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Growing the high-tech start-up; it takes more than a dream.

It Takes More Than a Dream

He can see his dream--in fact, it's sitting on his desk--a computer component, a software program, or a number of information technology products. The Utah entrepreneur may have mortgaged his home; his partner is an old friend. What our friend lacks in capital and expertise in marketing and finance, he more than makes up for with enthusiasm, self-confidence, hard work and technical expertise.

But his dream is slipping away. He was hesitant to ask for help. Perhaps he was taught all his life that self-reliance and vision will get you everywhere; he has learned now that they get you only half-way there. He has strived to learn marketing and business. But he didn't have the time--or the money--to make mistakes.

Once an entrepreneur has that product on his or her desk, he has to turn from the familiar soil of technical expertise to the complex land of business.

From R&D to the Marketplace

With the success of software giants like Novell and WordPerfect and the industry they have helped spawn, Utah promotes itself as a seedbed of high-tech startups. According to a 1990 survey done by the auditing firm Ernst and Young for the governor's Utah Information Technologies Task Force, this is true. But the same survey goes on to point out that many startups never make it past the emerging stage. At this stage, the fledgling company has a product to market, but if the technically oriented entrepreneur lacks financial, business, or marketing experience, the dream may slip away.

For the survey, Ernst and Young surveyed the heads of 40 Utah information technology businesses. The main conclusion, according to consultant Craig Bott: some Utah entrepreneurs lack critical business, finance, and marketing experience to push their companies from the technical R&D phase into the business stage of selling their product. "Those companies that survive the transition from a technical to a business orientation are those that were willing to bring in experienced management from the outside," said Bott.

One consultant suggested that Utah entrepreneurs may be at a disadvantage because of their geographic isolation. He said Utahns who grew up in the state may lack experienced role models in business or may never have been out of state. "People here are taught to be very self-reliant and are unaccustomed to seeking help," he said.

Many business leaders believe that these challenges are peculiar to Utah's culture. Others contend that the problems are those that any start-up faces in Anywhere, USA.

Marketing Savvy: Crucial for Success

Peter Genereaux, president of the Utah Information Technologies Association, said, "The entrepreneur has a tendency to overrely on his or her technical expertise and assumes that everyone wants this. He or she is less aware of marketing and business practices."

Loretta Gallant, chairman of Digitran in Logan, believes the transition to the business orientation is not necessarily a problem unique to Utah, but a common one. "It's difficult to move from a technical to a business orientation. Technical people are focused on the product; but the real world may not need the whole package. You have to find out what the customer wants," said Gallant, who comes from a banking background.

Many of those interviewed stressed marketing savvy as a crucial success tool. They pointed out that entrepreneurs must (1) identify the need for their product; (2) identify their potential customers; (3) be very aware of the competition's successes and failures; and (4) be open to marketing, technical, or business alliances.

Deciding whether to be a customer-or technology-driven company can create further confusion in marketing strategy. Steve Allen, president of Allen Communications, faced the challenge of educating end users about his company's multimedia technology. "A technology-driven company has to find and educate end users," said Allen. "Through marketing and advertising, you teach people about the benefits and applications of new technology. It takes time--it was three to five years. But we had the luxury of being one of the first in a new field."

For those entering markets that seem to be heavily penetrated, Digitran's Gallant suggested, "Pick a niche where you don't face a lot of competition. Digitran usually expands and diversifies its product line in these niches."

Accurate market research does more than uncover potential customers and their needs. "You have to understand why your competitors win," stressed Paul Sybrowsky, president and a founder of Dynix in Provo. "Otherwise you shouldn't be in the market."

Financial Strategies

Utah's supposed lack of venture capital, conservative banking industry, and cultural mistrust of major financing have created what many might term creative financing. Some entrepreneurs have been able to start on a shoestring and finance growth entirely from profits. Others must take the plunge and pipe in capital from outside investors before they miss their window of opportunity.

Steve Allen and his brother started Allen Communications with a few thousand dollars--and they've been profitable ever since. In their case, they were able to do this because their market grew conservatively. "We have no long-term or short-term debt," said Allen, who decided early on to not accept venture capital. "We didn't want to have to deal with someone else's expectations. Many entrepreneurs feel desperate for money. They should give themselves time. Too many bosses brings too much grief."

Of course, not everyone can follow Allen's strategy because not all markets grow that conservatively. One new product or technology can change the market landscape so rapidly that a new upcoming product may be outdated in months--before it ever hits the market.

Ken Duncan, president of Soft Solutions, in Orem, believes that venture capital can be used with the right timing--and in the right way. "Some may spend too much money on development rather than investing in marketing. If you bring in too much venture capital too early, you prematurely lose control of your company." Soft Solutions was financed from retained earnings and bank assistance.

Digitran finances money for growth primarily through export bank financing, which many Utah entrepreneurs may not be aware of. The U.S. Export/Import Bank guarantees 90 percent of a company's capital. "It's been a godsend," exclaimed Gallant. "We're the only company in Utah that uses the export/import bank." Digitran also finances growth through profits and public offerings. It has been a public company since 1985.

Bringing in venture capital raises the issue of company control and having to meet more expectations. For the entrepreneur who has a strong sense of ownership and a spirit of independence, this can be a struggle. Sybrowsky's advice: "The principal here is your focus. You shouldn't be concerned about whether your slice of the pie is the biggest. Care about making the pie bigger for everyone. Not one person has all the answers. The real focus must be on working together."

Building the Right Team

Once the entrepreneur realizes he needs to turn to others for marketing, financial, and business expertise, he has made an important step in building a good company team. But the actual process can be the biggest challenge he or she will face: it means coming to terms with personal limitations; and it means trusting others with a very personal vision. This is not just an emotional issue: how it is dealt with can determine whether the young company survives.

"It'll be your downfall if you can't let go," observed Allen. "You can't be involved in all the minutia of your company. You must be able to look holistically at things from some kind of distance. Otherwise, you may lose touch with important industry issues affecting your company."

A difficult dilemma that some entrepreneurs face is letting go of partners, who may be close friends. As a company grows, its need for experienced, knowledgeable leadership increases. "Develop a system of accountability that allows people to set and achieve their own goals. The company outgrows those who helped start it; you may have to let go of good friends who are no longer qualified," Gallant pointed out.

Dynix makes a conscious effort to strive for a balance between promoting people from within the company and recruiting new expertise. When asked how he let go of various areas of responsibility as Dynix grew, Paul Sybrowksy said, "First, I've always known what I can and can't do. It's always been easy for me to let go of those things I don't do well. Second, delegation is a worthy principle--you get more done. Third, life is too short to do everything yourself. And fourth, if you let your employees grow with more responsibility, so will your company. In other words, if your employees don't grow, neither will your company."

Building on Utah's Strengths

Whether the challenges discussed here are specific to Utah or are wider in scope, they are real issues crucial to a company's survival. The very things that often delight "outsiders" about Utah's business culture--idealism, technical know-how, enthusiasm, and strong worth ethic--also cause the greatest frustration. Idealism could prevent someone from learning to trust others when he should; technical expertise can create too narrow a focus; enthusiasm may create possessiveness that keeps out those with needed expertise.

But the challenges Utah's entrepreneur faces may indeed be parallel to what the state itself is experiencing right now: a long-awaited and well-earned acceptance into the business community and the world at large. It has taken an attitude change not only among "outsiders" but here at home as well.

Peter Genereaux may have summed it up best: "Take more opportunity to learn from outside and inside the state. Observe how other people did it."

But there is something unique that Utah may have to teach the business world at large as well. Sybrowsky said, "Utahns have traditionally placed high value on time for their families and personal lives. Some feel we aren't willing to make the sacrifice. But you have to have balance. I've lived and worked outside the state and watched people who don't have balance. They're good for a few years and then burn out. Then their personal lives suffer and that makes them unable to meet business commitments. I think we're better than we realize and what the world realizes. We should be proud of our well-balanced life."

PHOTO : Steve Allen, president, Allen Communications

PHOTO : Loretta Gallant, chairman, Digitran

Cara Bullinger-O'Sullivan is a freelance business and technology writer living in Salt Lake City.
COPYRIGHT 1992 Olympus Publishing Co.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Ernst and Young survey uncovers that some Utah businesses lack business, finance, and marketing experience necessary to push companies from technical research and development phase into business phase of marketing products
Author:Bullinger-O'Sullivan, Cara
Publication:Utah Business
Date:Mar 1, 1992
Words:1726
Previous Article:The Executive Committee: members solve common business problems.
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