ETL Forum: Randy Adams, CEO Auction Drop (11/3/2004)

Randy Adams, co-founder of Auction Drop, launched it a bit over a year ago.

Background: Randy grew up in Maine, went to MIT, was a program evaluator for NIH, management consulting for Booz, Allan, Hamilton. He joined as general manager for a public company making interactive training videos that was in trouble, there was a struggle for control which ended badly for Randy, so he moved to California in 1985. Since then, he's started 6 companies and raised 6 kids. He talked about the companies, not the kids:

Adams Software Design: first DTP for PC in 1985: published by Heidi Roizen under T-Maker.

Emerald City Software: 1989: Mac Type Software. Raised $1M at $1M pre-money, sold to Adobe for $12M in 9 months, worked for Warnock on Acrobat, PDF, Illustrator

Appsoft: 1991: Productivity software for NeXT. Raised $2M at $5M pre-money from Sequoia (Moritz). Went belly up when NeXT ceased making hardware.

Internet Shopping Network: First e-tailer selling software online with Ingram Micro providing fulfillment (they thought he was running a mail order catalog). Home Shopping Network purchased for $5M, subsequently resold for $500M. ISN had raised $500K at $500K pre-money.

Navitel: Windows CE telephony software Sold to Spyglass for $200M. It had raised $5M at $6M pre-money.

AuctionDrop: started 2002 Premoney $16M, raised $16M

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Competitors: As a startup, your competitors are not other startups, but big companies that have resources, but move slowly and are risk averse.

What is the goal of starting your company?: Make lots of money, change the world, or build a lasting company that employs lots of people?

Common traits of success

1. Vision: Ability to visualize implementation of idea. Test every decision against the end “pre-visualization”. Viable business model that doesn’t require change to infrastructure or consumer behavior. Unique.
   
2. Plan: Step-by-step roadmap. Measurable milestones to track progress. Fundable milestones to raise more money. But be ready to change on a dime. Flexibility allows you to beat big companies.
   
3. Take Action: Randy's Motto: "Rush forward blindly". Meant to be extreme. Most good ideas die for lack of action.
   
4. Take Risks: Small companies can take big risks, because the downside is minimal. People will tell you it will never work. Ignore them.
   
5. Have Passion: Care about what you do. Be willing to sacrifice. Work harder.
   
6. Never give up: Failing is OK (teaches you lessons, makes you humble, makes you stronger, gives you perspective), but still don't give up. Don’t quit until the board throws you out, then start a competing company.
   

Responses to Questions from Audience
Innovators unwilling to work in big, structured environment. So even those companies today that seem innovative (Google, Yahoo), won’t be long-term.

Look for companies in a head-to-head competitive environment, guess what they’ll need in a year and build that. They’d rather buy than build.

Auction Drop: Average household has $1,000 worth of stuff to be sold, but doesn't want the hassle of selling it on eBay themselves. Deal with UPS in May/June expecting 10 items/day for 3,600 stores. But it didn't happen. They don’t have $40M to launch a national advertising campaign. They're trying to integrate more closely with UPS, looking for viral promotion.

Do informal market research. Ask a lot of people what they think about the idea.

Auction Drop potential exits: eBay or shipping company. Three-year contract with UPS.

Personnel selection: Intelligence, adaptability. Trust.

Advice on dealing with VC’s: When things going well, they leave you alone. Work with the right VC—they won’t do bad things to you. They’ll protect the interest of the LP’s, but among good VC’s the "horror stories" don’t really happen.

Overcoming the fears of starting a company: Looking at the downside: What do you have to lose?

Idea vs. team Which is more important?: Depends on the economic cycle. Team is very important, investors are risk-averse, in “herd mode”. Different firms have different hot buttons. Tailor pitch accordingly. A good idea with proven results will win, investors will bring in the team if necessary.