The transcript of a Morino Institute Netpreneur Program event, held June 8, 1999, featuring two business visionaries who grew their companies from the garage into the 800-pound gorillas of their industries: Marc Andreessen, former CTO of AOL and founder of Netscape Communications, and Ted Leonsis, President of AOL Interactive Properties Group and founder of Redgate Communications. The event was moderated by Wall Street Journal reporter Kara Swisher and included closing remarks by Mario Morino, Chairman, Morino Institute and himself a software industry pioneer.

Copyright © 1999 Morino Institute. All rights reserved. Edited for length and clarity.
Statements made at Netpreneur events and recorded here reflect solely the views of the speakers and have not been reviewed or researched for accuracy or truthfulness. These statements in no way reflect the opinions or beliefs of the Morino Institute, Netpreneur.org or any of their affiliates, agents, officers or directors. The transcript is provided "as is" and your use is at your own risk.  

table of contents

part 1: mary macpherson: it's about what's possible

Good evening. I’m Mary MacPherson, Executive Director of the Morino Institute Netpreneur Program (http://netpreneur.org).

Wow, this is incredible! There is nothing like a Netpreneur Program event to bring this community out. But really, you are the event! Thanks so much for coming.

On behalf of this evening’s sponsors, America Online (http://www.aol.com), KPMG’s Midatlantic Information, Communications and Entertainment (ICE) practice (http://www.kpmg.com) and the Morino Institute (http://www.morino.org), it’s my great pleasure to welcome you to "Garage to Gorilla." We hope you enjoyed seeing the interviews with netpreneurs on the screens. It's good practice for future media opportunities.

For those of you who are joining us on the webcast, we’re here in Washington, DC, across the street from the National Zoo, where there are some other kinds of gorillas. For those of you who have not been with us before—and there are lots of you—we will have a transcript and video (http://netpreneur.org/gorilla/) of the event up on our Web site.

Tonight you are going to hear from some industry pioneers who will share their remarkable stories and insights on Internet startup success. Given the makeup of our audience of over 1500 people here and on the webcast, the topic is definitely on target. Of the people in the room tonight, over 750 come from net-centric companies, and about half of those are from startups. Over 5% of you are students—you are tomorrow’s netpreneurs. You’re here because you want to talk about what it takes to start an Internet business and grow it into an 800-pound gorilla.

For years, the business of Washington has been politics. As the capital of the United States, there will always be politics here. But there is growing evidence that the business of Washington is business and the explosion of entrepreneurship here is indisputable.

Just over two years ago, the Netpreneur Program hosted its first event, attended by some 40 people. That's hard to believe as I look around the room tonight. Today, thousands of individuals and companies are engaged in what’s become a vibrant online and offline community where people connect, collaborate, share ideas, solve problems and grow their businesses. Across the Greater Washington Region it’s all coming together—the executive and creative talent, funding, technology expertise, support resources and access to people who have "been there, done that."

Tonight, we have with us many netpreneur "gorillas in the making," companies who are just starting to make headlines, such as AnnuityNet, Blackboard, WebMethods, ImageCafe, Vastera, LifeMinders, TV onthe Web, Womenconnect.com and WisdomWare. The list grows daily.

Garage to Gorilla is all about what’s possible if you have the vision, the drive, the stamina, the leadership, the timing and, yes, even the luck. In the time that you’re here tonight, we hope that you’ll be inspired by our speakers, that you’ll take away knowledge you can use in your life and that you’ll make connections with people who will help you realize your dreams.

Before I introduce our next speaker, I’d like to take care of some thank yous. First, I’d like to thank the 25 netpreneurs who volunteered to help us with this event—they will receive the official Garage to Gorilla event t-shirt. Second, I’d like to thank CloPay and Capital Door for our garage door prop. And, last, but certainly not least, I want to thank my colleagues from the Morino Institute Netpreneur team.

We are truly fortunate to have Marc Andreessen and Ted Leonsis with us tonight. You’ll be hearing from them in a moment. Following Marc’s and Ted’s remarks, Kara Swisher from The Wall Street Journal will moderate a discussion and we’ll take your questions for Ted and Marc. We’ll end the program with closing remarks from a person who has inspired many of us in this room, Chairman of the Morino Institute, Mario Morino.

Thanks very much to the AOL team and to Kara for working with us on this program. Let’s get started!

It is now my pleasure to introduce Kathy Bushkin, Chief Communications Officer of America Online, to say a few words and to introduce tonight’s moderator. Kathy joined AOL in November, 1997. Previously, she was the head of the national Media Relations practice at Hill & Knowlton. Before that, she was the Director of Editorial Administration for U.S. News & World Report for 12 years. She also served as Senator Gary Hart's press secretary in his Senate office and 1984 Presidential campaign. Kathy is a board member of the International Women's Media Foundation, the National Press Foundation and Share Our Strength, a hunger relief foundation.

part 2: kathy bushkin: a vision shared

Thank you very much. I don't know why Gary Hart always gets a laugh.

I'm delighted to be here and I'm stunned at the size of this crowd. You know, size matters, and I have to say, congratulations to Mario Morino. It is truly amazing what you have done and what's happened in this region—all of it blossoming at the same time. You have turned time-tellers into clockmakers, and it's very exciting. There is a difference between having a vision and having a hallucination, and the difference is the number of people who share it with you. Well, I'd have to say, looking at this crowd, Mario, you have a vision, and we are glad to share it with you.

I'm happy to be here tonight because there are a lot of things going on in this region. As one of the companies that has been able to move up from the garage and on its way to gorilladom, we are excited about what's going on and, what happens to a company when it's able to lift its nose a little bit above the grindstone. We look around the region and figure out what we can do to give back a little bit.

There's a real opportunity here for all of us to share. We can share our money. We can share our knowledge. We can share our resources. We can share it not only in terms of helping businesses grow, but also helping social ventures grow. So AOL, as it's been moving along in its path, is looking excitedly around to see how it can help in this area. We are partnering with a number of you already, and we look forward to partnering with more of you as we exercise not only the opportunity, but the responsibility to be an active participant in our community—locally, regionally and globally.

Companies like ours have to accept that responsibility head on, and we are. The AOL Foundation, which was created just two years ago, is already doing some exciting things to fulfill a mission that empowers people to use the medium to make their lives better and to improve society. We have a partnership with Calvin Coolidge High School right here in Washington, DC, to create "AOL Achievers." We have initiative grants for high schools and grade schools that are doing exciting things to use the medium to find innovative ways to teach. We are supporting our employees who want to do more to communicate and contribute to partnerships in the community, and we are looking to do something very exciting on the Web. We haven't announced it yet, but it's coming, to create a Web site where charities and volunteers can find each other and use the medium in a way that it really should be used. We are excited about those possibilities, and we hope to see you in cyberspace fulfilling them with us.

Now, I want to talk to you a little bit about the moderator of tonight's program, Kara Swisher. Kara is . . . how can I say this?

Let me start by telling you a story about a friend of mine named Frank Mankiewicz. He is a well-known public relations maven around town, and he once said that the four scariest words in the English language are, "Mike Wallace is holding." Well, if you are in the technology business, sometimes hearing, "Kara Swisher is holding," can be pretty scary.

Kara now covers technology companies from AOL to Silicon Valley for The Wall Street Journal. She has been doing that for over a year, but before that she spent 17 years at The Washington Post. She created a technology beat by convincing her editors there was a small company in Virginia that was trying to do something worth covering. A lot of the time, her stories probably got buried at the back of the car pages in The Washington Post, but she kept at it and brought attention to what AOL and other companies were trying to do. At one point she decided to take a career-breaking, or career-making, move, she left The Washington Post to write a book.

The book, at that time, was about a company that was facing busy signals—I'm sure none of you remember that—and all kinds of other challenges on the road to growing from garage to gorilla. She wrote a book called "aol.com" which came out a year ago. It has done extremely well, and I'm sure she would be happy to have me tell you that the paperback edition is coming out this summer.

Kara is, and with all due respect, Kara, a reporter who models herself and reflects the best of what I think our industry and our technology is. She has all the passion of the people she covers. She covers it with the same kind of paranoia that we all exhibit on a daily basis. She works the hours and works the medium the same way as we do. It's what's made her a very good reporter. I know she is going to do a good job tonight directing you through finding out what it takes to grow your business into, hopefully, one as exciting and as successful as ours. Kara.

part 3: kara swisher: shut up and listen

It's really nice knowing that size matters from the former press secretary for Gary Hart. I left Washington two years ago. There is no sex in Silicon Valley, just entrepreneurism, so it's nice to be back here.

I'm going to start out with three statistics from my life: 10,526 - 437 - 103. The first one, 10,526, is the number of emails I have not opened in my account at The Wall Street Journal from entrepreneurs who are starting Internet companies and their press people. The second one, 437, is the number of faxes I have gotten from entrepreneurs that are starting Internet companies. The last one, 103, is the number of contacts from day traders who are driving me nuts since I started this job. Usually, they call up and say, "Hi, Kara, I want to trade some information." I'm like, "Well, you don't have any and I have a ton." I have a little test for them. I say, "Can you tell me who the head of AOL or Yahoo! is and where the company's located?" They just don't know. They are just trading with stocks. They have no idea what's going on, so I'm glad to be in front of an audience that does know a little bit about what's going on in the technology industry.

That's because what's going on right now, and I mean this in the nicest way, is insane in Silicon Valley. I liken it to what Hollywood was probably like in its greatest moments. Everybody is starting a Web company. Everybody has a business plan. When you go to a restaurant, the guy parking your car hands you a business plan. He has a little Web site, and he is going to do this. Same thing at the grocery store. It goes on and on and on. You get handed lots of business plans. I get a lot of them. I don't have any money to give to anybody, but they don't care, they'll give it to you.

And it's not just people with business plans moving in a crazy way; people are getting funded. The tiniest companies are going public and becoming worth billions of dollars. Just recently, for example, another search engine—like we need another search engine—just got $25 million from one of the top venture capitalists in Silicon Valley. That is a huge amount of money to start a small company. I think there are 10 people there.

A company called pets.com was recently funded by Amazon. There is a bunch of funding going on in the pet industry. The pets.com CEO is a woman named Julie Wainwright who is very funny. She used to run a service which sold videos over the Internet. When she wrote in the pets.com press release that she sent to me that they are the biggest pet site on the Internet, I called her up because I happened to know she just got to the company and they have two employees. I said, "Julie, how could you say that you are the biggest pet site on the Internet?" She said, "Well, someone has to be."

What's going on out there is crazy. The other day I got a press release from a company that sells antique watches on the Internet—another $25 million, which to me is astonishing. I'm very close friends with John Markoff who is an excellent technology reporter for the New York Times. We were at dinner the other night, and we didn't want to say it too loudly because we thought some venture capitalists would throw a bucket of money at us, but we thought that we would start a Web site called ShutUpAndListen.com. We would just pontificate on the Internet, on and on and on.

We weren't ready to go public, even though we made no profits, but that's okay.

What I've tried to do in Silicon Valley since leaving Washington, DC, is try to figure out why this is happening. At the heart of it, it's clear that the Internet is changing the world. On the edges there is greed and love of money that's really a little bit nuts, but we are changing the world. It's the kind of thing you always have to say.

What's happening is something very significant. Major industries are changing dramatically and overnight. Just recently, major companies that we once thought of as steady and in great shape are seeing troubles. Companies like Disney and Time Warner are trying to rethink how they can enter this medium while companies like AOL and Yahoo! begin to take parts of their business. Major retailers are seeing dramatic shifts, from the way they distribute things to the way they get information, to their customers, to establishing relationships.

It is a really significant medium, and it's really important that the excitement has inspired so many people trying to start Internet companies. It's like being in Detroit at the beginning of the car industry or in Hollywood in the beginning of the movies.

I would like to go back, however, to where it all started and how just three years ago, this was an industry that everybody was questioning. When I started doing my book on AOL, the editor of The Washington Post came up to me and said, "What are you writing, the death of AOL?" And I said, "No, I'm going to write AOL buys The Washington Post." Frankly, that's what I think is going to happen.

I love The Washington Post, but it was typical of the attitude of the day, which was that the Internet was a fad, that companies like America Online and others were not going to make it, that this was a flash in the pan. Seeing so many people excited about it is very encouraging, and to be able to introduce these next two speakers is also very encouraging because, even though everyone claims to be the father of the Internet—there is no "mother" of the Internet. Have you ever noticed that? . . . I am the mother of the Internet. No, wait, I should be careful about that.

There are some people who were very significant to the beginning of the Internet, including many of the people who worked for the Defense Department, but in terms of the commercial medium, there are a handful of people without whom this would not have occurred. I would say there are about 10 such in the world, and you have two of them here tonight.

Ted Leonsis is very well known as being the president of the AOL Interactive Properties. He was with AOL early on, at a time when they were very small, and he was one of the most critical parts of making it into the biggest new media company in the world today.

Marc Andreessen, I don't think needs any introduction. With a bunch of students, he created the browser which allows you to navigate the Internet and without which you would not be able to use the Web significantly. It caused this medium to take off in a way that I think very few of us could ever understand.

I'd like to start by introducing Marc who, at 28 years old—gosh, you are really old for the Internet—is like the granddad of the Internet. He has been through one of the most important startups of all time, Netscape Communications Corp. (http://netscape.com), which he saw through an incredible roller coaster ride, including the stock running up and down and an attack by Microsoft Corp, the subject of a trial I have been reading about recently here in Washington. He also sold the company to AOL to create what many people think is one of the most significant companies going forward. After not liking AOL, he loves it now—Yeah, it's really great. I love AOL, Kara. He is now the Chief Technology Officer of America Online, a critical job because, going forward, the technologies are going to change significantly over the next five years as we move into broadband and high speed connections. What Marc Andreessen thinks about the Net is going to be very important to how you do your business and how consumers all over the world are going to receive it.

part 4: marc andreessen: living on skittles and mountain dew

Thank you. It's a lot of fun to be here tonight. I was kind of hoping that we would be able to move this whole event outside, but I guess they didn't want to do that for some reason. It must be the weather.

It was just a little bit more than five years ago that we first started Netscape. Back then, nobody took the Internet seriously. There was just a handful of us in a little office in Mountainview, California. I don't remember much from those days because not only was that 35 Internet years ago, but, like all of you, we were pretty much surviving on Skittles and Mountain Dew, so the resulting sugar-induced haze pretty much determined our lives.

Every step of the way during the five years after we started the company, I was surprised by the amount of change that kept happening, and the level of impact that the Net kept having. We are really, in many ways, only getting started. As Kara mentioned, so many businesses and industries are being changed. Any CEO of any company in the world today who is able to sleep at night is probably smoking dope. There is really no other explanation, because if he thinks that things are going well enough that he can sleep at night, something is deeply wrong. That's why there are all of these huge opportunities out there, certainly more opportunities now than ever before. It's a tremendously exciting time.

What I thought I would do is spend a few minutes talking about how I would do a startup today—if I were going to do a startup again, which I'm not today. I have been keeping notes and have a few rules of thumb that I would follow if I were going to do it again, so I thought I'd share those with you and have that be our kickoff for our discussion. There are five basic rules that I would follow.

1. ride the right horse

The first rule, and the most important one, in fact the most important thing in the world, is to ride the right horse—decide to do the right thing. I wanted to kick off this section with two quotes from personal heroes of mine. One is Jim Barksdale, our CEO, who, when he first got to Netscape, sat us down in the conference room and said, "Look, if we want to be a leader, what we need to do is find a parade and jump in front of it." We said, "Okay, we have that."

The problem with that, of course, is that it's a very confusing time. It's hard to figure out what the parades are when you are trying to figure out what a specific business is going to do. It's very easy to jump on the wrong horse and to decide to do the wrong thing first. In fact, I think that for most businesses throughout history, their original business plan was the wrong thing to do.

I also want to quote my second hero of the night, probably the finest legal mind in Washington, DC, Thomas Penfield Jackson, the judge in the Microsoft case. He recently said, and I'm going to take his quote out of context because he was referring to Microsoft's legal strategy, but I would apply it to the rules of thumb you have to follow at the beginning of a startup. He said, "The code of tribal wisdom says that when you discover you are riding a dead horse, the best strategy is to dismount. However, at law firms," and I would apply it to startups, "and in established companies we often try other strategies with dead horses including the following: buying a stronger whip, changing riders, saying things like, 'this is the way we have always ridden the horse,' appointing a committee to study the horse," that's something that older companies tend to do, "arranging to visit other firms to see how they ride dead horses, increasing the standards for riding dead horses, declaring that the horse is better, faster and cheaper dead. And finally, of course, harnessing several dead horses together to increase the speed." That kind of sums it up.

Riding the right horse is the single most important thing you can possibly do. In fact, I'll make a fairly radical statement that being on the right horse in a startup is more important than having a good CEO; it's more important than having a good team; it's more important than having good programmers; it's more important than having the right marketing strategy; it's more important than setting prices correctly; it's more important than venture financing. It's more important than all of those things put together because, if you are on the right horse, with the way these markets are developing and the growth rates that we see, you will probably figure out everything else. If you are on the wrong horse, you are probably dead.

I'll probably quote Jim Barksdale a couple of more times because he is very quotable. He told me something that I thought was very interesting with respect to how unpredictable this whole environment is, and how unpredictable the impact of a new idea can be. He said, "Thomas Edison thought he was inventing the light bulb. He was actually inventing not going to bed with the chickens."

It took me a little while to figure that one out. You can think about it for the rest of the night. What he meant was, it's very unpredictable. When we see something like the Internet in its early days, or the PC, the things that we assume at first about the way they are going to be used and the impact they are going to have is often not at all the way that they actually develop or the way they actually turn out.

Like I said, I think that if you go back through history, most companies have changed their plans—they have changed horses—often very early in their histories. Microsoft is an obvious example. They shifted very early from doing programming tools like Basic to doing operating systems. It was Bill Gates who was still urging Apple in 1985 to license the Macintosh operating system. You really have to be able to adapt, and it's something Microsoft has been very good at.

IBM, at a later stage of its development, in the early 1950s, had to make a shift from electrical tabulators, the business they had been built on, to computers. It was a huge source of stress in the company. Intel went through the same thing with the shift from memory chips to CPUs. Every big, successful company has had to make that kind of transition, and a lot of startups have to as well.

What you see happening in a startup, we saw it at Netscape and you see it at a lot of companies, is that you develop your product, you get it all figured out how people are going to use it, you put it on the market, they buy it and then they use it for the wrong reason. They do the wrong thing with it. You build the Aardvark 7000 for people to use to suck ants out of their holes, and, instead, they are using it to go after anteaters. They're using it for the wrong reason.

You take a look at the customers and say, "The customers don't get it, they are using the product for the wrong reason." They're actually using it for the right reason. You have to go back, look at it and proceed along their courses.

Entrepreneurs who are too stubborn will suffer. One of the things you will hear is, "Pick your plan and then have a huge amount of determination to achieve your goal." I don't believe in that at all. I think that it's much more important to have the right plan, much more important than anything else you can possibly do. Therefore, the only quality in a management team that matters in the early days of a startup is the ability to end up on the right horse, even if you don't start there.

2. know why your company exists

The second thing I would do is to really know why you are in business—know why your company exists. Really know it deep in yourself. This is increasingly important because there are so many startups out there now. For example, some ex-Netscape people were starting their own companies. I was talking to one guy in the Valley a few months ago. I asked, "What's the goal of your startup?" He said that their goal was to try to sell out within the next 12 months.

That's a fine goal to have, I suppose, but it's not a goal that's going to build a tremendous amount of passion. It's not a goal that is going to make it easy for people in the company to figure out what to do. The second most important thing, next to riding the right horse, is knowing viscerally what you are in business to do, even if you don't know exactly what you are going to do. Know why you exist. Know what you are trying to do. Know how you are going to try to change the world. It becomes much easier to manage a startup if this is the case. There are startups in the Valley right now that are absolutely adrift because they don't have that sense of mission, they don't know what they are trying to do. They don't have well-developed management teams because no startup does, and it's very hard to run that way.

3. focus on just one thing

For the third rule of thumb, I have to quote Jim Barksdale again. You are going to love this one. "At a ham and egg breakfast, the chicken is involved but the pig is committed."

I told you, you would have to think about these.

It's very important to be the pig. It's very important to ruthlessly focus on just one thing. It's very important to be totally committed to exactly one thing.

It's extremely easy in a startup environment for the entrepreneur, to say, "I'm going to run the company. I'm going to do this and I'm going to do that. I'll be the CEO myself." That's something a lot of entrepreneurs do. A lesson I learned very early from Jim Clark is that when you start a company, you don't have to run it. You don't have to be the CEO. You can actually hire CEOs and they can become an integral member of the team. You can have a tremendous amount of influence and the company can be much more successful than it ever was. At a personal level, we need to understand what we are good at doing and we must focus and bear down on that one thing. The exact same thing is true for what our companies do.

Companies have a hard time, no matter what size they are, really doing more than one thing, however that thing is defined. A bigger company can define it more broadly, but regardless, it's a huge problem for a lot of companies, both small and large, that have a huge amount of corporate ego. You see this in the software industry all the time. You talk to a software company executive and ask, for example, if they want to partner around a software product. We'd do that with Netscape. We'd go talk to the big software companies when we were starting out and they would say, "Well, we can do that. We can do browsers, we can do servers, we can do that stuff."

And the fact is, they can do that in theory. They can do anything in theory. But in practice, all of their best people are focused on the business they already have. They are focused on the one thing they have, the one thing they are already doing well.

There were a tremendous number of companies in the first few years of the Internet that tried to develop their own browsers and servers. They tried, but if they thought about it for 30 seconds, they would have realized that with the talent they had and the management bandwidth, and given how fast the world was going, they should bear down and focus on the one thing that they can really do well.

In the world of software, there is a unit of measurement that not many people know about. It's called the SMOP. SMOP stands for "Simple Matter Of Programming." You can typically evaluate how long a software project is going to take by how many SMOPs it's going to be. If it's a simple, little thing, it will take a team of four about six months. That's one SMOP. If it's a big project, it can take five or ten SMOPs. Any time it takes even one SMOP, if it's not something that's in the mainstream of what you are doing, that's the time to figure out how to partner and figure out how not to do it. Therein lies the opportunity.

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