tizra--the 46-year-old entrepreneur hears his dog bark, followed by a key rattling in the front door lock. Seconds later, Tizra's chief marketing officer, Anne Orens, will trundle up the stairs--right past Durand's bedroom. "I try to be tactful, but I like to work early," she says. "And Dave is more of a night person."

Abe Dane, one of Tizra's four co-founders, doesn't mind the informality, either: "I don't think I could ever work someplace where the CEO didn't greet me in his bathrobe."

Just 18 months ago, Durand, Orens, Dane and Francisco Assis Rosa, an open-source code aficionado, were coworkers at the Providence office of Ingenta, a U.K. software outfit aimed at the professional publishing industry. Durand, however, had bigger plans: He saw a need for software that would give publishers more control of their content on the Web.

The foursome had the makings of a good team. Durand had taught computer science at nearby Brown University; Orens, 50, had worked at the University of Chicago Press; Dane, 45, did a stint as a journalist with Popular Mechanics; and Rosa, 36, spent 14 years helping design Web-related software for behemoths like McGraw-Hill. The real question: Did they have the courage to strike out on their own?

"We're not exactly thrill seekers," says Dane, a father of three. "We all have mortgages, families." Of the four, Dane had the most memorable--and painful--entrepreneurial experience: He started a photo management Web site that predated Flickr--and, sadly, the surging use of digital cameras.

The Idea

Still, Durand was onto something. Even though Google digitizes countless books, less than 5% of all titles are available online. Professional organizations, from the World Bank to the Girl Scouts, are putting their books and manuals online, too. Of the $15 billion total market for "professional" pubs, the electronic segment accounts for $1.6 billion and is growing at 40% a year, estimates Orens.

Yet selling targeted, book-related information online isn't easy. First, publishers either have to build a customized Web site or let their work get lumped into an aggregator, such as Google Books or Amazon.com; that's like selling Harry Potter next to the snowshoes in Wal-Mart, Dane contends.

Readers have a beef, too. Publishers tend to present text files in Adobe Systems' portable document format (PDF). While the pages are wonderfully clear, users have to download the entire document--which for books can run hundreds of pages--even if they just want, say, that one chapter on thin mint cookies.

Durand imagined a software service that would both let publishers slice huge PDF files into smaller chunks and--most critically--easily reconfigure their Web sites to peddle unique packages of content. The new company could then make its money through subscription fees and by taking a cut of content revenue.

The Decision

At first, the foursome proposed spinning off a group from Ingenta. When that idea got shot down, they huddled together over conference calls, patching together cellphones and Skype connections. They had heart-to-heart talks with their families. Finally, on one cold February evening, they convened in a lonely café in the Providence train station, where Orens awaited a commuter train to Boston, to hash out the final terms.

"These chances don't happen much in regular life," says Dane. "Usually people just grumble about their jobs."

Their lawyer cautioned the group to leave Ingenta without taking a scrap of property that belonged to the company. They did have a few secret assets, though, including a huge stash of old computer gear, spouses with jobs, a lot of friends in a town with relatively few start-ups and Durand's very big house. Better yet, Durand's father, a retired Spanish literature professor, agreed to stake them with enough seed money to last about eight months.

Committed, the group first had to pick a name. They agreed on "Tizra"--after an extract of Moroccan sumac trees used to make flexible, long-lasting leather bindings for books.

As for digs, Dane coaxed a friend who ran a nearby bicycle welding shop to clear out some room amid the torches, machine tools and exotic metal tubing. Then they headed off to Home Depot, bought several sheets of white metal paneling and screwed it to a wall. Voila: the official brainstorming "white board."

Durand scavenged parts of an old Sun Microsystems workstation to build a server (which runs on free Linux software). "[It] was part of a hosting setup for the American Medical Association," he says. "I feel sad when I see people throwing away stuff that was once cool." Rosa built a second server out of old parts he had amassed; it sat near the television in his living room until his precocious 2-year-old shut down the network. "She wasn't trying to turn off Barney," Rosa insists. "She really was trying to disconnect the network!"

The Struggle

At most start-ups, the early days are hard and lean, and everybody has to share the load. Rosa, for one, agreed to accept a bit more equity in lieu of pay for the first six months. "My wife and I take turns being crazy," he says cheerfully. For now, she has the corporate job with benefits.

For their part, Durand and his wife Eilli Mylonas, soon gave up their house. Mylonas, an associate director in the Scholarly Technology Group at Brown University, says she doesn't mind--even when the Tizra team shows up early. "Sometimes it's very convenient," she says. "They can collect packages dropped off on the porch. And Abe is really good about sending me an email if the dentist calls about an appointment. Dave never tells me."

On the third floor, furnished with an old sofa, surplus desks and a microwave, the team spends the day hunched over their computers, combing the knots out of the software code and communicating with potential customers. While packed in close enough to hear an irregular heartbeat, they still post notes for each other on the "corporate wiki"--a private, internal site that holds every key document describing the company and its work.

Tizra doesn't have the frat house feel of a Silicon Valley company run by people who routinely get carded at bars. As afternoon sunlight filters through one of the house's stained-glass windows, Durand's teenage daughter joins the group on the third floor and does her homework on a spare desk. Dane's preschool children flop on the floor in the front of the television next to a six-foot-tall cutout of Buffy the Vampire Slayer. Two dogs monopolize the one sofa.

"We have had a few unfortunate barking incidents during conference calls," Dane sighs. Even so, when Tizra hires its first new employee, "compatibility with dogs" will be a must.

Six weeks into the start-up, Rosa hit a key milestone, churning out enough code that he could demonstrate how future customers would be able to drag and drop packages of content on their Web sites. "It wasn't a mockup--and it was real enough to make us believe this idea would truly work," Dane says.

Seven months later, however, cash was running short. Dane scrutinized every pizza bill. Rosa taught them to make a Brazilian roast by rubbing a tough cut of meat with salt and cooking it for hours in a kettle. ("Feeds eight for $12.00!" Dane declares.) Orens dipped into personal savings. Durand decided to bet the house--literally--on the company and applied for a home equity loan, but there was a fragile month before the money would be on tap. Dane stepped up: "It was my turn to say, ‘I really believe in this.' " So he made a bridge loan to Tizra to keep the company running until the loan came through.

The Break

The good news came on (Friday) April 13: Tizra snagged $500,000 in funding. Its benefactor, the Slater Technology Fund, uses state money to provide seed financing and advice to technology start-ups in Rhode Island. Durand and Dane began tapping Slater for guidance soon after Tizra launched. Over several months, Slater executives coached the team on their presentations--especially when it came to the company's financial projections.

"The first time we met, they told us why our numbers didn't make sense," Dane recalls. "We redid our analysis and 36 hours later had projections based on industry norms."

Ultimately the Tizra story makes good business sense, says Thorne Sparkman, Slater's managing director. While getting books online has lagged music and videos, "I feel the market is now at a tipping point and the approach Tizra is taking is immensely practical," he says.

The next big hurdle: scaring up some paying customers. Orens is working with five "beta" customers including a large nonprofit organization, a commercial publisher and a scholarly journal. All are testing the software and offering critiques, she says. With any luck, Tizra will be able to celebrate its first trickle of revenue in June.

"I'm in charge of optimism," Durand says. "I haven't had a moment when I didn't think we could do this."

http://www.forbes.com/entrepreneurs/2007/04/16/google-walmart-amazon-ent-manage-cx_ec_0417startup.html

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Column: Follow the talent

Letter From Silicon Valley

Burlingame, Calif. -Some people watch Wal-Mart sales to track the economy's health. Others believe they can divine the harshness of the winter by measuring the stripes of the woolly bear caterpillar. (There is some lingering disagreement over whether the woolly bear is a leading or lagging indicator.)

“Talent” is a hand-wavy way to describe the people every company dreams of hiring: folks with powerful instincts for technology or marketing, or industry trends who are willing to work insane hours to tackle seemingly impossible tasks. A decade ago, all roads seemed to lead to Microsoft; more recently, of course, they end at Google.

But there’s refreshing news in Silicon Valley. Google is still a hot ticket. But lots of talented young people are widening their horizons. Chat with current M.B.A. students from top schools--as I’ve been doing lately--and it’s clear that their dreams involve lots of other companies, including spunky little start-ups that most of us haven’t heard of yet. Going to work at those outfits will be risky indeed. But it’s that kind of risk-taking that helps the Valley rejuvenate itself.

This winter, swarms of graduate business students have been visiting the Valley to check out opportunities for summer internships and jobs. About 85 students made the trip from MIT’s Sloan School of Management in early January.

In three days, the visitors from Boston enjoyed a whirlwind of introductions and sneak peeks. They talked with executives of fledgling start-ups and toured companies with market caps in the billions. They chatted with venture capitalists. And of course, they lunched at Google.

A number of students have an eye fixed on the very long horizon and so hope to land jobs in organizations that will build skills they expect to use for decades. Garrett Dodge, a first-year student, says Symantec and SAP are high on his list. “I want to see how great organizations are run--and if it leads to a start-up down the road, that’s all good.”

Others found inspiring signs in companies that the conventional wisdom had once dismissed. “There was a sparkle in the eyes of the people at IBM's research facility,” observed Donna Pitteri, another first-year student.

And plenty of the students--some of whom have already run their own businesses--are lured by start-ups. “The point isn’t just to get a job--it’s to do something you’re passionate about,” says Antonio Sosa-Pascual, a first-year student who helped coordinate the Sloan tour. The commonality is that there is no commonality.

Sosa-Pascual is intrigued by professional networking ventures and alternative energy. That drew him to oDesk, which is serving as a clearing house for engineering talent around the globe, as well as NanoSolar and Miasole, which aim to build cheaper solar cell chips. He gave good marks to the oddly named Fat Spaniel, which uses Web-based software to measure energy savings too.

Chris Johnson, who has a background in aerospace engineering, was thrilled to look under the hood of Tesla Motors, the start-up building a powerful, all electric car. Also meaningful: Conversations with one of the more hardcore start-ups, a semiconductor company called Cavium Networks.

Sloan students who have already started companies on their own savored their venture capital time. “You hear that most people have 20 seconds to give an elevator pitch on their business ideas,” says Ryan Tseng, a 23-year-old who has already founded a company that makes wireless power systems for consumer electronics. “Many of these people gave us a couple of hours of their time.”

Ted Hamilton savored the back story behind Pandora Music, a seven-year old company that’s beginning to find some traction after navigating through some choppy economic times. “I was really impressed with their persistence and passion,” he says.

Just as good: A reception at San Francisco’s panoramic Carnelian Room atop the Bank of America building, where Hamilton got a warm reception from some big company executives when he described one business idea he has been nurturing. “Now I need to see if I can get the business off the ground while I’m at school.”

It’s easy to look around the Valley and see signs of a bubble, but all those companies and choices are signs of health. And these students--and plenty of other smart people--are picking their spots based on what ignites their passion and where they feel they can learn the most.

So what about Google?

Before the Silicon Valley trek, none of the well-known Google perks--the gourmet food, the onsite laundry, the pay or the stock options--seemed to tweak the interest of the Boston students. This made them rarities, because the Googleplex is teeming with applicants: The company says it gets 3,000 applications per day.

And it has places for many of them--Google expects to double its 10,000 headcount by the end of 2007. To put those numbers in context: Microsoft passed the 10,000-employee mark in early 1992 but kept growth to about 3,000 a year until 1998. Last year, it employed more than 71,000 people.

In theory, that kind of growth should deter ambitious applicants--how do you make your mark when there are 19,999 co-workers hired ahead of you?

But Google’s “managed chaos” atmosphere--more collegial than corporate--helped sway some of the visitors. So did talking to a dozen or so former Sloan students who talked about their experiences after signing on with the search giant. “The students got to talk with people with the same values and intellectual horsepower that they have,” says Kenneth Morse, who directs Sloan’s entrepreneurship program.

“I saw my freshman counselor from MIT,” says Johnson. “He likes it. Google still has that start-up vibe--the opportunity that people can contribute outside of their prescribed roles.”

The visit turned a few more heads. Post-visit, an informal poll found 42% of the Sloan students were upbeat about summer internship prospects at Google and 26% would consider a full-time job.

Where those students and the other three-quarters of Sloan’s entrepreneurial program wind up, I’d be willing to bet they will make a difference. And as Bill Gates always warned, it’s the little company you don’t suspect that can change your world.

http://www.forbes.com/home/technology/2007/01/12/valley-mba-google-tech-cz_ec_0115valleyletter.html

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