Building a Toolkit for Startup CTOs with Jothy Rosenberg, Keynote Speaker & Author

(Intro Narrator at 00:00:00) Today, we're talking to keynote speaker and author Jothy Rosenberg about his book, Tech Startup Toolkit. You're listening to Joel Beasley, Modern CTO.

(Joel Beasley at 00:00:16) Let's talk about your book. I want to talk about the Tech Startup Toolkit. Is that out yet for people?

(Jothy Rosenberg at 00:00:23) It came out of the printer on July 15th, but it didn't start shipping from Amazon until Tuesday, which is August 20th. I guess Amazon just needed to build up inventory at their distribution centers or something.

(Joel Beasley at 00:00:45) Bezos is building rockets now, so he's busy doing that.

(Jothy Rosenberg at 00:00:50) Yeah, I know. Or getting giant diamond rings for his fiancée and sailing his 417-foot boat.

(Joel Beasley at 00:01:06) Or buying a library and turning it into a house? Look, I love that guy because I would do similar things, I'm sure, if I had that much money. You have no idea. I'm not criticizing.

(Jothy Rosenberg at 00:01:17) I'm not criticizing either. I'm just saying, I don't ever have any misconceptions that you're going to make money selling a book unless your name is Britney Spears—but then you didn't write it anyway if you were Britney Spears. In our case, it's really about getting this into the hands of as many startup founders as possible. Which brings me back to your theme, your show, because so many technical people, CTOs, are founders of tech startups. Where do the ideas, where does the product come from before it's actually even conceived of as a startup? Well, I think a lot of times it's from the person who would be the CTO. And one of the most important chapters in this book is about who should be the CEO. This is true of me, so I can speak from personal experience. Someone who is a technical person who hasn't had sales and marketing direct experience frequently can have imposter syndrome, and they don't think they could or should be the CEO. That is absolutely wrong. The person who's got the vision, who's got the understanding of the technology, who can explain it to investors and future customers—they should be the CEO. And even if they aren't going to be the CEO after 18 months or two years, they should still accept it and embrace it right at the beginning because they absolutely are going to be great as the CEO.

(Joel Beasley at 00:03:31) Good example of that is Kyle Malady. He was the CTO of Verizon and became the CEO of Verizon Business. And his predecessor before him did the same thing, so there was a lot of transition. And he's great technically. He could program radio spectrum frequency. He could do everything. He can talk about it in the most granular detail, but he also has a great business sense. And I actually saw this trend happening. We've been doing the show about 10 years. I think like three years in, I saw this trend happen of all these CTOs becoming CEOs, and I did probably four or five episodes back to back with people that had made that transition. One of them was Kyle.

(Jothy Rosenberg at 00:04:11) Unfortunately, a lot of investors didn't get the memo. And so what happened to me is that I was out raising money for this startup. It was actually my second startup out of the nine, and it was the first one here in the Boston area. We had a great team of four technical, really hands-on technical people. I was not really that hands-on, although I really understood the technology really well and could speak to it. It was the first load balancing technology for the web. And when I met with that first investor—and I won't say names—but that first investor here in the Boston area, he said, you know, it was kind of rude actually the way he said it. He said, "What makes you think you're CEO material?" And because I already had sort of concerns, imposter syndrome if you will, that struck a nerve. And so I sort of started to back away from projecting me as the CEO. But then the second investor had the exact opposite view. He got that the technical founder needed to be the CEO. But he had a hard time convincing me after I got such a rude reset at the very beginning. I insisted that we get someone else to come in and be the CEO, which was a mistake. I mean, it was one of my mistakes. And the whole point of this book is I'm chronicling my mistakes.

(Joel Beasley at 00:06:11) I'm a big fan of finding people who've done what you're trying to do and learning from them, right? And two of nine startups that you did got to over $100 million. Is that correct?

(Jothy Rosenberg at 00:06:23) Yeah, including the one I was just referencing. It was quite an unbelievable thing. Two years later, we'd only raised $4 million, but two years later we were doing $2 million in revenue, and we were bought for $106 million. It was crazy. But it's always about the market, right? And if your market is ginormous and growing, which of course this was the web, and it was 1996 when we started, and it was still only '98 when we were bought. The web was just—everybody saw it, that it was just going to go crazy. And the investors, by the way, were also customers, so the end investors. So Fidelity was our first customer, and they definitely saw what was happening and that they wanted to use the web for online 401(k) and whatever else. And then they decided to be our lead investor as well. And so it was just, you know, it was a true rocket ship.

(Joel Beasley at 00:07:54) And what was the other startup that did over $100 million?

(Jothy Rosenberg at 00:07:56) That one was another five years later that we started it, and it took seven years. The company was called GeoTrust, and it was bought by VeriSign. It took us seven years to build it, not just two. And we were bought for five times revenue. So it was back down to earth, you know, the more sane numbers. So we were doing $25 million, and they bought us for $125 million.

(Joel Beasley at 00:08:35) And you were a founder at both of these startups?

(Jothy Rosenberg at 00:08:38) Yeah.

(Joel Beasley at 00:08:39) Oh, that's awesome. Let's talk about the failures. Which ones didn't work, or did they all kind of work a little bit? They just didn't get such big numbers.

(Jothy Rosenberg at 00:08:48) I actually had one where I describe it as we hit the wall and there were no skid marks. I mean, it was an absolute disaster. And we all should have known better. It was the classic example of "we have this amazing technology, and let's go find customers that want it," as opposed to "let's build something that we know the market really wants and needs." Unfortunately, that's not what we did. And it was basically the same team, the same team that had done that previous one. So that's the other thing—you have a huge roaring success, and you sometimes think, "Well, I can just do that again." But the first one, we knew there was a giant problem, and it just so happened that what we'd been working on in the context of a bigger company was a distributed computing system. And the problem of load balancing for web servers was a distributed computing problem. And so the fit was perfect. But then to go to this next one—and this one was about accelerating and monitoring XML flows in and out of the enterprise. We knew that all kinds of really important business information was flowing in XML of various dialects in and out of these big enterprises. The question was, "Okay, what are we going to do with it? What do they want to do with it? What problem do they have?" And ultimately, there wasn't really a good answer to any of those questions. What happened was it became a feature. See, we thought we were a product, and we thought we were actually maybe a company with a product. We were neither because ultimately the web servers all incorporated monitoring XML flows right into the web servers. And so if you didn't get bought, if you had this kind of technology and you didn't get bought by a web server company, you were going to be the one standing as everybody else sat down in the game of musical chairs. That's what happened.

(Joel Beasley at 00:11:33) You said you made the mistake that you didn't build something that you knew the market wants and needs. How do you know what the market wants and needs?

(Jothy Rosenberg at 00:11:41) You talk. You talk to the market. You talk to people.

(Joel Beasley at 00:11:45) Bring it down to actual things people can do. Like, how would it actually play out in reality? You just do a bunch of phone calls with people in the market?

(Jothy Rosenberg at 00:11:55) So now that LinkedIn has a billion people in it, it is really an incredible resource if you use the search tools to the maximum extent of the feature set that they support. You can do extremely targeted outreach to people. You can go by industry. You can go by title or the role of the person you want to try to talk to. And then you work hard to craft a message, a short message that's going to get someone's attention to want to talk to you. And people don't start with no idea. They always have an idea. People tend to do a startup—this is just my opinion and my experience—people tend to come out of an industry, or they've spent, for some reason, a lot of time in an industry. Maybe they were working at a large company first or something. And then they recognize that there's some unsolved problems. And so then they might think they have an idea on how to solve that problem. That's the point at which I really like to recommend that people don't go build too much. Maybe you build a prototype, and then you get on this quest to go talk to people. I mean, it took me almost no time at all recently to get out there and get 40 meetings. Forty people on LinkedIn agreed to have a meeting, short. You know, I would say, "Let's just have 20 minutes." The nice thing about when you set up a meeting for 20 minutes, they probably didn't book the next meeting right at the 20-minute boundary. And so you've probably got a little more time if things are going well. And if they want to get off, then fine. And it was a great example of using LinkedIn, having worked hard to get a message that I thought would get people's interest. And there are some nice resources where you can sort of get templates of—and I include some in the book, actually—of how to craft a message that's simple. And it doesn't sound like you're begging them for input. It's more like, "I think I have something, and I'd like to see if it might help you." You know, it's crafted as "I think I have something, and I want to help you." And then it's not like, "Hey, I've got some—I want to pick your brain and get ideas for a new product or company."

(Joel Beasley at 00:15:15) So this is covered in the book?

(Jothy Rosenberg at 00:15:17) Yeah.

(Joel Beasley at 00:15:18) Nice. Hey, one of the things that actually piqued my interest quite a bit was a section about what makes VCs tick. Were both of these companies that you started that hit $100 million—were they both VC-backed?

(Jothy Rosenberg at 00:15:31) Yeah. So Fidelity at the time, and I don't think it's as active anymore, had a separate entity called Fidelity Ventures. So it really was a VC with the only difference from a typical VC being that there was only one limited partner, and that was the Fidelity operating company. But they still had managing directors who were not just people that were just out of Fidelity. They were really trained investment professionals, and they operated out of a fund, but the fund was just provided by Fidelity, the operating company. And the other thing, of course, is that—well, maybe it's not "of course." But most of these corporate VCs, you know, Intel and most of these others, they still like to find out if whatever it is they're about to invest in is of value to the operating company. Some claim that, "Well, we're really independent of that, and we really don't need the operating company to say, 'Oh yes, this is something we want to buy.'" There's always—even when I got Qualcomm to invest, and they love to say that Qualcomm Ventures is totally independent. But then when they were evaluating us and doing their due diligence, they asked people from the operating company to evaluate us for them. And so it's like, "Okay, well..." But still, that was a VC, and they were, of course, joined by—I'd gone out and talked to other VCs, and we had two VCs ultimately in that: Charles River Ventures and Fidelity Ventures. Then the later one, yeah, we'd gotten all the way to raising a Series C. And so we'd had a number of VCs at that point. And when you get to a Series C, there's a lot more dilution. So the early investors, if they didn't participate as each step went along, then they got a lot less than the most recent VCs.

(Joel Beasley at 00:18:07) Are you planning on doing any more startups, or do you have any currently?

(Jothy Rosenberg at 00:18:11) I am. This is number nine. I'm still running. It's been a challenging one because it's hardware and software, and the hardware part is very challenging for a startup to really manage because timescales are long to get hardware built, and a lot more capital is needed. And I don't plan on doing one beyond this. After this, I would like to write, speak, podcast, and travel and other stuff like that. I mean, one of my favorite things actually is to mentor CEOs. I love doing that.

(Joel Beasley at 00:18:58) Very cool. And so can you tell me more about this startup, or is it stealth mode?

(Jothy Rosenberg at 00:19:03) No, it's not stealth mode. It's called Dover Microsystems, and it came out of a DARPA program. Conceptually, it started in 2010, so it seems like a long time ago. But for the first five years, it was just a pure research program funded by DARPA. And it was a reaction to a cyber attack that the Israelis wrote, and it was going after the Iranian plutonium enrichment program. Specifically, it was targeting the SCADA controllers for the centrifuges. And it was successful—in air quotes—because it destroyed 2,000 centrifuges and set their plutonium, weapons-grade plutonium program back a decade. But the problem for all the rest of us is that this taught the world how to write a small amount of code, like 135 lines of code, that could destroy physical equipment on the other side of the world. And so the Pentagon reacted quickly and put this program together, funded it at a pretty good level of $100 million. And I had—it was the recession, it was 2008—and I had taken a break from trying to do startups because there was no money. And I was at a defense contractor, and we went after this program, and we were a winner with our proposal. We won. And so then we spent the next five years trying to figure out how to stop these types of attacks. And at the end of it, we had something very good. And at that point, I realized this has got incredible commercial potential, and I had to go figure out where do I incubate this because it was still research. But I found a place, and I incubated it there for two years. It was a laboratory here in Cambridge, Mass. And at the end of that, I was confident it was ready, and I was able to spin it out and start raising money. And we've been at it ever since.

(Joel Beasley at 00:21:43) As we start to wrap up here, I did notice you had a TED talk. At the beginning of the call, you showed a children's book, and you mentioned just briefly adversity. How has adversity impacted you? Have you used it as fuel? Tell me about that.

(Jothy Rosenberg at 00:21:59) Well, yeah, that's exactly what the TED talk is about. So yeah, I lost my leg and my left lung when I was a teenager, age 16, and then the lung was at 19, same cancer. And what happened was all I heard was what I can't do. Everybody would say, "Well, you can't ski again." And "If you try to swim, well, you can't swim straight. You'll swim in a circle, and you can't bike because, well, how would you bike with one leg? And you can't even balance." I mean, it was ridiculous.

(Jothy Rosenberg at 00:22:38) And so that led to, well, that led to this book. I keep pulling these up. That led to this book, "Who Says I Can't?"

(Joel Beasley at 00:22:49) Nice.

(Jothy Rosenberg at 00:22:50) That's my memoir of that whole thing. And the TED talk explains, well, it answers the question, why is it that people who become disabled tend to overachieve? And we've all seen it. I mean, you can list all the polio survivors starting with Franklin Delano Roosevelt and going down through Alan Alda and Judy Collins and famous golfers and famous, you know, just, it's amazing. And I think it comes from three traits that come naturally to the person that this has happened to.

(Jothy Rosenberg at 00:23:40) And one is insecurity. Yes, which maybe, you know, also think of it as not arrogant, but it's insecurity. And someone who's got a disability, you know, for example, I don't ever forget that I have a disability. Just out of sight, these, my crutches are nearby because I'm not wearing my leg. And you know, I'm not going to stand up and trip because I forgot my crutches because I always remember that I've got those. So the insecurity actually is a starting point. It's not a negative, actually. The second thing is what I call exceptionalism, which is when you've decided you really want to accomplish something and you set some modest goals and you work hard, focus, work hard, achieve them, celebrate, and then go on to the next one. And that was like, "Well, I wonder if I could get good on crutches and then I could climb mountains with them." Turns out, yep, good. Then, you know, I said, "Well, I really would like to get back into swimming." And I became an open water swimmer, and now I compete every year in the open water swim from Alcatraz Island back to San Francisco. And next year will be my thirtieth time doing it.

(Joel Beasley at 00:25:16) No way.

(Jothy Rosenberg at 00:25:16) And I beat most, I mean, I beat half the two-leggers that are entered into the swim, and most of them are way younger than me too. So, and then, so the third trait is discipline. And the first two traits work off of each other in an interesting way. You don't think of insecurity and exceptionalism being together, but they are in a way. They sort of create this drive because the insecurity kind of keeps you from getting ahead of yourself, and exceptionalism starts to make you feel better and better and better about yourself. And it's how you rebuild self-esteem, by the way. And then the discipline puts a nice package around it that says, "Okay, well, you know, you need to keep focused. You need to keep working hard. You can't let up. You have to keep at it."

(Jothy Rosenberg at 00:26:15) So that's what's happened. And it applies to my business world, business life too. I mean, it just, you know, it carries over. And when something bad happens in the startup, I put it in perspective. It can't be as bad as what happened to me before. But you have to send me your mailing address because I know that maybe the guest on your podcast doesn't normally send you a gift, but I'm going to send your kids a gift. I'm going to send them a copy of the Chase book.

(Joel Beasley at 00:26:56) Thank you. I appreciate that. Yeah, they'll like it too. My daughter is seven, and she's, like, legit reading books now. And my five-year-old son, he is getting there. He's starting to sight identify. And my two-year-old's, no, we're not close.

(Jothy Rosenberg at 00:27:12) I hope not.