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Video Interview with Demian Entrekin, Founder Innotas. Demian is the Founder of Innotas , an industry leading provider of PPM for IT. As founder and CEO from 1999 to 2006, Demian oversaw company vision, marketing, product development, sales and services for the company. After reaching cash flow positive and then raising venture capital in 2006, he took over the CTO role until 2008. Prior to Innotas, Demian co-founded Convoy Corporation and was Chief Architect of its product lines. In that role, he helped the company lead the middleware market with an annual growth rate of 670 percent. Convoy was acquired by New Era Networks in 1999. A recognized thought leader in Project Portfolio Management (PPM), Software Development Life Cycle (SDLC) and Software as a Service (SaaS), Demian has published numerous papers on PPM and his blog (PPM Today) explores current issues related to successful PPM implementation. You can find Demian on Twitter @dentrekin & his blog
Transcript follows & video above. This is PartI of the interview.
- Could you tell me briefly about your past history in sourcing venture capital?
Started really in about 1995 with the first startup company that I was apart of. It was actually a joint project with my father. He was coming to the end of a project he was doing. I was writing code on Sunday night at 11:30pm in Santa Clara wondering ‘How the heck did this happen to me, there’s gotta be a better way?’ So we agreed to start a company which was started right around 1992 or so.
So would your father have been a mentor obviously in your process of becoming an entrepreneur?
Sure in a lot of ways, maybe I’m misunderstanding, but I saw us as kind of co-conspirators really. He for his reasons, me for my reasons trying to write our own path rather than being stuck in the path we were handed if you will. Then right around 1995 we thought we had something that was venture worthy. We thought it was! It was kind of a learning process to actually have those conversations with venture. Luckily we had a few relationships that were able to open up some doors. In retrospect, as that company came to its conclusion, I look back on it & realize we really had no idea what we were doing. No idea how to conduct the conversation, no idea how to even really build the product we were proposing to build. It was just a time I think where we fortunate enough that there was enough optimism that folks were willing to say ‘Well it seems that some lessons were learned. You have this new idea we’ll reinvest & see if you can make a go of that!’ And that one ended up working. We raised the money, we had to throw away what we had built because frankly it was never going fly. And I like to say that it had 4 or 5 fatal flaws, any one of which would have killed it! But anyway that company eventually had a successful liquidity event right around 1998. So we all thought we knew what we were doing at that point. We felt pretty smart. Little did we know that that was sort of like Chapter 1!
in the venture episode?
Just building a company. So for me building a company is really the challenge & dealing with the venture folks is just part of the plan. Assuming you have a business that matches what the venture folks are trying to do. A lot of businesses just don’t have that match. And frankly when we first started that company, we didn’t either. None of us really knew it frankly. We were fortunate enough to kind of discover something along the way.
The second company we self-funded at the beginning, that was right around 1999-2000 which ended up being software as a service SAS application project portfolio management. Now it’s more focused on IT governance. That company is called Innotas. They’re in the market today, doing really well. But we self funded that to the point where it really became clear that 1) if we didn’t get a lot more capital we were going to miss a window. (We had survived the tech recession which was long & painful & very costly to the founders & angel investors.) So it was a combination of the time was now & we were kind of running out of fuel. We raised venture again 2005. We were a little bit smarter about it this time I think, certainly not masters of it. The venture guys do venture all day long, that’s all they do. The entrepreneurs it’s very much a part time job. So you have to know you’re going into the room without the deal making skills that they have. That’s worked out fairly well. That company has been able to use the capital reasonably efficiently & growing very well.
And you sold that company?
So the second company is in the market now, in growth mode, has a lot of very happy customers & really well positioned, unique position, good team.
Will there be an exit with that?
You know most likely there will be some kind of liquidity event. That’s what the investors are after right? They have their limited partners who have a certain expectation of a return. So certainly I would imagine there will be some kind of liquidity event in the foreseeable future. I’m not actively involved in the company day to day.
How much did you raise for that last company?
We did a couple of rounds. The first was about $5.5 million. Then a couple of subsequent rounds, I’m not sure of what the total amount is right now, but it’s around $10 million I would say.
- As an entrepreneur, this has been a conversation on the web recently, I wondered how it’s been for you raising a family? With all the work demands & pressures that we have as entrepreneurs, it’s almost like a 24 hour job really. I just wondered how you’ve managed to balance that, if you have any work life balance?
Yes to me I think it’s really important to spend time with my kids & my family as much as I can. A lot of times you know the thinking you’re doing is not sitting at a desk. I think time away from it is actually really good as well. That said it is a bit of a consuming experience & it often takes a long time & there’s a lot of financial uncertainty for the family often. We’ve certainly been up & down on the financial sine wave, the personal financial sine wave. So you also need a partner who is going to be able to ride the risk wave with you.
Yeah & kind of understanding that that’s the life you’re living & help to make it work. I’m pretty lucky that I have that.
Sounds like you’re blessed.
Also in our case I run the business of the company & in many ways I don’t do much else, you know. I don’t even do our taxes. My wife takes care of keeping the business of keeping our family afloat. So that really helps a lot, I don’t have to think about work stuff all day long & then go home & figure out how we’re going to refinance the house with the new rates. That would just be frankly kind of miserable.
So that’s a remarkable experience that you’ve managed to have the right ingredients & the right people to actually maintain some sort of balance. That’s fantastic & a great success story!
A smart, tolerant wife, is I guess what I would say.
- I note that you volunteer to support female entrepreneurs pitching for venture capital. (Hurrah for you!) Have you noticed differences in the way women pitch or build businesses?
Not really I haven’t noticed a big difference. Other than the actual feminine presence of them in the room. But no & I don’t know if you were going to cover this a little bit? I think that the discrepancy with men versus women is a historical fact that doesn’t need to be discussed. In some businesses more than others, perhaps in some sectors more than others. In fact I was reading an article recently about there was a fair number of women in sort of bio/life science whereas in IT it’s a pretty small number. So that’s the historical fact but I think that if a woman is going to pitch & raise money & try & build a business, the issue is really just about their business skills. I think it’s really all that matters! So if a person knows how to sell, if a person knows how to build a product, if a person knows how to manage finance, if a person knows how to create a vision, if a person knows how to inspire other people, if a person knows how to get people to come together & solve really hard problems? Those are the skills that matter, those are going to come through, if you have them or not. In my experience with women in business & men in business is that gender really doesn’t seem to be a part of the puzzle. What matters is can they solve those problems? Can they perform those complicated duties?
And all those skills that you mentioned are skills that an entrepreneur needs to have to actually even start on that journey?
Yes & an expectation that this may take a while. And this is where things get really kind of hard, especially on the family side of things & the cash flow side of things. So I don’t know if I’m answering your question? But I would say I think that the successful entrepreneurs don’t think about ‘Oh I’m a female entrepreneur! I’m a male entrepreneur!’ They think ‘Here’s the business, here’s the opportunity, here’s the risk, here’s the cost!’ I’ve read recently & I’ve seen it, when I see people present this way, it kind of makes me cringe, that women do better in collaborative environments. I think once you open the door by saying that women do better at x, you’re in trouble.
And your explanation for that?
Because it suggests that now maybe there are areas which they don’t do as well. See now you’ve opened this door for all of these generalizations. Oh so if women are good at collaborative environments then men aren’t, well that’s not true. Or if women are good in collaborative environments, they’re not good in heirarchical environments, well that’s clearly not true. And then it also opens the question if women are better at this, then men are better at that. So I think that that’s a real danger zone & I guess I would avoid that path completely.
Very good that’s a great point, actually.
But the empirical fact is still in front of us right, 2% of women in IT, running IT. So what’s that? I really don’t know. I just think that the solution to that is not about gender, it’s about solving a problem.
- Through the experience of supporting female entrepreneurs as you have been doing, have you noted any obstacles for women sourcing venture? Is it this historical fact, do you think, because they say that between 5 to 8% of women are actually achieving venture funding?
Raising venture is hard for anybody. There’s a really small number that gets funded. I haven’t looked recently but I wanted to say 2% get funded & probably 10% of those have some kind of successful outcome. So it’s hard anyway & it could just be that they’re not being encouraged. I haven’t done the research. I’ve been so busy building companies that I haven’t focused on the sort of statistics of it. How many pitches do women give versus men? What’s their progression through the stages to funding?
So there’s nothing that you noticed overtly in your experience with venture capitalists & entrepreneurs that you would say may be an obstacle?
So let’s talk about some of the women vcs I’ve talked to & I know several. The ones that I’ve talked to don’t care if the entrepreneur is a man or woman. They want an opportunity. They want something that’s going to have a return for their fund & for them. They want to be successful too. So I haven’t experienced an overt difference at that level. That game is about low risk, high reward. If they say high risk, low reward, they’re not telling you the truth. Investors are looking for low risk high reward.
Yes I know, they mask it or cloak it a little when they talk about it.
Some do. Some are pretty open about it.
- What qualities do you think women entrepreneurs need specifically for sourcing venture?
One I would say, don’t make it about the fact that you’re a woman. That’s irrelevant. I would completely say ‘Who cares?’
Forget about gender.
I would say both for men & women, for me, a real keen understanding of your strengths & weaknesses.
OK, just as a human being?
You need to know what you’re good at. And you can’t be delusional about what you’re good at. Having been delusional about what I was good at in the past & being smacked about the head by the market.
That’s very open of you.
Well you know the market is a quick & brutal teacher. So I would say a really keen sense of what you’re good at. People talk about building a really good team & we invest in teams or we invest in markets or we invest in products. Some of that stuff is true & some of it is just blanket positioning. But from an entrepreneur’s standpoint, my view is the more you aware of what you’re good at. So again maybe you’re good at selling & marketing? Maybe you’re great at managing cash? Maybe you really understand exquisitely product development life cycle? Each one of those is going to have it’s own strengths & weaknesses that you need to be aware of. So you come in with a really strong sales background, a venture is going to say ‘Mmm ok this person knows how to sell. Can they bring the skills to the table to build a product that will scale. Do they even know if they have enough talent they have is the right talent because they don’t have enough experience to know?’ If you come from the product side, there’s going to be a question about: can that person sell? Anyway so I’d say that the awareness of your strengths & weaknesses. I gave a presentation to Astia I guess 2 years ago maybe about risk management. I said that 50 CEOs or fledgling CEOs in the room & I said ‘The single biggest weakness in your company is you. You are the biggest weakness! If you are really bad at managing cash & you don’t know it, you are in trouble right now.
Point taken & it sounds like that’s good advice for just being human in the world too?
Certainly for starting a business because the lights are bright!
Yep, you’re on the front lines then & everything is going to be magnified then. Thank you.