Vivek Wadhwa – 1 of 2

“The accidental entrepreneur turned academic.” Vivek is turning entrepreneurial misconceptions upside down through his wisdom, experience, and research.

Matthew: Hi, this is Matthew Wise with We empower entrepreneurs to have a voice and share their story with the world, enabling others to learn about building products and starting companies. It’s with great pleasure that I’m here today with Vivek Wadhwa. He is a professor at Harvard, Duke, Emory, and Berkeley, and he’s also founder. I would like Vivek to introduce himself to our audience. 

Vivek: Matthew, I call myself entrepreneur turned academic because I founded two companies and then I switched gears and became an academic. I started researching global policy and globalization, immigration, entrepreneurship and all sorts of topics, and I write a lot. 

So that’s why a lot of people know of me, because I’ve been pretty vocal in expressing my views and sharing my knowledge as an academic with all of them. I write about them quite a bit. And the most of the things I write about create controversy because I tend to challenge a lot of the myths and the misconceptions about the way the world really is. 

Matthew: Excellent. And so, can you tell us a little bit about the two companies that you started and how you started those companies?

Vivek: I started my career as a computer programmer and then my ambition in life used to be to write great code. I used to take pride in it, I used to kind of show off about all of the algorithms I wrote and how smart I was as a computer programmer. So, I was quite the introvert. 

And I joined First Boston in the mid-80s and they had a big problem to solve, they were trying to move out of their legacy systems over to a client server architecture. Now, today there’s nothing surprising about that. That seems like what everyone does but this was 1986, well before client server was a known word, before we had PCs, when Bill Gates was still making sales calls trying to sell Windows, it was way ahead of its time. 

My challenge was to build technology that regular people could use to build these sophisticated systems with. Well, it was a difficult project but we did it. We succeeded, and First Boston built this entire technology on the systems, on the software that I had created. And then 1990 comes along and IBM comes to us and says, “Hey, this is great technology, why don’t we spin off a company.” 

And I had an opportunity to go from the safe corporate world, First Boston making mega-bucks and they pay you big, they pay you really well in investment banking and I had the opportunity to become an entrepreneur and I knew nothing about entrepreneurship and no idea what I was getting into. But it was my technology, I was really excited about it, I thought it would change the world. And I jumped ship along with my development team and my managing director started Sear Technologies.

Matthew: Okay, and after Sear, where did you go?

Vivek: Sear we grew from zero to 129 mil in five years which was quite a record. Go back and check the history books, not even Bill Gates . . .

Matthew: That’s amazing.

Vivek: Or Scott, or Larry Ellison built Microsoft or Oracle as fast as we did. Zero to 120 mil roughly in about IPO in 5 years. That was quite a record for the software industry. But then after the IPO what happens is that things always go wrong and becomes dull and boring and bureaucratic and I was fed up with it. So I was yearning to do my own thing and the company got into trouble a couple years later and I was fed up and I ended leaving and starting my own start up. 

So now I wasn’t part of an executive team of a large company, I had a chance to be my own boss and start my own thing based on technologies that I really believed in. So I spun off my technologies, started Relativity Technologies. And what we did basically was we commercialized software that had built in Russia to take legacy systems and move them over to the client-server world.

Matthew: We know that a lot of companies are started by multiple founders and with Relativity how did you come across your co-founders? I mean, what qualities were you looking for?

Vivek: What always happens is that you always start companies with people you know, it’s very rare that you go to party and you bump into someone and you pick them to be your founder, because it’s very much like getting married that you have to live with the people that just founded a company with day in and day out. So to the extent that you know other people, that you’re comfortable with them and that they compliment you weaknesses, that’s what to look for in a founder. 

In my case, now I had a very strong development team so when I started Relativity I took my top 3 or 4 people and asked them if they wanted to start a company with me and they did and it was not only developers, for example one person Richard [Conlan 04:38] he was a business development guy, really good sales guy. I asked him to join me as well. So we basically took a team of people that were complimentary that had different strengths and we decided to take a risk together.

Matthew: And so, what were some interested metrics or statistics about Relativity?

Vivek: We started off with my savings, I had a quarter million dollars set aside at the bank, my kids education funds literally. I had put this money aside and then it was quite a dilemma when I started Relativity because I had built a 120 million dollar public company, I was in pretty high demand. And I was talking to Microsoft about getting a job in Seattle. They had asked me to, invited me over, they rolled out the red carpet. They treated us like VIPs. I was very tempted to take an executive position in Microsoft. 

The alternative was jumping out of the airplane without a parachute and starting my own company. Not only that, taking my children’s education funds and betting them on this start up. But I talked about it to my wife, my kids, and I was 39 years of age then and it was a dilemma, “Do we take this risk, or do we play it safe?” My wife said that you have the rest of your life to work for Microsoft, take the risk, let’s try it because it’s what you’re passionate about. You’ll feel more happy taking the risk, taking the gamble. So we bet it all and I started Relativity. 

The company did extremely well and we took off like a rocket ship. Within the first six months I founded this thing and then I started looking at expanding the company further. It’s never easy, there are always battle there, you know? When you hear people’s founder stories, everything looks like it was magic. I talked about how we took Sear from zero to 120 mil IPO success story, but you don’t realize that every day, there’s a different battle, everyday something goes wrong. Every day you wonder, have I made a mistake? What happens if this deal doesn’t close or if this person leaves? 

You’re always worried about something going wrong every day. When you hear stories like mine, about how I took a company from zero to 120 mil public and developed my second company, don’t believe just that. Peel the onion, go below it and you’ll find there are a lot of others. Relativity we did really well, built a successful company, I ended up getting millions of dollars, in fact tens of millions of dollars on the venture capital. We thought we were going to take over the world. 

Then the dot com bubble burst- bang! Business start closing. Even though we were an enterprise software company, on the east coast in Raleigh, North Carolina, building software to re-engineer legacy systems, the dot-com bubble bursting hurt us. And I didn’t believe that would impact us because we were in a different market segment. I miscalculated. I made a mistake. I kept hiring, I kept building the company, in reaction to the pipeline. It was buzzing at the same . . . we were driving about monthly million dollar sales and there business coming in than we could imagine but because of the dot com bubble, sales stopped closing. 

By the time I realized we were in trouble, the bank balance was dipping lower and lower and deals hadn’t closed for about six months or so. That’s when I got into crisis mode and I downsized the company a little bit, stopped spending, I corrected the company. For a year I worked day and night, literally 90 hours a week. What I also did was I put my own money into the company to turn it around. I was so proud. This was my mistake, I had done wrong. My [visa 08:29] did nothing wrong, so I put my own money into the company and I turned the company around. 

With that kind of dedication and my management team invested money in the company. I had my friends invest money in the company, that’s how much we believed in what we were doing that we would risk everything. And I didn’t take a cent from venture capitalists to do this because I was so proud. These were our mistakes. I made a mistake, first of all, in miscalculating that our deals weren’t closing and by continuing to upsize the company. I made a mistake in putting my own money into the company. 

I made a mistake in the way I handled things because what happened was that I did succeed at turning the company around, wonderful success story now we were looking at 200% growth rates, 27% profit margins, I was going 2.5 million dollar quarter to 4.5 million dollar quarter with expenses about 3 million, so we were talking about spectacular success. But here’s what happened, my body broke when I burned myself out, I had a massive heart attack.

Matthew: Wow.

Vivek: I went on vacation to celebrate success and ended up having a massive heart attack because I had worked too hard, okay? And when you put your money in to turn a company around, you know I took a lot- I really cared about my employees, so much so that I was writing checks from my personal checking account to make payroll when I needed to. 

And that was too close, the attraction between the company and me became so tight that everything was on my shoulders. I couldn’t sleep at night, I was just- literally, I burnt myself out. I had a massive heart attack. I woke up in critical care and suddenly, my venture capitalists weren’t my friends anymore. They saw opportunity at a company they could take over and gain all the benefit from. It looked like the CEO was dying so they were doing their solution by taking over the company. 

Anyway, very ugly battles which I eventually won. I don’t want to discuss all that because people do wrong things at wrong times and these were good people who were doing bad things at the wrong time. Won those battles but I was so sick of the [stat world 10:32] by the time I was done. I was so sick that I would be fighting my friends. I was so sick of having to walk out of critical care and having to fight battles like this. Then I exited from the tech world, that’s when I decided I would be checking out of this greedy, this world of greed and corruption and I wanted nothing to do with it. And that’s when I switched gears and eventually became an academic.

Matthew: Right. That’s an amazing story, Vivek, thanks for sharing.

Vivek: I’m not sharing with anyone else, I mean, I talking about it now and then but it’s something I try to keep out of the press because it’s a painful story but the reason I’m sharing with you is because it is important for founders to know how the real world works. 

This is why I decided to open up with you at this point, because everyone needs to know that it’s never easy when you read about Facebook, yeah you watch a spectacular movie and Zuckerberg had his ups and downs but I’ll tell you, I bet it was much uglier than what you see on the big screen that there were a lot of depressing moments and a lot of other things that went wrong and it wasn’t as sweet as it seems. 

Everyone goes through these downs and they go through it every day. Your friends turn on you, your enemies turn on you, your customers stop buying from you, your employees leave you, things go wrong all the time and as an entrepreneur you have to expect that that’s going to happen. 

If you’re lucky, you’ll eventually achieve success but along the way there are many problems. Play snakes and ladders, you’ll see what I mean. Sometimes we get the magic ladder and you go all the way to the top but then you go two steps forward and a snake bites you and you’re back down to worse than where you started. Entrepreneurship is a game of snakes and ladders.


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