In this episode, we delve into the world of customer obsession and its powerful impact on business growth and board governance. Our guest, Marbue Brown, shares valuable strategies and insights that can elevate your business to new heights. 🚀 Discover how customer obsession can drive transformative growth. 📈 Explore effective strategies for board governance and value creation. 🎧 Listen to Marbue Brown's expert insights on our podcast. Join us as we unlock the secrets to creating exceptional customer experiences and fostering a customer-centric mindset within your organization. Don't miss out on this enriching conversation! Tune in now and gain a fresh perspective on achieving success through customer obsession
WATCH THE EPISODE NOW…
Listen to The Episode
LISTEN NOW! PRIVATE: EPISODE #100 – WHO SAYS I CAN’T – JOTHY ROSENBERG
BY DAVID A. ROSEN | DAVID A. ROSEN & JOTHY ROSENBERG CEO
Notes and Transcripts
Welcome to the Amazing Exec show. I’m your host David A. Rosen, and I’m here to introduce you today to someone very special on episode 100.
His name is Jothy Rosenberg. And he has been a serial entrepreneur, founding many, very deep tech companies, as well as a strong business and technology leader working on some great programs in NASA and security programs at Draper labs and others.
But what you’re going to see is not only a business athlete today, but you’re going to see an amazing human athlete who’s overcome his handicaps of being an amputee since he was 10 years old. To this day, he is still involved in racing and sports as active as anyone else I know if not more.
You will learn more about his perspectives as a 9 time CEO in the areas of:
- Being a Balanced Leader with a strong support network and family to help him succeed and navigate through challenges
- Managing People in various stages of growth from startup to growth to scale
- Commercializing Deep Technology and creating industrial products for larger markets
- Views on the value and roles of Board Governance and the relationship between the CEO and the Board, including investors
- The Value of Independent Board Members to the Business
Intro-Jothy Rosenberg with David A. Rosen
Emily: Acrelic Group welcomes you to the Amazing Exec show where business leaders learn from other leaders. Join us along with your host, David A. Rosen, the CEO of Acrelic Group. We discover and dive into stories from executives, founders, and owners, and what separates them from success and failure here in see amazing leaders from startups.
And global leading companies now kick back and enjoy watching our video cast or listening to our podcast. The choice of media is all yours. Come take this amazing journey with us and learn how great people do the thing they do.
David A. Rosen: Hello. Welcome to the Amazing Exec show. I’m your host David A. Rosen, and I’m here to introduce you today to someone very special on episode 100. His name is Jothy Rosenberg. And he has been a serial entrepreneur, [00:01:00] founding many, very deep tech companies, as well as working for some great programs in NASA and security programs at Draper labs and others.
But what you’re going to see is not only a business athlete today, but you’re going to see an amazing human athlete who’s overcome handicaps of being an amputee since he was 10 years old. Still involved in racing and sports as active as anyone else I know if not more.
here’s some examples of what I heard that you’re going to find. Very interesting.
Jothy Rosenberg: I used to make the mistake that these very nice people, which are your investors
they’re very friendly. Because in that business, you can’t be successful as an investor unless you are friendly and welcoming. There’s a lot of investors out there and you get to pick and choose. The mistake I made early in my career [00:02:00] was to think that, oh, these are really great people and they’re my friends and they’re not your friends.
As the CEO, you don’t make that mistake. They are looking out for themselves, their firm and their investors. And of course, if they’ve invested in your company, they want your company to do well, but they’re not your friend.
There’s two adage that applied here. One is hire slowly, fire quickly. That’s part of the culture. If you put up with people that are not productive, that are dragging the team down, that’s when people start to talk, that’s where politics comes in and it’s not helpful if you act quickly, if the bozo bit has been flipped and there’s no flipping it back, once it flips, it’s permanent.
Then as the [00:03:00] leader, you have to act very quickly. And when you do the rest of the team is thankful. You’ve listened to them. You’re in tune to what’s going on within the team and you just cemented the team. One more bit by doing that by acting quickly and taking care of it. Okay.
David A. Rosen: So I hope you enjoyed that preview.
I look forward to hearing your feedback and I hope you enjoy the show and please hit subscribe. If you want to know more, we’re going to be releasing programs every couple of weeks, and we look forward to interacting with you and engaging more with some live programs and webinars in the future. Be well be happy, healthy and be safe.
[00:00:00] Jothy Rosenberg: Hi, nice to be here, David.
[00:00:02] David A. Rosen: Hello. Let me tell you about Jothy. He has a great background. Jothy founded nine high-tech startups in the areas ranging from parallel computers, to internet security, with some internet infrastructure, television, broadcasting equipment, and Hollywood special effects startups in between. Two of his startups had exits of over a hundred million. In the middle of these, Jothy did a stint at Borland international, where he ran the programming languages division.
Borland moved into Boston for an acquisition where he has lived now for 26 years. In 2009, Jothy joined defense contractor, BAE systems and helped lead the DARPA crash program to develop a processor immune to cyber attacks. In 2015, he moved that project to Draper labs to further develop it. And in 2017, he spun it out of Draper as a commercial spin-out and founded [00:01:00] Dover Microsystems, which is now selling Jothy has numerous patents has authored five books, including his memoir entitled, who says I can’t and his newest work adventures on the can-do trail, actually a children’s book yet another book is underway.
He is calling antidotes of an incorrigible entrepreneur. He developed a television series for YouTube. That is also called, who says I can’t. He is the founder of the nonprofit. The who says I can’t foundation that helps those with disabilities regain their self-esteem through success. At high challenge athletics. His related Ted talks explains his theory as to why those with a disability frequently outperform their able-bodied compatriots.
Jothy also has a PhD in computer science from duke university, the Harvard of the south. So Jothy, we [00:02:00] welcome you. You have such an amazing background and not only as a technical and scientific lead, but also as a founder of many companies tell us more about yourself and your, and how you did this and, and your experience..
[00:02:16] Jothy Rosenberg: As you mentioned in the intro I did spend some time at Duke. So after my PhD, I was on the faculty for five years. And you look like what you do when you’re a faculty member, you get research projects. And I got one from NASA that was pretty exciting. NASA wanted, this is back in the eighties and NASA wanted a single board thousand processor essentially supercomputer to, be on board the space shuttle and do what’s called telemetry processing. What was happening was the space shuttle. When it goes around the earth, it gets into the sun’s shadow. And at that, [00:03:00] for that period of time, which is quite a few minutes, there’s no ability to transmit data back and forth, which is dangerous. The space shuttle has to be constantly aware or any spacecraft, of what it’s near and what kind of space debris or any objects whatsoever that might be dangerous. So it was an exciting project. We literally had to buy our own supercomputer that went into a raised floor room in order to simulate this single board processor. And we used up every single shred of performance in that super computer to simulate our machine. And so w when this was, this was a successful project, I had this idea, which had no basis in fact that, Hey, this ought to be a commercial company.
I was a university professor. I really had no way to know whether that was true or not, but I got it in my head and in North Carolina that really at the [00:04:00] time, anyway, that really wasn’t something that was going to be feasible there. So I told my wife we’re going to have to move to California.
She’s from Ohio. And she. don’t want to move there that, that whole state’s gonna have an earthquake and fall into the ocean. And I talked her into it in 1988 and we lived there for about eight months and the worst earthquake in a hundred years hit, it was called the Loma Prieta earthquake. It was a 7.1.
It was the one that they call it the world series earthquake. You may remember it was during the middle of the world series game between San Francisco and Oakland. so that’s how I got started. My first startup was in California based on that fun work,
[00:04:50] David A. Rosen: And how this was your wife with you? After that,
[00:04:54] Jothy Rosenberg: Some of us end up just getting lucky, in our choice of a life [00:05:00] partner. And I’m extremely lucky. This just happened. We have to learn how to live with it.
[00:05:04] David A. Rosen: Good. Good. So you got started and what did you think you were talking about commercializing the product? Did that happen? Were you thinking about it?
[00:05:12] Jothy Rosenberg: the reason we moved to California was to build a startup that did that, that exact thing. And we do, we were successful. I found a group of people. That were from DEC digital equipment corporation. They were actually at what DEC ha had out there called the Palo Alto research center park.
And a bunch of those people were interested in this concept of a mat, what was called a massively parallel supercomputer. And they welcomed me in to, to bring the knowledge that I had from the research side. Myself and one of my grad students from duke we’re employees, 12 and 13, I ended up running the software group for them. My [00:06:00] students learned a lot while he was there for four years. And then I decided to do something different and he decided to stay and he became the CEO of that. And then all these years later after he did, a bunch of amazing things, he’s the president of the San Jose sharks.
[00:06:14] David A. Rosen: awesome. That’s a good sign of a good leader where they’re bringing in people that Excel beyond the place where they were at. So that’s another Testament. That’s good. So tell us something about yourself that people don’t know. That would be interesting to know.
[00:06:31] Jothy Rosenberg: The reason you mentioned who says, I can’t several times in the intro. It’s true. It’s the name of a book I wrote. It’s the name of a TV show! My Ted talk and the foundation and where that came from is, and I actually right over the camera is the plaque from the us patent and trademark office that says that Jothy Rosenberg is the holder of who says I can’t as a trademark.
And where [00:07:00] that phrase came from was. as you probably all imagined I have a disability, I lost my leg when I was 16 from bone cancer, which is very rare hits only about a thousand teenagers, only hits teenagers in the U S a year. And that was in 1973. We know a lot more about this kind of thing than we do did then.
And people were saying to me almost immediately, you can’t ski anymore. And I love skiing. You can’t play football, you can’t skate. I loved hockey. I lived, I was growing up in Michigan. Of course we played hockey. It on and on, you can’t. And so that. That is a motivating thing to go through.
Yes it crushes your self-esteem and that’s dangerous. Of course, humans can’t live without self-esteem. But it also is a rallying cry to [00:08:00] eventually you get this I’ll show you kind of attitude. And I became a double black diamond skier. I do the Alcatraz swim from Alcatraz island to San Francisco every year, 27 years in a row.
I do marathon bike rides, so I became this sort of an extreme athlete and in the process discovered that it was sports. That was how I rebuilt my self-esteem. And and then I discovered that too, when you have a disability and you deal with an insurance company, the insurance company’s sole focus is to help people ambulate again.
So in my case, it was with a prosthetic leg for walking. Just walking to, and from your place of business your, the restaurants that you’re going to the [00:09:00] stores, but they refuse to help on any sports equipment. And so I created this foundation for doing that and just to fill out, where did the phrase come from in the first place?
It wasn’t just that people were saying camp as I got started but then even after. Already accomplished these sports to, to a great degree. I was running a company and I was sitting at a staff meeting and I was telling people with great joy that I was going to support one of our employees who was going to do this amazing feat, which was to ride from Boston to New York, four days of a bike ride to raise money for aids research.
A cause I thought was really worthwhile and important. So I was going to be one of her sponsors and one of the people on my staff turned to me and said it’s so wonderful that you’re supporting that. And it’s so sad that you can’t [00:10:00] do something like that yourself.
And I bought a bike that afternoon and I started and I was determined that the next year I would do that.
Which was a scary thought because I, when I got on a bike again, first time since I was a kid, I couldn’t ride more than a mile or two without my leg being exhausted. And all of me being exhausted, but it’s the kind of thing where, all right, I’m focused, I’ve got discipline, I’ll keep at this.
And I started to do five mile rides, 10 mile rides, 50, 70, a 70 mile ride takes you all day, basically. And and so I was trained. I was ready and I did the bike ride from Boston to New York three years in a row. And and since then I’ve done a fundraiser, bike rides. All over the place.
I did the Lance Armstrong ride with him [00:11:00] also three times, which is a hundred miles around the city of Austin. That’s back when we thought Lance was a good guy.
[00:11:06] David A. Rosen: Wow. That’s such an amazing story, Jothy and such a tribute to your personality and what drives you as a business leader. So tell us what are the major lessons that you’ve learned through your career as a, an employee, as a academic and as a business leader in those roles? Tell me about the things that you’ve.
[00:11:29] Jothy Rosenberg: I think some of the things I’ll say, you’ll hear from a lot of people. But I worry that sometimes people. Pay, maybe not enough attention to these things and they just say them, but the most important thing are the people aspects of the job of leading a group or a company. And making sure that you you really hire well that to me, the way, the best way to do that, and you can’t do this at the beginning of your career, [00:12:00] but is my phrase for it is hire no strangers.
And what I mean by that is tap your network, tap the people that have worked for you before. If that was a good experience for both of you, then there’s a chance that you’ll be able to attract those people. And so this last company Dover in the first 20 people, I was able to hire no strangers. These are people.
Had worked for me before, or one of the people I hired, they that they had their own network and they did the same thing. So one step removed was just fine, but it’s, and what it did was it created a team that was extremely efficient. There’s no politics. Everybody trusts that everybody else can do their job.
And communication is extremely efficient because each other.
And so you create a very high performance team in this way. And the critical stage [00:13:00] is about that first 20 people after that, the next stage is to get to 50 people. And at that point in, you’re going to recruit people but everybody.
Has the same standards, you’re part of a very tight police of group. And in most startups, you’re going to, you reach a plateau where the 20 person team is the team that’s got to prove product market fit, really start to execute the go to market strategy. So that is the team that’s going to be bound to each other for some period of time.
[00:13:33] David A. Rosen: That’s an interesting point. When you’re hiring no strangers, have these people typically worked together in the past and also know each other, as opposed to having you as the only point of reference.
[00:13:43] Jothy Rosenberg: well, a little bit of both. So you might have two or three people that you pull in that were with you at one company and then two or three at a, at another, it’s not like all 20 people just came, wholesale from another [00:14:00] experience.
But it’s still there. There’s this trust that’s built in.
It’s okay I worked for this guy before. I trust him to have hired people that are like-minded that are, that are, like me. And so there’s this, very nice layer of trust that exists. And so not only does it help make sure that there’s no wasted time and there’s no room whatsoever for politics and a 20 person company.
But it also enables you to do the other super critical thing that the leader has to do, which is set the culture. And you do that, not by. Talking about it, but by with your actions and what values you have. And and so from four years, I believe, until the company’s, more than 75 people, I do an all hands meeting once a week.
And it’s a [00:15:00] super important part of what we do. And I’m, I believe that you want to be about as open as you possibly can about what’s going on, including things that aren’t good. You can’t just say the good things, the platitudes you have to say we didn’t close that deal. And here’s why, and here’s what we’ve learned.
Things that aren’t necessarily good news to the company, but that’s when they really start to trust you even more. So that’s the.
[00:15:29] David A. Rosen: I think you’re absolutely dead on. What if I told you that I met a CEO recently who did not want to set the culture of their growing pharma company? . How would you react to that?
[00:15:47] Jothy Rosenberg: What I wonder what does he think his job is? I’ve known CEO’s that have a COO who ends up becoming the person who’s really leading the [00:16:00] company. And what is the CEO doing? CEO is raising money and investor relations and that sort of thing. That’s a different model. I think that can work. But if his or hers if this person’s answer to that is I don’t think that, there’s no COO and no I’m not setting the culture. I don’t believe that company will actually end up being successful. I believe the culture is that important.
[00:16:27] David A. Rosen: You bet. I think you’re absolutely right. And it’s scary because if you don’t know what the culture is going to become, or don’t set a north star viewpoint for it, you’ll soon find a culture being created and you’re probably not going to like it.
[00:16:43] Jothy Rosenberg: Let me give you one other anecdote, from my experience. So we’re all humans and none of us can say we’re perfect at hiring. So we will, to the end of our careers, we will still make [00:17:00] mistakes in hiring. Once we got to the 20 person level, we hired a couple people from the outside that were not that in the, the higher, no strangers level.
And were some mistakes. So here’s where the whole team is watching you. And what I said to people when we had the first mistake and I was watching carefully what was going on. And when somebody that I really knew, never overstated things said to me, this person is not productive. They’re hurting the team.
I walked that person out the door that day. And we still pay them for two more weeks, but I said, we’re finished this. Isn’t working out that sent an extremely strong message to the team.
There is an adage that says there’s two adages that applied here. One is hire [00:18:00] slowly fire quickly. That’s part of the culture. If you put up with people that are not productive, that are dragging the team down, that’s when people start to talk, that’s where politics comes in and it’s not helpful. If you act quickly if the bozo bit has been flipped and there’s no flipping it back, once it flips, it’s permanent.
[00:18:27] David A. Rosen: Right.
[00:18:29] Jothy Rosenberg: Then as the leader, you have to act very quickly. And when you do, the rest of the team is thankful. You’ve listened to them, you’re in tune to what’s going on within the team. And you just cemented the team one more bit by doing that by acting quickly and taking care of that problem.
[00:18:51] David A. Rosen: So Jothy, you’ve talked about hiring no strangers and that culture is really critical to the success. What other lessons have you [00:19:00] learned?
[00:19:02] Jothy Rosenberg: I used to make the mistake that these very nice people, which are your investors and they’re very friendly because in that business, you can’t be successful as an investor unless you are friendly and welcoming, because there’s a lot of investors out there and you get to pick and choose. But the mistake I made early in my career was to think that, oh, these are really great people and they’re my friends and they’re not your friends.
And I don’t mean that in a bad way. And I don’t mean to insult anyone who might be listening to this. Who’s an investor, but it’s important that as the CEO, you don’t make that mistake. And so they are looking out for themselves, their firm and their investors, they are. And of course, if they’ve invested in your company, they want your company to do well, but [00:20:00] they’re not your friend.
And and here’s a case in point. So one time I was I was looking for the, my next role. And I knew a bunch of VCs in the area and I went to one of them that I liked a lot. And I said to him, do you have a couple of your portfolio companies where you have a role for me?
He said, oh yeah, absolutely. Here are two that I really want you to take a look at. And so I went and I went and interviewed and I liked them both a lot. And I said to him okay, which one is the better one? And that’s the point where I was thinking he would be looking out for what was the best thing for me.
And he picked the one that was the most important to him. And if I’d understood that and go on to the other one, I would have had a much better. Outcome instead, I went to the one that was essentially going to [00:21:00] be my first role as a CEO. And it was a venture back turnaround, which is an oxymoron.
And as a freshmen CEO, you shouldn’t be doing a turnaround. That’s just not right. Not fair to you. And then I had other times when I relearn that lesson when I had investors that were, that I brought in to the company and I forgot that lesson once I made that mistake a couple of times I had that very clear in my mind,
[00:21:30] David A. Rosen: Wow. It, it’s a, you’ve got a very strong theme here around the people aspects of business, which even, I include the stakeholders and investors in the people role. And in fact, this is why in, in our new incarnation of Acrelic Group, we’ve focused on when we go to market, you have to go to market with people people and business people together, simultaneously. In my experience of doing turnarounds and growing businesses from nothing to [00:22:00] something that the people far overhang, any business issues that occur in the business. If you’re not thinking about the people and getting them aligned with your new direction, if you’re not talking to them weekly and building trust and rapport, with people who need to be nimble and agile yet still focusing and converge on things that are most important and let go of those things that are less productive and strategic that you are going to do yourself a disservice and you will fail because the people side will cause the failure more than smart business process or logic or anything else.
[00:22:40] Jothy Rosenberg: Oh, absolutely. And it’s everything you said is true. There are times when you can get all of that people’s stuff, and still not succeed. So that’s just, that’s life of early stage companies. Maybe it’s life of all companies, but my experience is all with early stage companies.
[00:22:58] David A. Rosen: So let’s dig in there for a [00:23:00] second Jaci because I, another it, I have a feeling you have another lesson learned and that’s about product market fit and things that are important more to an early stage company, first finding its way and failing fast and moving quickly.
[00:23:15] Jothy Rosenberg: Yes. And I it’s still, even that has to do with with with people for in this most recent company, the the getting product market fit was very challenging for us. It, it is a hardware partially a hardware company. And in the semiconductor business, there is a way in which the customers.
Evaluate your technology that is PPA performance, power area. And those three things have to be, you have to meet their thresholds for each of those things. It has to run at a [00:24:00] certain, certain speed. You can’t slow their system down more than a certain amount with your technology. You can’t use more power than they, they budget for your portion of their overall chip and then there’s area.
And an area was was the one of the three that was the most challenging for us. We were about eight times too big for customers and it took honestly just sheer brilliance on the part of our engineering team to figure out how to get something that. 800,000 gates down to 100,000 gates, which they were able to do.
And so great. Now we’ve got product market fit, but you also have to have good marketing and sales. And one of the mistakes I’ve made as a leader is to everything I said earlier about team also means [00:25:00] that even if somebody on the team isn’t maybe performing at the absolute peak.
The team has jelled and everybody likes each other and trust each other. But in the world of sales, it has to be a little bit more cutthroat. They actually have to sell and they have to succeed at selling. And the here’s where it’s really tough to be, the leader and you have to say everyone really likes this person.
And I like this person, but the outside world isn’t buying from us, is it the whole company’s fault or is there some role that this, the sales person has and sometimes that’s a tough situation and you have to be really black and white almost about that.
[00:25:49] David A. Rosen: Interesting. So th those have been very interesting lessons learned. Was there anything else that you want to add to that list? So that’s a pretty good list.
[00:25:58] Jothy Rosenberg: Here’s one other thing. I would [00:26:00] say that we got into a situation where we had to quickly pivot away from raising a series a from traditional venture capital type investors, maybe some strategics. And and this is right at the beginning of the pandemic when we were supposed to close that and instead raise money from individual investors. And again, these are all people that I got to know. I like a lot, but they’re not. These aren’t people that are super knowledgeable about your industry or your technology or maybe about any technology. These might be financial people completely. But you’re trying to fund the company and other sources of funding have seem to have dried up. There’s a price to be paid for you using that kind of financing. And it can be very difficult for you later. And then along comes, you’re, you finally can raise money from [00:27:00] a more traditional investor and what they want to do is, there’s some very negative sounding terms for it.
Crammed down. That’s good. Essentially take the value of the investment from all those individuals and cut it by a factor of 10 or even more in terms of value. Sometimes they call it a cap table reset, where you’re essentially collapsing a whole bunch of investors into a smaller group and they’re not going to have priority.
That’s hard on, that’s hard to do because these are people you’ve got to know. They’re human beings. You’re not talking to a firm, if I had it to do over again, I would’ve, I would have tried very hard not to raise so much money from individuals because it became very hard later to deal with.
So I would recommend people. Keep their bring angels in when you’re pre-seed your, friends and family early stage investing so that there’s [00:28:00] not that many of them. I ended up having in one little round 82 individuals, each invested in an average of $31,000.
[00:28:07] David A. Rosen: Jothy I hope this makes you feel a little bit better, but as an angel investor, I was actually happy when I got 30 cents on the dollar back from the sale of one of my companies. When the companies typically fail, they fail and you don’t get anything back. And a good angel investor understands that’s going to happen to them, that you’re in such an early stage.
So if you have the ability to sell the business and get something back, even though it might be a cramdown for the investors, or it just might be a cash out on 30 cents on the dollar, that’s something that they probably didn’t expect because most angel investors should, not saying that they all do, but most angel investors should expect that they get one out of 20 deals might come back with something.
[00:28:58] Jothy Rosenberg: Yeah, [00:29:00] no, it’s that, of course that’s encouraging to hear course and, and intellectually, I know that and in the abstract, but and I guess I have to say that as I talk to some of these individual investors and they realized that, the 25,000 or 50,000, maybe for the larger ones that they invested, they may not be getting back anything or a small amount there it’s, instead of being mad at me or mad at the world, they’re saying I hope you’re doing okay.
Really interesting reaction.
[00:29:35] David A. Rosen: That’s awesome. And that’s the way it should be. It’s just, I think some angel investors have not thought through what it’s like to be an angel investor, and they’re not really thinking of their investments as options that they’re making and the risks that they’re putting into that. And so they just think that if I go with smart people that I know I’m going to hedge my risk you’re not, [00:30:00] all, the startup numbers of the startup numbers.
I’ve also learned that the number one reason why businesses fail is that there’s a lack of a market for the product. And so no matter how smart we are, we sometimes just don’t know that the value proposition of the product or service just isn’t strong enough to drive demand. And so you have to accept that.
So let’s move on from there a little bit. You’ve got such a great background Jothy and you’ve worked for larger businesses and corporations. Academia and on the technical front end of some amazing things that have happened.
I’ve talked a lot about the commercial cascade from NASA programs and space programs because of the problems and challenges that were created by putting people into space and letting them breathe and live and work and get there. And the problems that were solved have translated to so many commercial opportunities for us as a result.
[00:31:00] So Jothy, tell us about the experiences you’ve had as a leader that you’re most proud of.
Just remembering that our audience here today are other owners and founders and executives of companies in the middle market and larger and share your thoughts. And some of the other things that you’ve done that you’re most proud of.
[00:31:19] Jothy Rosenberg: I think I’ll talk about the most recent experience that I’m most proud of, which is the in the introduction you mentioned that th that I was part of a DARPA research program. And what that program was there a reaction from the Pentagon to. A 2009 cyber attack, which had a funny name which most people they may have read about it in the news, but it’s a name that they may not even remember.
It was called Stuxnet. But what people might remember is that it was the attack against the Iranian centrifuges, which are purifying plutonium for bombs. And [00:32:00] so it was this attack, which was quote successful in that it destroyed 2000 of these centrifuges, which is a big deal and it set their program back 10 years. But but that was the first time we’ve seen a little bit of code that could destroy physical equipment and that scared the heck out of the Pentagon because. Think about what that means. If that’s turned against us and you can’t put a cyber attack out into the wild and not have people be able to analyze it and figure it out eventually and use it themselves.
And so they created this DARPA program and we were part of that and we were very enthusiastically, a part of that, to me personally, having done a PhD in computer science, I was totally taken aback and I considered it an affront to all the things that we [00:33:00] stood for trying to make computers more performance, more usable, doing more things for humanity society and here’s somebody, it doesn’t matter whether it was us or a great album.
That was now using the programming languages and all the tools that we developed to destroy things that could be turned away on us to destroy some, something of ours. And so I was very motivated to be part of this program and and we were the largest group on that program. But the moment that was just really most, I was most proud of was that we had a good result in that program.
And I saw, again, I had this kind of visceral reaction. Wow, this is something that should be commercialized. Now. Of course, I’d done eight startups by this time. So I knew more about whether that was realistic expectation. But I also knew that it wasn’t just [00:34:00] immediately out of a research program ready to go into the commercial world and I shopped around and finally found a place where we could incubate it.
And this was just, this was the moment where cause we didn’t have any, we hadn’t developed a technology per se. We’d done some experiments and we’d written papers. And that was really the result that we had out of this DARPA program. Now we had a bunch of people three actually with good ideas in their heads and these papers that we’ve published.
And now we needed to hire a team and build this team within a safe environment, which is what an incubator is supposed to be a safe environment where we could get it in a couple of years ready for being. And this was the really exciting moment of an embryo of an idea and a tiny little team.
And we were given this [00:35:00] safe environment at a place in Cambridge mass called Draper labs. And we built it up and we were able to demonstrate that it had commercial potential by taking another fairly well-publicized cyber bug. That was something that affected about two thirds of the servers on the internet.
It also had, a fun name Heartbleed and that was one we could demonstrate that we would have stopped. So that was exciting. And then that was the moment that we all said, okay, now let’s go turn this into a spin-out it’s a separate new, brand new startup. I mean on day one I was the sole director and I owned all the shares, and there’s, that there’s that moment.
And then, you have to find a place to live. You bring the rest of the team in those early, early, early moments are very exciting and gratifying.
[00:35:55] David A. Rosen: That’s awesome. So if we could let’s flip this [00:36:00] around a little bit and you’ve been able to survive it. At least you’ve gotten through and experience the global pandemic and crisis Before that, what other things have occurred in your career as a leader and a manager that you’ve learned from what not to do. How did you get around those situations and how fast were you at picking up the solution to it?
[00:36:22] Jothy Rosenberg: So here’s one. I mentioned earlier that I was brought in to be. Helping these investors with a turnaround of their one of their companies. So it they’d been an investor for six years, I think. They were on series E most investors don’t actually count that high in rounds of investing.
You don’t see in PitchBook, you don’t see, oh, they’re raising their series F it’s just not done well. So the way this really happened was that they initially hired me as CTO, where they had a CEO who was [00:37:00] really trying to take the company from the founder that had not really made it grow very well.
And they brought in this guy who was a monster at sales. He was, he’d been a sales guy, very successful at another company. And they brought him in and they wanted, and since they wanted me to get trained to be a CEO, they have me be the CTO, working closely with him learning sales from him.
And he he did a projection that they would do 20 million in sales and they ended up doing 10. But he spent like they were going to do 20 million in sales. And there was an ID only been there eight months and this had happened and they, one of the investors called me up as a board member to actually board member investor.
And he asked me to go out to dinner with them. Now this has never happened. I knew this had to be something pretty strange. And he sits down with me and he says, okay. So the [00:38:00] CEO is being, let go tomorrow morning because he spent we’re going to make 20 million and we’re going to end up making a 10.
And so we’d like you to become CEO. And I said, what do you mean eight months? I can’t have learned how to be CEO yet. And he said, what he said next is where I should. This is lesson learned because what he said next was, he said look, we’re not in a situation where we can hire a CEO from the outside.
And so if you say, no, we’re going to shut the company down tomorrow. And that’s when I should have said no. Instead I, my reaction was, wait a minute, we’ve got good technology. We’ve got a good team. We’ve got some strong companies there. They’re companies were huge pharmaceutical companies. And so I said, okay.
And he said, oh, by the way, you have to raise a series F. I said, I don’t know how to raise money. I’ve never done it before. And so a year later I had raised [00:39:00] that money. I had redirected the company. We were fourth in a declining market. And I had to redirect us with the existing team and the technology to a different market that was growing. And we had a great set of first three customers, GM 3m, and Fiat. And if anybody listening remembers back, when you had actual, InfoWorld hard newspaper, we were on the front page and the next board meeting where I said, okay, now that we’ve done this, we need to raise a small amount to get us to the next level.
2 million is all we need. And I was so confident that they would say yes, and instead the investor said everything’s great. You’ve turned it around. You’ve done everything we’ve asked, but we’re shutting it down tomorrow because we’ve had our funds have been seven years in this company.
And. Our LPs are basically ready to write it off. So it’s over. lesson [00:40:00] learned several, one of which is when you’re given this choice where neither choice is acceptable, don’t, and I went ahead and said, yes, I’ll be CEO. Second of all knowing about there that, investors have a limit and it doesn’t matter if you’re starting to make progress.
If you get past this limit it’s from their point standpoint, it’s too late. It’s over,
[00:40:22] David A. Rosen: Jothy. That’s a great point. You really need to be aware of who your investors are and where they are. A lot of people don’t recognize that their funds are ten-year funds or seven-year. Somewhere in that range and they change their attitude when it comes to the end of life of that fund.
And they’ve already moved on to starting their next fund if they’re staying in the business. And so a lot of venture capitalists don’t have the fortitude to last beyond typically five years of investment in a business to give it a chance to grow.[00:41:00] If this was close to the end of life of that fund, you really need to be careful about the investors that you take money from knowing exactly are they spending what was supposed to be dry powder investing in new businesses later on in their fund life when they shouldn’t be.
So you’ve run into a tough situation. You described what you learned from that? Was there anything else.
[00:41:22] Jothy Rosenberg: Basically I think first is think about whether, that at that dinner be given that choice. Was completely wrong and unfair. I should have simply said I’m sorry, shut it down. You’re you’re you brought me in for me to learn how to be CEO and that doesn’t happen in eight months from a CEO that you now say is not doing well.
It’s not, and you’re firing him. And so all of the premises that which I was hired were being thrown out the window. And so I, I [00:42:00] should not have agreed to help bail them out when another 12 months later they say, oh, sorry, too late. This is why the CEO job is so hard because there’s so much to know.
And so many things that you’re unfortunately gonna learn through experience and mistakes. A few startups later there were just two VCs that we did the seed round with. W and then it was basically about 15 months in, and the, we all the three of us, those two lead investors. And I had a conversation about where the company was and what it needs. And we all agree that what it really needed was a different different CEO EO. So I’m a strong believer in early, very early stage startups that are technology driven companies should have a very technical CEO, but at a [00:43:00] later stage that might not be the right kind of CEO. And I’ve seen this transition happen all the time.
And it’s happened with me to my with my support several times, which is I’m a startup CEO. I got to explain the technology to investors, to some, early customers, but to really grow the company then somebody else comes in. Who’s been in, in sort of a COO role maybe before or CEO and.
I’ll slide into a CTO role. Working closely with this, with the CEO and with sales, the job in my view of the job of a CTO is to be the opener and the closer of deals not without the salesperson with the salesperson. So the opener and the closer but what happened was when we were, when it was time to hire a CEO from the outside and we had some nice candidates there was a very savvy, experienced [00:44:00] sales oriented CEO.
He had been a COO and he was ready and we hit it off. And my entire founding team, which was four other people also hit it off with this guy. And then there was a guy who had. Only been at a really big company, never raised money before never worked at a startup before. And of course never been CEO before.
And one of the board members really liked this guy and none of us could figure out why. And ultimately he said either you buy entire founding team wanted not this guy, his other guy who had never had the right experiences. He didn’t have as much exp business being the CEO as I did. And they, and the other board member also agreed with us.
And yet this one guy was able to veto the, essentially the hiring committee and say that’s fine. You guys can win, but it, but if you [00:45:00] do, and I don’t get my guy as CEO, Then you will not get any more investment from us. And that was not going to work. The company wouldn’t survive because the next round we knew it was going to be an insider round.
so we, the founding group decided that we would lose that battle and survive so that we could fight another, another day this guy was a complete disaster and and a year later the company ran out of money because he didn’t know how to raise money. He and he failed at it.
And again, that’s a situation where when that board member acted that way, that was time for me to walk and to not, to just not put up with that. I shouldn’t have stuck around but I cared about the team. I cared about the people. I thought that this new CEO was going to need my help, but the CEO wanted didn’t even didn’t really want me around, but we’d agreed.
I’d stick around for a year. And when other people don’t meet their follow their agreements, then [00:46:00] why should then, why should I but I didn’t learn that lesson until it had hit it hit me over the head
[00:46:06] David A. Rosen: Wow. in my experience with a couple of my companies, the role of sales initially is different for the first 50 customers or 20 customer than it is for the follow-on roll of sales. And that a lot of it has to do with your first two or three or four customers is not a sale. It is a professional service custom solution tailored to a specific co it’s, all consultative selling.
[00:46:41] Jothy Rosenberg: Yeah, it is
[00:46:42] David A. Rosen: And it goes back to your point about the CTO for the first 20 million is different than the, or the CEO for the first 20 million is different than the CEO for the next 50 a hundred million. And so how much did that play into that? Where if, what was this person, a product sales guy [00:47:00] and therefore was always used to selling specs and features, or, when you say sales, how do you define.
[00:47:07] Jothy Rosenberg: Are you talking about my most recent story?
[00:47:09] David A. Rosen: No, I’m talking about this story where they wanted to hire a sales guy and they had the perception that he could drive the business forward. But what I’m separating is that some people are great in sales, but they’re very good at product sales, things
that are well-defined and well-packaged with a strong value proposition.
That’s been proven out by the major players in that industry, and then cascades down to the rest of the industry.
[00:47:36] Jothy Rosenberg: right. We had two people. One was was a CTO at a gigantic company. That doesn’t exist anymore, but people may remember it called JD Edwards,
and it’s it’s like PeopleSoft, it’s like SAP, it’s like that kind of system and, it’s sold to giant corporations.
It’s a very expensive [00:48:00] sale, 10 to 50 million. And it’s gotta be, huge professional services engagement to get it, to work within that company. So just none of us could figure out how this could possibly make sense, but JD Edwards was in the process of being bought by, PeopleSoft and then PeopleSoft ultimately was bought by, I think.
But I can’t remember, but the this guy was very involved with customers, but it was just as you surmised, it was customers in a professional services type of engagement. So yes, he had customer experience, but not selling experience and not how to grow something small into something big. He was already at something extremely big. Where does the other guy had been at several startups as COO? So we’d run sales and marketing. He any grown them very successfully. And he’d been part of [00:49:00] several IPO’s. But he made the mistake of saying something critical in the interview process. Of, without knowing it, of this other investors one of his close friends and it wasn’t like really a very, it was just a, a statement like I think this person that is, that you’re asking me about was lucky on his, huge success. That’s it was it wasn’t a horrible insult that was the sole reason. He didn’t want to hire this guy.
[00:49:33] David A. Rosen: I want to just diverge for one minute and talk about board governance and board learnings. And then we’ll wrap it up. Jothy. This has been great. I think we could go on for hours here, but tell me a little bit about the role of boards that you’ve learned.
What are the lessons learned of boards from startup all the way to, scaling businesses and how much value they are or how much detraction they are, or.
[00:49:59] Jothy Rosenberg: I have, I [00:50:00] try to simplify things at least in my own mind into sometimes, little sayings. So I have a saying, which is that prior to being cashflow positive on, in terms of your board, it’s $1, one vote after cashflow positive, it’s one person, one vote. And and it, this ties back to the previous story because.
We were certainly not cashflow positive yet, and an investor. Regardless of the fact that there was a three person board, one person could say I’m not going to make another investment if you don’t agree with what I want. So you have essentially a by design, you have a dysfunctional board situation at the early stage startup.
And what I mean by that is that now it’s all about personalities and the people and how you interact with them and how you, because [00:51:00] you can’t go by if two out of three of us want something or, three out of five of us want something it’s a vote, which is what it’s, which is what board governance is supposed to look like.
So that, that was one of the first. That I, that I had to learn the second thing
Here’s my point. In your example, you’ve got one investor and two members of the founding team and so let’s, there’s a vote the investor. By themselves can win any vote by simply saying your next round of financing is going to need to be led by an insight by us insiders because frequently let’s face it.
You’re going to need an, a second round in your seed and you’re going to need it. And at that point you’re not ready for a series a and so adding new investors could be very challenging because you don’t have proof of your product market fit yet, right back or back to that.
And so technically this person only owns [00:52:00] 30% or 40%, but they can win any vote by simply saying, this is important to me.
And if you don’t don’t let me win. Then I’m not going to participate in the next round. So that’s what I mean by $1, one vote.
[00:52:15] David A. Rosen: Interesting. Okay, good.
[00:52:16] Jothy Rosenberg: Later on, you’ll get into a more sane world where two out of the three would win a vote. So you’ve got that situation that creates an interesting dynamic.
So you need to be very careful how you structure, especially a small board so that you have, a mate, you also have to make sure you pick your investor very carefully. Just because they say, yes, I’ll invest. Doesn’t mean you want them on your board because you may lose you may lose a bit of control or all control.
The second thing about board governance is that in the early stages, you find yourself in a situation where. Somebody says yeah, I’ll invest, [00:53:00] but I need to be I need to be an observer on the board. Now. There’s a funny thing about the word observer. Most observers have not looked up the word observer in the dictionary and it doesn’t mean talking
[00:53:13] David A. Rosen: Great. Good.
[00:53:15] Jothy Rosenberg: It’s I’ve been plagued with too many observers in almost every early stage startup and luckily at a serious, round an a or a B, you get to wipe the slate clean typically of previous observers because they set a new set of terms and the terms might not include observers.
Yeah. Observers. There are a distraction they can they can inf if they talk a lot, they can influence decisions in ways that you were trying to avoid. So again that’s all about being careful who’s investing and what demands they’re placing on you with respect [00:54:00] to either board membership or observer being observers.
[00:54:05] David A. Rosen: Good point. Any other lessons about board governance and value and role, and this has been very helpful
[00:54:12] Jothy Rosenberg: I would say I w I would say the most valuable board member role in my experience is going to be that independent board. If you, so multiple times that independent board member, who’s not an investor is cause the CEO role is it can be a very lonely role, right? So there are certain things you can’t confide in your team about you, you just, you can’t it’s things might scare them, my demotivate, them that you’re dealing with.
So there are a set of things you can’t share, but there’s also a set of things you can’t share with the board who is technically your boss. You’ve got. Your spouse maybe and your dog, and that’s, there are certain things that those are the only [00:55:00] people you can truly share.
Some of that stuff with, which is why the CEO support groups are a good thing. And I endorsed those. But that independent board member can become someone that you can truly use as a sounding board. Really can be supportive of you, but not like a pushover, somebody that pushes back when necessary.
I’ve been very fortunate to have that kind of independent board member several times. And it’s that the CEO should spend a lot of time figuring out who should that person be when they assuming they get
[00:55:35] David A. Rosen: So Jothy there is a good situation to discuss. How often when you take it investors, do they open up their kimono and say, I’ve got a great independent board member right here. How do you react to that?
[00:55:47] Jothy Rosenberg: I always say I’m certainly happy to consider them. I have my own set of people as well. I’ve usually gotten the person that I’m very interested in approved by [00:56:00] the board. As long as they’re really qualified, they add value in terms of, knowing something about the business. That has been usually I’ve gotten a good response from the board.
[00:56:12] David A. Rosen: Yeah, that’s been one of my key. Considerations for a lot of startup founders and CEOs. You have to be really careful of the proxies that your investor will put in front of you. As independent board members, because you need an odd number on the board, so you can break the ties, but back to your earlier point of, $1, one vote versus one person, one vote.
You’ve got to be careful, the independent board member that comes from one of your investors, because they are typically more aligned towards what the investor’s needs are than your own business needs, because they are probably consultants to other portfolio companies from that investor. They may be on other boards.
And so they get a lot more money in compensation coming from [00:57:00] that that investor group. And you have to be sensitive to the fact that you really need someone that you can consider to be truly independent.
It sounds like you, you are quite aligned with that.
Jothy, this has been amazing. You have, you’ve been able to share a lot of great experiences and growing companies and starting them up from nothing to something and some great lessons.
Two things, do you have any final notes of advice for our audience of other CEO, founders and owners of companies, and then tell us how people can get in touch with you?
[00:57:39] Jothy Rosenberg: I’ve touched on most of the things, I’ll say that, I don’t mean this to be a shameless plug, but I think having this foundation, which I founded a number of years ago. Is great, and I don’t spend a lot of time on it is a great outlet.
It’s the kind of thing that we help a few people out a year. We’re not a [00:58:00] big, we’re not earth shaking and the kinds of things that we get done, but we focus on kids. We focus on people that are, newly disabled. We get them equipment that gets them back into some sport and the results are astounding and so gratifying.
My point is to have something like that is outside. On the one hand you would say the CEO role is all consuming. Not completely. And there’s time for something else and everybody should have something else. In my case, it’s the foundation.
And then of course, doing all the sports that I love to do.
The way in which people can get ahold of me is through my, my email is Jothy R so J O T H Y R at gmail.com. I welcome people who want to communicate with me and talk more.
And all of the things that I said [00:59:00] here, and many more are going to be in the next book, which you mentioned. So I’m not doing a shameless plug, which is going to be called . “Anecdotes of an incorrigible entrepreneur.” And I call them anecdotes instead of chapters, because they’re short, they’re focused on one and only one topic and all of them are from a personal experience of mine.
[00:59:24] David A. Rosen: This has been amazing Jothy you truly are a balanced leader. And you’ve mentioned that it’s important to be balanced, not just as the leader, but probably the other things that you’ve done, whether it’s working in the foundation or whether it’s writing books is giving you and being, a husband and family member, those are all things that are important for CEOs to be as well.
We’re all human and the more balanced we are as people the more effective we are as a business leader. So thank you for taking the time
[00:59:57] Jothy Rosenberg: I’ll say one last thing.
[00:59:59] David A. Rosen: yup.
[00:59:59] Jothy Rosenberg: [01:00:00] So I am finishing up the sale of this of Dover and and I am looking for a new role.
Okay. Thank you so much for inviting me to this.
[01:00:10] David A. Rosen: Thank you. This was amazing.
You May Also Like…
HARDWARE AND SOFTWARE DEVELOPMENT IS YIELDING HIGH VALUE FOR MANUFACTURING! View this two-part Video Interview (Vinterview) with our CEO, David A. Rosen as he talks with Charles Araujo, on behalf of Intel.
David Speaks with Owners and Executives and Discusses His Strategies and Methodologies for Finding Great Business Ideas.
If You Enjoyed the Program, Please Leave a Review Here...
It just takes a few minutes, but your feedback will be helpful to bring in more guests to reveal their stories and secrets. Any feedback is helpful and appreciated.