Serial Success | Montgomery Kersten

Interview Transcript of: Serial Success | Montgomery Kersten

Alan
Welcome back. I’m here today with Monty Kersten money inside Silicon Valley, entrepreneur and money. I want to first start in to give me a timeline of your background, how you got to where you are today.

Introduction to Montgomery Kersten, bio further down.

Monty
Well, I came to the Silicon Valley to go to law school, I thought I wanted to be Perry Mason. And as soon as I got out of Stanford Law School, I realized that the world of lawyers was not for me, they weren’t about seeking justice. But I did work on the last big anti trust case for computers that exposed me to the 300 computer companies in the world.

And I became very much in love with high technology and went in that direction. So that was the beginning that brought me here.

Alan
And you came out of Stanford is that that’s true. And, and so over the years, what, what types of companies have you been associated with as

Monty
well, I’ve worked for little 12 person startups founded a company myself with a partner Jim gets, and he and I made a very successful young company that grew to about 50 people, and then even larger about over 100. But it was also acquired eventually by a 5000 person company, which later was acquired by a 150,000 person company.

So I have worked at the smallest little ventures, you could imagine and also worked with literally, the one of the largest companies in the world.

Alan
Now. You moved on. And so today, you’re on several different boards.

Monty
Yes, I’m on the board of five little startups, these are all early stage ventures, but bound for the stars, or at least have the hope to be

Alan
and if so, would you call yourself an angel investor?

Monty
I do occasionally invest in young companies as an angel, which is early stage and relatively small amounts compared to what the institutional firms do.

Alan
So what how is this evolved? What’s the difference between an angel investor versus a venture capitalist,

Monty
they are similar in that they both seek high returns on young companies that can grow to be very large, and impactful, but they’re very different in that the they approach it one, by the firms very professionally, with very deep analytics, thorough background reviews, technology advisors that help them understand it, et cetera, the angels make their decisions usually, much more rapidly.

They do it on intuition, of course, they look at some analytical things, they usually invest between 25 and $100,000, maybe more in a little venture that they understand and believe in, and they can do it very quickly. So you can get a small angel round round it up very much faster than you can often institutional round from VC firms, which liked to invest no less than about 2 million, often more.

Alan
So and at the angel level, typically what set a mess but

Monty
I’d say it’s 25 to 100,000, you do see a quarter million dollar checks being written by some of the more wealthier angels out there. And of course, most of them are high tech veterans, many of them are self made. So they are use their intuition often in deciding what they want to invest in because they’ve done it themselves.

Alan
Do you see trends happening that now in the valley, there are

Monty
always trends happening? huge trend, of course, is mobile, huge, huge trend, but trends and financing. It there is a consolidation of the VC firms going on right now. They are getting pickier, there’s bigger deal flow that is a greater deal flow, more deals, all very interesting. And you see consolidation amongst the VC firms, you see a smaller amount totally raised by them all and thus total, less amount put to work.

And at the same time you see angels growing. So angels, the angel networks are getting bigger, they’re investing larger amounts. And in a way, they’re almost competing with the early stage VC firms. The last trend I see Alan is that more and more VC firms are not early stage investors, they want to see significant revenue and traction and customers and things want to see products in the market.

Don’t want to start paper companies that have a great business plan, but nothing really assembled yet. And that day is that’s a big shift that I don’t think you’re going to go back to the old days.

Alan
You know, when would people come to you and say, Hey, Monty, I got a great idea. And I’d like you to come on my board and get involved in my company. How do you decide what companies to get involved with versus stay away?

Monty
Well, I’m intuitive. So the first thing I have to like the people, if I’m going to be on their board, you have to trust them and enjoy them. The second thing is they have to have some advantage. It doesn’t have to be just technology. It could be it could be footprint. can be market share any number of things. It has to be a big enough market to be justified that it can really grow.

Doesn’t have to be a billion dollar company, but it has to have the ability to be like 100 million in revenue over time.

Alan
I’m busy here today with Monty Kherson money is a Silicon Valley. I’ll call you a serial entrepreneur involved in some angel investing right now where we need to take a quick break. We’ll be right back after these messages,

Alan
I’m here today with Monty Kersen, a Silicon Valley entrepreneur and also has been involved in Angel investing. And Monty before the break, we’re talking about, you know, basically differences between Angel investing in venture capital. And I want to turn the page now to what’s happening out here in the valley with the workforce or talent pool. You know, is it? Is it easy to find the good employees?

Or, you know, how difficult is it just as hard

Monty
as ever right now to find great talent, there’s a huge pool out there, but it’s greatly in demand. And you can tell just because of the traffic on the freeways, how Silicon Valley’s back at work. So we find that there are new ways to try to find people like LinkedIn, which is a very effective tool.

And at the same time, we find that there’s a huge amount of competition for the great talent, whether it’s young or old, the big companies like Google are very aggressive in their recruiting, and they’re very attractive to a lot of people. And then the young ventures find themselves trying to convince the young talent that it’s worth taking a chance with them alongside the investors.

Alan
And I was reading on an article about an individual who he was a catalyst behind a Google Docs. He started a new company called rightly. And he was in discussions with Box Sutton net, and nixing he knew Box net was, you know, entertaining having to come over and Google had bought his company, instead, rightly, eventually became the Google Docs that we know today.

So couple years go by and box calls, and back says that we want you over there, lots of Tiger white cats going

Monty
very much, very much. It’s very fast paced, and anything can happen.

Alan
How do I how did you help to attract good talent to sit in with inside the companies in order to get the company to where you need it to be?

Monty
First, you have to have great leadership behind the company, the CEO, and if he has a co founder, need to be strong leaders that can inspire confidence, because joining a startup is irrational from many points of view, you’re up against big competition there, many startups don’t make it you have funding challenges, you have many challenges.

And it’s much harder to work there. It’s extremely exciting. And in fact, once you’ve worked in a startup, you’ll never go back. So there are startup people. And then there are people that think they want to be startup people and find out that they’re not.

But the way to attract them in my mind is to give them meaningful piece of the rock true the classic stock option or participation in the company, true stock, common stock, none of these partnership units or other sorts of phantom stock, then just give them equity in the company invest over time. They work hard, they do all they can for success because they own a piece of the rock.

Alan
You know, it hasn’t been a trend moving more to restricted stock units versus the stock options. Certainly

Monty
I see that I do see that. I’ve never worked for a company without as meaningful stock option. I would never join a company without having a meaningful stock option. Sometimes they don’t turn into value. But today you do see it being more convenient for companies administratively to adapt the to adopt these plans that are phantom stock or units that are not really equity issued by the company.

And it doesn’t have the stronger tax advantages for it. And less fewer dollars end up in the workers pocket if it becomes successful because of that,

Alan
when speaking with these individuals who are very entrepreneurial in nature, but But you need them there’s the stock component become more important than the cash flow for them where Often,

Monty
I actually am on the board of a company, where the Director of Sales said he didn’t want a bonus program in the first year because he wanted to build cash in the company to make his stock go up faster in value. That’s pretty enlightened. I don’t normally see that. But it’s an example of people in the valley highly valuing their equity in this startup or they wouldn’t be there.

Alan
Well, they get it that ultimately, it’s all about your liquidity events and cashing in your stock. So, a minute we need to take a quick break, I like to come back and speak more with you on startup companies. And you know how you get these things going? Sure. We’ll be right back after these messages.

Alan
Welcome back visiting here today with Monty Kirsten, the Silicon Valley serial entrepreneur, been involved in some angel investing. We’ve been talking about the valley and anything from putting money as an angel investor to what venture capitalists see where the talent pool is today. And money, I want to, I want to turn into focusing on a company that has finally begin to get traction and grow. And you sit on several boards.

And so when you sense that, you know that that we have a model that is is growing, what steps you take to ensure that the growth is sound, and that eventually, you’re working it backwards, let me put it this way. When you get onto board, you typically work it from the back and forward to saying, What’s my exit strategy with this?

Monty
Well, you certainly before you begin want to have an exit strategy in mind, there are always one or two ways which is either sell or be acquired by different institution, usually another company in a similar market, or be able to go public in the public markets, which are there several notable examples that happened this last year. But those are the only two ways to really punch out if you want to say it that way.

And it’s extremely important to realize you cannot determine an accurate make an acquisition happen, they have to come to you. You can’t just put yourself on the block and say we’re for sale now.

It’s not effective. Instead, you have to drive every day building the business relentlessly urgently with focus, questioning always, is this the right path? Is there a better alternative approach to take on and have a supportive Board have adequate capital but not too much. You don’t want to drown in money.

Alan
What’s the IPO market like today? Is it

Monty
there’s true that you cannot be a public company today without having critical mass sufficient to handle the burden of reporting, Sarbanes Oxley and all the other compliance requirements that are out there. But there are some notable examples like LinkedIn and jive recent offerings workday?

I mean, what a great offering that was with real quality companies in high growth markets that have usually earnings, which is good.

Alan
Earnings are good. So do you find that it’s a trend moving away from companies wanting to go public to more privately held or equity

Monty
certainly in the last three years, there was almost complete lockout in the market of the public window was closed. And then it was pretty much pushed open. Facebook, no question about it chilled the market with its stumble in its IPO. And I’m sure we would have already many more companies out have had that not happened.

You have companies like Twitter that could go public tomorrow should they wish to supposedly bound for over a half a billion dollars in revenue in 2013 that have chosen to not go public because they supposedly don’t want the hassle and are waiting for the right time. So it’s it certainly is the best way to control your destiny but only not even one out of 10 companies that are started will ever go public.

Alan
Would you say we’re in the midst of a recovery here in the valley?

Monty
No question about it.

Alan
So what about these guys that have been working for you know, 20 years in the workforce all sudden they find laid off and they come in they say I can’t get a job today. They just want to hire these younger guys very

Monty
true. I’m sad to tell you it’s absolutely true. What

Alan
advice did you have for them?

Monty
relentless focus, be energetic. Know what the company that you’re going after and why your experience is relevant to it pay attention to your LinkedIn profile, it absolutely matters as a new place to be hired. And I’m not saying there’s active age discrimination as much as there is a desire for youth joining youth. And you see, most of the entrepreneurs are 30.

And under right now, there are some that are 40, and a very few that are over 50. It’s a young man’s game increasingly, and many times these cultures want to have youth around them. I can tell you, if I walk on Google’s campus, they know I’m not a senior executive. So they know I don’t work there.

Alan
Do you see trends in the valley and types of companies that are coming to fruition today,

Monty
social networking has grown up, it’s certainly gotten much more focused on a bottom line and an impact financially, not just retina burn, but you still see things like Pinterest that have no significant revenue, and are supposedly just capitalize the two and a half billion dollars with their most recent round, you do see something interesting right now.

Which is it used to be that the investors never would cash out the entrepreneurs or stockholders that were of workers. As time progressed, they were waiting for that liquidity event that everybody experienced. But now you’re starting to see VC willing to pay some of their capital not going into the company’s coffers on around, but actually going to management and employees who take some off the table.

Because the company isn’t public it isn’t bought, and that VC are actually willing to let that happen right now is sort of a straddle or risk management strategy for the management employees. So rather than dilute, they’re just, they’re selling some of their stock. They’re cashing out some of their stock right now. Because there’s no other liquidity for them.

And they are also I mean, I don’t know what their personal decision is. But often, it’s just trying to not have all your eggs in one basket.

Alan
So social networking is mature. In the mobile app, do you see any of these new types of companies, what types of companies have you seen, emerging is still a really hot out there?

Monty
mobile, mobile mobile is, I think, the hottest field. We just saw a company RelayRides. That’s much to be Airbnb, for cars, that you could rent your own car through this network. I think it’s going to be a huge, amazing success. There are plenty of ideas waiting to be developed. You see advertising much more important in mobile now. It used to be that people wouldn’t tolerate it.

Well. It’s here and people are tolerating it. You’re going to see that as a very high growth network. And you’re going to see innovation continuing at a very rapid pace. Apple has got a lot of surprises, waiting to tell us.

Alan
Bomani, that’s great having you here today. It’s it’s also refreshing to hear about trends happening in the Valley for people who are in the trenches such as yourself, working with companies sitting on various boards, and you know, what, what, where do you see what’s your prediction where the value will be three years from now?

Monty
Three years from now? Well, I’m an optimist. I’m a startup guy, so I’m always believing things are gonna get better. I think the worldwide recession is a concern. But for Silicon Valley, I think things will continue to recover and continue to improve over the next three years. As long as the huge trends in in the Middle East and other places. Don’t go the wrong direction.

Alan
It’s been a pleasure having you on today’s show.

Monty
My pleasure to be here.

Alan
We’ll be right back after these messages.

 

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About Montgomery Kersten

Montgomery Kersten works with development-stage companies as an independent board member and advisor on strategic initiatives. Mr. Kersten was the co-founder, and CEO of VitalSigns Software (later acquired), and today serves as a board member of several Silicon Valley private companies.

Mr. Kersten is an active “Angel” investor in high technology companies and has led the initial and follow-on financings for many young ventures.

Mr. Kersten serves as a mentor and advisor to founders in order to accelerate their success and assist them in overcoming the many challenges ventures face, from founding, all the way through the company life cycle to an acquisition or IPO.

Mr. Kersten’s expertise focuses on organizing, financing and developing young companies, advising founders on strategies and tactics for successfully negotiating with all parties, creating effective sales and marketing strategies.

Forging strategic relationships, building strong intellectual property protection, safeguarding founders and fiduciary board members, rapidly building value, and accomplishing successful mergers & acquisitions or IPO’s.