Kevin O‘Connor: Selling For $1.1 Billion By Following One Simple Rule

Kevin O’Connor is one of those entrepreneurs and investors who is really in the top 0.5% of business experts who has not only created a billion dollar venture, but has been involved with more than one. I had the huge pleasure of interviewing him on a recent episode of the DealMakers Podcast. He added a lot of insights and important takeaways for those looking to launch a startup that really has legs and can go places.

Amongst other ventures, Kevin founded the Double Click advertising machine now owned by Google. A part of a bundle of services that Google ended up paying around $3.1B for.

In this episode you will learn:

The secrets of raising capital
What to look for when scaling up
Lessons from the last tech crash
Patterns of successful founders
Advice for the next generation of entrepreneurs

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About Kevin O‘Connor:

Kevin O’Connor was a co-founder of DoubleClick, an internet advertisement-technology, and founder of O’Connor Ventures, a venture capital firm that invests in early stage companies, including 9Star, Surfline, Travidia, Procore and CampusExplorer.

Previously O’Connor worked for Cincinnati-based Intercomputer Communications Corporation, a microcomputer to mainframe inter-connectivity company which achieved annual revenues of $35 million. When ICC was acquired by Digital Communications Associates in 1992, O’Connor eventually became its Chief Technology Officer and a Vice President of Research and Development.

O’Connor was the initial investor of ISS which went public in 1999 and was sold to IBM Corp. for $1.4bb in 2006. He is also co-author of the book The Map of Innovation: Creating Something Out of Nothing, which was published in 2003.

His most current venture, Graphiq, is a “research engine,” essentially a search engine that lets consumers compare everything from colleges to cell phones. The company was recently acquired by Amazon.

Connect with Kevin O‘Connor:

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FULL TRANSCRIPTION OF THE INTERVIEW:

Alejandro: Alrightee. Well, hello, everyone, and welcome to the DealMakers Show. So today, I have someone that I think is going to be able to share a lot of valuable information. So Mr. O’Connor, Mr. Kevin O’Connor, welcome to the DealMakers Show today.

Kevin O’Connor: Thanks, Alejandro. Good to be here.

Alejandro: So the chances of creating a billion dollar company is something like 0.0005% and you’ve not done it once but you’ve been involved in several instances where the company has become a billion dollar business. So why don’t we do here a little walk through memory lane since you started back in ICC which is this company that was acquired by Digital Communication Associate. So you went to become a CTO for them after the transaction. So how did this experience shape you before going at it as an entrepreneur?

Kevin O’Connor: We started ICC back in my final semester back in college and really bootstrapped it. I think we raised $25,000 from friends and family and grew it to be $30 million company. Then we went to DCA so we acquired so I was on the acquisition side and then that was a public company and we ended up going private and then we ended up merging that with our biggest competitors. So we had a whole sort of master’s degree and education, and M&A and fundraising and taking the public company to private so it was pretty educational.

Alejandro: That’s fantastic. And then you went and became the initial investor of ISS. Is that right?

Kevin O’Connor: I did. We had a common lawyer and he said, “Hey, I got this 20-year old kid. Got that at Georgia Tech. Lived with his grandmother. I don’t know he’s doing something. Sounds interesting but I’m a lawyer so I don’t understand it. Maybe talk to him.” And Chris Klaus, met Chris and he had developed his product on his own and he sold it to 10 large companies for about $10,000 each. I was like holy crap, this is a kid that’s validated the market. This is going to be big. It was still the early days of the internet. It still wasn’t. I was pretty certain the internet was going to be big but it wasn’t a given.

Alejandro: Got it. Because we’re talking about the ‘90’s here.

Kevin O’Connor: Yeah. It was like early ‘95.

Alejandro: And the price of the transaction that ended up happening like around 2006 for ISS it was around 1.4 billion. Is that right?

Kevin O’Connor: I think so. I think it was 1.5 to IBM.

Alejandro: That’s amazing. So you were kind of like a part of somehow the strategy and the board, or what was your involvement with ISS?

Kevin O’Connor: So the early days, I really worked on helping Chris about the strategy and then really recruiting the CEO, the VP of sales, Tom Newnan who I was in acquaintance with thought he’d be a good match. Tom came from the sales side. He was many years in management so I connected him with Chris and those guys really, really built the company and raised some venture money down in Atlanta. They got some Silicon Valley companies interested and they really took off from there. So I continue to man the board from the beginning to the end sometimes giving good advice, sometimes giving bad advice but those guys ended up really doing well.

Alejandro: Got it. Got it. Absolutely. I mean the transaction is just remarkable. So let’s talk about Double Click now which is probably your first big, big company. So Double Click, you met Dwight Merrriman who was your cofounder. So how did you guys meet?

Kevin O’Connor: So when ICC was acquired from DCA, ICC was in Cincinnati and I was going to move down to Atlanta which is the headquarters of DCA to start a research group and I was asking around the company, we probably had about 100 engineers at the time, I was kind of asking like who’s the best engineer and I actually thought it would be sort of one of the most seasoned folks and I kept hearing Dwight Merriman. We just hired this kid. I didn’t even—I met him once but didn’t really know him but everyone said this kid is great. He’s three months out of school. Never seen anything like it .So Dwight came down and joined me down to Atlanta to do research. Our first big product that we did it was a great product. It was one of my best products ever done. It was a complete and total failure. It was basically Slack. We had come up with, it was back if you remember Lotus Notes, we wanted a collaboration product that would capture organizational knowledge and we came up with this one of the first SaaS base products. It was web based. Built it out. It was a great product. Put it into corporations and it destroyed productivity. So it did the opposite of what it thought it would do so that’s kind of a good example of wrong timing. Great product, wrong timing. Slack obviously is not [05:32] to crush it.

Alejandro: Yeah. Got it.

Kevin O’Connor: And then Dwight left. We’re both there for about three years and both left especially after the new owner, the new CEO, the majority owner basically told me he didn’t believe in R&D, didn’t believe in new products so that made the exit easy. And Dwight and I spent the summer coming up with ideas trying to figure out what to do.

Alejandro: So how did the idea of Double Click come about? What was the incubation process?

Kevin O’Connor: So I’ve been working on this process and continued to work on it. In fact, we just turned it in to a product. We’re going to launch it. It’s a sort of a forest innovation product. The name site is teamstormit.com. But it’s a [wit 06:20] of force innovation. It’s way of sort of looking of what are the emerging technologies and you know the basic belief is that emerging technologies cause a disjoint the market, easiest time to sort of become a dominant player in the new market. And we applied that to industry problems in our case. Most of these are internet but there were also other stuff. But really the problem was how people are going to make money and so we brainstormed. I think we came up with a hundred different solutions and narrowed it down to sort of five big ones and really focused our attention on that. The original idea was actually to do more of a subscription package for websites. That was my original idea, a subscription package like ESPN. We started researching it and Dwight said, you know, “Why don’t we you know advertising seems so much bigger than subscription,” and that was kind of the sort of the pivot. And I was like, “Yeah, you’re right.”

Alejandro: Got it. And this was in Atlanta. So what point did you guys say, okay, it’s time to make the move to New York?

Kevin O’Connor: So we had merged [07:28] Atlanta and then we had merged with the company, actually it wasn’t a company, it was a small group, four sales people, and they were called Double Click. And they were split between New York and San Francisco and Dwight and I really thought, you know, look, we already know technology. We don’t need to be in Silicon Valley and we’re both engineers. What we don’t know really is we don’t know publishing and advertising and New York is the headquarters of both of them. So we felt like it would be a better move to move to New York and we did that early ’96.

Alejandro: Got it. So what were the initial days of the business like what were those days? I mean how was the company financed over the course of time really during those days?

Kevin O’Connor: So Dwight and I both put money in to the company and then when we did the mega merger of four people and four people, the company is called BJ Candy. It was a big agency holding company invested I believe something like $500,000 and they had an existing, the four sales people were actually at selling. They were selling advertising for Netscape, Xcite. So they had a pretty decent ad sales business. And then they also gave us free office space. They actually gave us, they did all of our accounting for us and it turn out that we could buy anything we wanted. There was no limit. So we abused. That turned into like a $5 million, we had to pay that back eventually but that was really, that little flaw there in the system really helped us finance it.

Alejandro: Got it. And at what point did you realize, Kevin, “Wow, we’re here on a rocket ship. This is really taking off”?

Kevin O’Connor: Yes, it’s probably late ’96. I mean that’s really when the internet, early ’97, that’s when just sort of the mega dose started flowing in from venture capital. Company started going public so there’s just a lot of money. People needed to buy advertising. Most media companies decided they had to do something on it. They had to have a presence on the internet so probably late ’96, ‘97. I remember a sales person coming in. We just heard the guy that, Craig Kerner and he sold magazine advertising and he came in to my office. He had this shock look on his face. I said, “What’s wrong, Craig?” He said, “Somebody called me to buy advertising.” That’s never happened before. It was such an odd moment in history.

Alejandro: Yeah. Yeah. And without a doubt I mean you guys grew the business to—and there’s no such thing as a straight line in business and one of the things that I’ve seen in your guys journey is you grew this to over 2000 employees and then all of a sudden you needed to slash the employee count by half. And at that point, the company became very profitable but those are difficult times. And just wondering how did you deal with this type of times yourself as a founder?

Kevin O’Connor: It’s funny, it’s not that funny, I just left as CEO so Kevin Ryan took over. So I was remained chairman but Kevin Ryan took over. It was right before the dot com crash so it was brilliant timing at my part in the sense that you know I got to ride the rocket ship up and then Kevin Ryan really had to deal with really the ugly ugly part of the business. And quite honestly he was way, way better than me at dealing with that that I would have ever been. You know it’s tough. It’s a little bit—the whole industry was imploding at that point so people understood. Thank God we were well financed. I mean Jeff Epstein was brilliant. I always ask Jeff, I’m like, “Jeff, why are we raising money?” We’ve actually raised one of the last sort of big secondary, I mean primary offerings out of Wall Street. I mean it was sort of beginning march of 2000, we raised like $400 million. I was like, “Jeff, we don’t need it.” “Kevin, there’s no such thing as too much money. When people are giving you money, you got to take it. You don’t know what’s going to happen.”

Alejandro: Yeah.

Kevin O’Connor: So that money really helped us see it through. Unfortunately we had to cut because we just didn’t know how bad it was going to be. I mean I think the biggest mistakes a company has made and Kevin Ryan did a grand job here was that when bad things happen, people want to believe it’s not that bad. So it’s better to sort of over correct than to under correct. And we saw a lot of companies do that. They sort of made a minor adjustment and then they made another minor and it just became an endless cycle of cutting and that destroys a company. On the flipside, a lot of those people went off to do joined companies like Facebook and Yahoo and Google. They all did, most of them did very, very well or start their own thing.

Alejandro: Got it. And I mean did the company, the outcome end up being obviously positive and you’ve seen this, companies going up and down. So I guess many times you know from the operator perspective from your experience when this type of situations happen and you need to take difficult decisions, how do you minimize the impact on the culture?

Kevin O’Connor: A lot of it is communications transparency and we were always very, you know, we made it very clear, we are in business to stay in business. That is our ultimate goal. We have to drive to profitability and if we have a business that doesn’t support this number of people, we have to make changes. So I think it’s the communications. I don’t think anybody I haven’t heard in years anyone come back and say, “That was horrible what you did.” You do it with compassion. You do it with kindness and you do it with information. You tell them why you’re doing it. Probably the biggest question was, “Hey, we have $400 million. Why don’t we just spend that?” And really we got the right size of business. It’s not an efficient use of capital. Like people should go to companies where they’re needed and their skills, thank God, people who came out of Double Click, it was like coming out of Harvard or something. I mean it was a well known, people had a lot of success with sort of graduates from Double Click. And so people had pretty easy time getting a new job.

Alejandro: Yeah. And in many instances, as a follow up to this type of timing in the market, in many instances crashes really help to resurface the best companies. So you made it through with Double Click and you guys did the full cycle on this. So what did the dot com bust experience teach you?

Kevin O’Connor: I’m always just, I’m a skeptical technologist and I was older. I was 34 at the time which in the internet days that was pretty old. So I was a little bit less this whole new economy stuff I always thought it was kind of crap. I didn’t think. I didn’t know what it was. There’s no new economy. It’s really about efficiency. These are all old economic principles. Giving away stuff for free forever doesn’t make any sense. I think the thing that really fooled people and fooled us too is that people tend to look at relative evaluations. At one time I think we were worth I think $12 to 15 billion, right. Now that was an absurd number for how big we were but we tend to look at it like here is kind of a crappy competitor of ours that’s worth 20 billion. So you start doing relative evaluations and as one of our board members said you know, “Kevin, it’s like trading two $5000 cats for a $10,000 dog.” You can’t fool yourself on relative evaluations. I kind of sold up and down like I just didn’t, you know, I just always remember the bears and bulls make money and pigs get slaughtered. So at the end of the day, a lot of people got slaughtered. A lot of people, I don’t know if you’re around during those time period, but people were margining their stock to buy more of their stock or you know borrowing $6 million to fund their business…

Alejandro: Yeah, I remember now on our talk you were mentioning that you knew someone that literally had a net worth $850 million and that went to zero.

Kevin O’Connor: Yeah. Yeah. Because we believed it. A lot of people outside the dot com industry thought it was maybe a big Ponzi scheme. It wasn’t. We were making the Kool Aid and drinking it.

Alejandro: Yup. Yeah. And there’s a lot of people that are talking now about correction and how capital is going to become more expensive. What are your thoughts on this?

Kevin O’Connor: I don’t know.

Alejandro: Like how would you suggest like let’s say for the entrepreneurs that are listening like how could they prepare the best to really tackle those tough moments?

Kevin O’Connor: The thing I always tell entrepreneurs number one is raise money when you don’t need it and make sure you don’t run out of money because dark times always come. I haven’t been in the business yet where it hasn’t faced a significant challenge or a period of time where the market freezes.

Alejandro: Yeah.

Kevin O’Connor: And you got to be able to ride it through.

Alejandro: Yeah. Absolutely.

Kevin O’Connor: Don’t raise too much money at too high valuations. I mean people I think will end up, they end up making very difficult to get an outcome. They can build a very successful company and end up with sort of nothing.

Alejandro: Yeah. I mean I’m very much aligned with you on the fact that you raise you know when you don’t need money and when I speak with founders I always share the mentality of just raising opportunistically. And if you’re offered the money, just take it because you don’t know what’s going to happen in the future.

Kevin O’Connor: And nobody does.

Alejandro: Yeah. So I guess going back to Double Click, Kevin, so when Double Click got acquired, it had a lot of cash. So I’ve heard you say that there is this thing that happens that when you have a lot of cash, it can become a problem. Why is that?

Kevin O’Connor: I mean too much cash is you become unleveraged. You’re deleveraged. So it’s difficult to make the stock opened out when you have people that have a lot of options. It’s a big damper effect.

Alejandro: Yeah. Got it. And you’ve obviously been in several transactions. So when the transaction actually was you know going to happen, you remember like what were those triggers that you know was like okay, now you know it’s time to take a look at this series.

Kevin O’Connor: Yeah. I mean for us it was really a few factors. One is that the dot com has sort of disappeared. As Kevin Ryan said you know 70% of our customers we lost through the bankruptcy. They went away. I remembered 75% and it was a lot, most of our customer. Advertising was, internet advertising had fallen out of favor. Companies are really striving. We really didn’t know how long we were to go. We had acquired a few businesses that didn’t really make sense anymore like we really needed to split the businesses up and we needed to get out of a couple of businesses and that’s tough to do in a public market and there was management risk and everything else. So we decided to sell the company. I get the award for them. I’m still waiting for a gift from [Helmund 19:31] Friedman. I think that was one of the biggest PE deals ever done, most successful PE deals ever done.

Alejandro: Nice.

Kevin O’Connor: That was an MBA. They’re not on our side. It was on their side. They crushed it.

Alejandro: They tripled, no?

Kevin O’Connor: Yeah. I mean they broke the company apart and then they sold it to, the big part of course to Google. What was interesting is Google was at the auction, the original when we were selling the company, but decided they passed. I guess they decided they’d rather pay three times the price a couple of years. No, actually, I’ve heard the inside story. It was more of a they really viewed, I mean this is a little bit of Silicon Valley mentality is they don’t believe that technology can be built outside—sorry, I’m making a gross generalization. Many people don’t think that technology can be built outside Silicon Valley. That’s total crap. And they kind of saw from what I’ve heard saw us more of a sales organization rather than technology organization and when they looked at it again, it was like this is tech.

Alejandro: Got it. And for how much did this PE firm acquire you guys?

Kevin O’Connor: I think it was for a 1.5 billion, somewhere around there, 1.3. I’m not sure.

Alejandro: I mean it’s obviously not 3.1 like Google paid but definitely a really good success. So how did you celebrate? Do you remember celebrating that?

Kevin O’Connor: So I was no longer part of the company so that was a little bit…

Alejandro: Yeah.

Kevin O’Connor: I mean I was like great, I’m glad they found a home so I’m not sure I celebrated but it was good like I’m really thrilled that product continues until today.

Alejandro: So talking about your next chapter, so after the experience of Double Click, you go to launch FindTheBest. And FindTheBest ends up rebranding in to Graphiq. So can you tell us a little bit more this experience?

Kevin O’Connor: So first before Graphiq, I first came out to Santa Barbara and started doing venture capital again and invested early on on a company Procore. I don’t know if you’re familiar with Procore but Procore they’re crushing it. It’s a SaaS company for the construction industry. I think they have something like 30% of the construction going on in the United States is running through Procore now. But when I first found [22:00], I had this general thesis that every industry, every vertical was going to become a technology company. I looked at construction when they first came to me the construction industry was massive but didn’t spend any money on IT. They were doing all these stuff old school. So I thought that was pretty good. Way too early. It took years for that company to sort of an inflection point and really take off. Graphiq we started FindTheBest was started around 2009. That was really just had a huge impact on me. [22:39] brain company and I was like you know all the vertical search is the same like search is great for broad base, finding information, but when you really want to make a decision like travel or buying a car or going to school, it’s a more nuanced faceted vertical search and my feeling was that it’s all the same and we can do this for a hundred things. We can do it for picking a dog, picking a medical school, picking a smart phone. What’s the best ski resort? So I reluctantly went back and started another company and did that for nine years. And that company was an interesting one because we build great technology but end up there was all sorts of issues. It’s very difficult to build a media company when Google controls all traffic. You’re kind of at the whim of Google and that was kind of the ultimate problem with the original business model.

Alejandro: Got it. And just out of curiosity, Graphiq goes from 65,000 to almost 7 million in literally two years in revenue. What happened?

Kevin O’Connor: So before Graphiq, there was sort of FindTheBest before we going in to other businesses. I mean advertising was great. Vertical search with selling is comparing cars, they’re looking for car. It’s the best advertising spot possible. So I never had any doubt that we could sell advertising and it was very easy but it’s all traffic related which Google controls.

Alejandro: Yeah.

Kevin O’Connor: So we eventually I mean we’re really, the core asset that we have was the technology asset that ended up being more valuable. You know there’s this whole movement of natural language processing and natural language integration with Siri or Google now or Alexa and our technology, we had taken a very radical approach to amassing the world’s information and building semantic knowledge craft and all these fancy words but in any case, it was our ability to understand the human language and produce answers base on you know these billions of facts that we had was probably the best in the industry. So we ended up selling out to Amazon.

Alejandro: I saw that and in the process you also raised money from really top tier VCs. I mean obviously now you know and you probably can’t tell me this but once you’ve been successful in the past people you know start throwing money at you and when you literally start other companies you had like Kleiner Perkins and others. So did you find it easier raising money this time around?

Kevin O’Connor: Actually I find it harder.

Alejandro: Oh really? Why is that?

Kevin O’Connor: Probably two reasons. One is so many VCs have been burned by the SEO reliance and Google. And they’ve all had sort of tin burns in that area and they didn’t want to have it. So I completely underappreciated that issue. And the other one there’s probably a little bit of Santa Barbara. When you live in Santa Barbara, it was primarily the first one.

Alejandro: Got it.

Kevin O’Connor: People prefer SaaS company to subscription and you know we didn’t have that.

Alejandro: Got it. And I mean you’ve been around the block a few times and you created really big success stories so on these companies that end up becoming billion dollar success stories, what do you typically find that is the hardest thing to scale?

Kevin O’Connor: So like my first company it was when PCs were first emerging. The growth of that company and the growth of Double Click were really predicated on being at the right industry that was going through explosive growth so if you kind of look at it, to build a billion dollar company you’ve got to be someplace where it has experienced explosive growth, right. So you have to have a really great product and you have to be able to figure out where that’s going to take off. What was the second part of your question? Sorry.

Alejandro: Yes, so what is the hardest thing that you’ve seen in scaling really this type of companies? What’s the hardest thing that you find?

Kevin O’Connor: I mean you kind of get through a few different stages. The first one is sort of after 10. When you’re 10 people, everyone is involved in every decision. It’s very clubby. It’s very chumming. And people very much like that, right. They join the start up so they can see how all the sausages are made and participate. That’s great. And as you start growing, you start scaling, going to a hundred people you have some level of specialization. You got to like trust that your engineer is going to build a great product and your marketing person, sales people are going to be build great teams. And a lot of people fall off. A lot of people you know 25% of people are just getting knocked out and then when you get to a thousand people you’re really talking about professionalization and putting in processes and you know making everything reproduceable, predictably reproduceable, and that’s just the whole another set of skills. I’ve seen lots of people that have been able to sort of bridge all that but it’s probably more than the exception than the rule and that can be tough. But just for CEOs to really recognize that. I mean I always tell for example founders I told a group at Kleiner, a group of founders, I said first of all get rid of the word ‘founder’ off your business card. Who cares? You stumble upon an idea, it doesn’t make you king or queen or prince. It doesn’t make you CEO. You got to earn it every single day. So it’s kind of getting rid of that entitlement, getting rid of that view of that you may not be the best person, now which is why I voluntarily stepped down to CEO at Double Click. I thought Kevin Ryan—I was a reluctant CEO, Kevin Ryan would be a better CEO.

Alejandro: And I love that, Kevin, what you’re saying here because at the end of the day when you become the CEO, it’s not people working for you. It’s you working for them and I think that a lot of people make that mistake where they leave corporate for example now they have like this founder and CEO role and just think that they’re like the king of the castle.

Kevin O’Connor: Yes. And I love the ones that like some guys, some folks do make the successful transition. I mean [Tuwey 29:12] at Procore, he started it and he’s a great CEO, super authentic, never lost his authenticity. He’s the same guy. Others aren’t so much. But they’re going to be comfortable. You know Chris Klaus for example, he stepped in to a CTO role and that was great. Dwight became CEO at Mongo and he probably, I mean Dwight is one of the most brilliant sort of engineers out there. I remember when he wanted to move off the management. I said it’ll be humanity’s greatest tragedy, losing one of the world’s greatest engineer and turning him in to a mediocre manager.

Alejandro: Right. Right. So now I’ve seen that you’ve been involved with boards. I’m sure that the strategic perspective that you can bring you know, it’s a privilege probably for the companies that you work with. And then you’ve been investing. You’ve been quite active. Now you have your own venture fund. Is that right?

Kevin O’Connor: Yes. So I restarted back in September so it’s called SCOP, S-C-O-P, Venture Capital. Really looking for a SaaS based companies, primarily SaaS based companies. People with you know 500 to a million dollars AR. They’re already proven their market validation but they’re really trying to figure out they still have a long way to go. They’re still trying to figure out how to scale it as an organization and I’ve seen that’s probably where my sweet spot is as well as de-risks an organization quite a bit.

Alejandro: Yeah.

Kevin O’Connor: I have not much luck in, ideas I always say are very cheap and not very valuable. Founders tend to think the idea is the most valuable part and it’s not.

Alejandro: Yeah. Just to that point, Kevin, really quickly I heard you speak and you were talking about I think it was at an event and you were talking about some of the ideas that were dumb that you decided to pass on. So I was just wondering like any examples of those ideas that you’re like this is completely stupid that ended up becoming something?

Kevin O’Connor: My biggest anti portfolio love of all time was Tullo and I knew Jeff Loss. And I knew him well. I invested in his first company and we had done a company together and then he came and pitched the seed round to us and that was like you know, what are you talking about, palms? That’s old. That’s my generation. It’s on the web. Where have you been? So that was a big miss. Mind Body was another one.

Alejandro: Yeah. I mean you can’t win them all, right, so it is what it is. And one of the things that I’ve seen, Kevin, is that you share with founders the recommendation of always thinking of ways to destroy their own business. Why is this?

Kevin O’Connor: There’s always someone else is [32:01] other people looking to destroy your own business so you got to be constantly looking for look you know I think everything you do in business is a hypothesis like there is no truth. If you knew the truth and the truth is always changing over time as markets evolve. So you got to be hunting for, you got to be always go in and say look, this is the hypothesis. I had to disprove it in order to make it closer to truth.

Alejandro: Yeah. Yeah. For sure. And you’ve been obviously surrounded by very qualified individuals. I think probably we may both agree that team is really a big factor in the success of a business so some companies have found these individuals. And what did the recruiting process look like?

Kevin O’Connor: I was always, not to get political, but I was always like a Ronald Reagan fan in the sense that he was always able to recruit, he knew like he wasn’t like the smartest guy in the planet but he was always able to recruit these really, really smart people. He was very charismatic human and he what he was good at and he knew what he wasn’t good at. And so I always kind of envision sort of a great leader is that. I mean my specialty is probably visionary. I’m very passionate and have some level of charisma but you know very passionate about technology and to really find people that we used to call them I always look for smart athletes, looking for people with high IQs, people who are very competitive and that people that wanted to greatness, people who believe that they can. And I always say you can’t teach IQ. You can’t teach smartness and competitiveness is just something that a lot—I’ve met a lot of smart people and are very competitive but you bring those two together and it’s great. Never really focus on hiring on skills. I think skills are way over rated. I think if you’re going to hire a CFO, it helps that they’re a CPA or accounting background but I think people tend to hire way too much base on skills. And skills I mean think about the skills you’ve learned in high school and the ones you learned on college and the ones you use today. I mean it’s your ability to—I invest everything. It’s really your ability to solve a problem and you learn skills that are necessary to solve a problem, not the other way around. Otherwise you trap yourself in to, look, my skill is used to be internet advertising. It’s not who I am. It’s not—I’m done with that, I’m not done with the skill but I’ve moved on to other things that are interesting.

Alejandro: Yeah. And one of the things that I’ve heard you say is that people should not follow their passion but should follow their talent. What do you mean with this?

Kevin O’Connor: Actually I said it the other way around.

Alejandro: Oh the other way. But what…

Kevin O’Connor: I said it the other way around which was I said it at Michigan engineering commencement, I was like you know forget your degree. Follow your passion. It was just wrong. It’s so happen I’m passionate about what I’m also talented at. I think following something where you’re really talented at eventually become passionate. I always ask people you know what’s your talent that you’re 5% in the world? And as I kind of look back in my own life and I was really passionate about wrestling, I was never going to be good. Sorry. I was good, I was never going to become great. Like there’s nothing I can do to ever become world class. So you have to look at what are you really talented at and that develops sort in to a passion. I was very fortunate I love technology. I love inventing. I happen to be good at it and so I was fortunate. I completed the two.

Alejandro: That’s amazing. So you’ve seen definitely a lot in your career, Kevin. And man of your former colleagues have gone out to build multi billion dollar companies and also people that perhaps you invested in or people like you passed on like we were discussing earlier. But what in your mind really takes, what does it take really to become a successful entrepreneur? What are those traits that you’ve seen or those patterns?

Kevin O’Connor: I did a research on this. I presented it to entrepreneurial classes and there’s been sort of one okay study done on it and then I’ve picked the ones that sort of reaffirmed what I thought was the case. I mean a lot of it has to do with sort of an urgency. It’s not I’m going to put it off until tomorrow. It’s really just the sense of it, sense of urgency. The other one is just this ability to be skeptical especially about technology, even our love technology I’m skeptical of it but it’s really focusing on what problem am I solving. I need to pull up that sheet. And another one is sort of willing to break the rules, willing to now look at the status quo and to do something that’s a little bit perceived to be a little bit crazy.

Alejandro: Got it. And in the process of building all these companies now today like how have your views on leadership, how have they changed?

Kevin O’Connor: I’ve mellowed out a lot. I used to be probably way, way more aggressive.

Alejandro: Got it.

Kevin O’Connor: I used to coach—I always say my MBA was when I coached wrestling. My view of leadership is to paint a picture, a big broad picture for where we’re heading. It’s to focus the company and build a consensus. That’s one of the things this hotspot of putting together for [TeamStormit 38:13] to really you know there’s a hundred things you can do as a company. There’s three things you must do and to really too many start ups go, it’s the curse of the entrepreneur. They’re wrap on too many things. They spread themselves too thin. It’s really what are those three things? Every business. You know Google won the search business because of one thing, page rank. Yeah, there’s lots of things that came after that but without that secret sauce, that was it. So really painting the big picture, figuring out what we need to focus on, and building a consensus of this is our shared vision, not my vision. It’s a shared vision, and then just getting people to believe. The first step is I always tell people look someone is going to dominate this market. Why can’t it be us? Someone is going to be president of the United States. Why can’t it be you? Someone is going to win the world Olympic medal. Why can’t it be you? Now there could be reasons. Like there was a reason I wasn’t going to win the gold medal in wrestling but in many cases it’s like, huh, why isn’t it me? Why can’t we build a billion dollar company? We can. It’s a subtle sort of you know, and for me my [39:28] hopefully more inspirational than anything else.

Alejandro: Got it. And so I guess you’ve been building and scaling companies and in the venture space for quite some time like at least, I mean I don’t want to put words in your mouth, but for some time. So the question that I wanted to ask you here, Kevin, is if you had to go back the early days when you were starting in the venture space and just talk to your younger self before building that first business, what would be that piece of advice that you would give your younger self?

Kevin O’Connor: I hate looking at the rear view mirror because you can’t change it. It’s all hypothetical so I tend to really not look at this. But I do give people you know advice and the advice…

Alejandro: So to put it differently, right, so I have let’s say three children now. If you were in my shoes and one of my children was about to launch their own business, what would be one piece of advice that you would give them that you’ve learned?

Kevin O’Connor: For starting your own business, you better make sure—there’s probably two pieces of advice: you better make sure it solves a problem and you better find that out cheaply. Forget about cool technology and it should be a big problem. Like our first company we dominated the market, crushed it, 95% of market share, small market. If you’re going to go after, if you’re going to spend your time on something, go after something that’s really, really big. One of the reasons businesses fail, entrepreneurship, their solution is not a solution. It’s either it doesn’t actually solve a real problem that anyone has any perceived value. Everything is about creating value. You either save people time. You make them more money. You make them more efficient. Whatever it is, you got to be creating value. And it can’t just be incremental value. It can’t be I’m 10% better. I see a lot of people that introduce products that are product features of Google or Microsoft like you’re going to get destroyed. So it’s just got to be something unique defensible problem that you’re solving and you got to have a team, a team that can pull it off.

Alejandro: For sure. For sure. Well, I very much love those pieces of advice there, Kevin. So what is the best way for folks that are listening to reach out and say hi?

Kevin O’Connor: So you can go to scopvc.com. If you’re a SaaS company looking for money, that’s great,

ke***@sc****.com

. And check out, we’re still on Alpha. This is a very cool product. I’m not even sure what we’re going to do with it. It’s to help the innovation. It’s teamstormit.com but I’m pretty excited about it. So the number you’re looking for is 35 years I’ve been involved with this. That’s 35 years I’m working on, how do you force innovation? And you can. You absolutely can force innovation. It’s not a mystery. I’ve done it. I’ve done products with second graders and if you can’t do it, then you know it’s your own damn fault. But this is sort of a good system for doing it. I try to introduce to organizations, organizations I’ve founded, they’re just not that innovative.

Alejandro: I love it. And there’s a ton of those. There’s a ton of those. But Kevin, I don’t want to take more of your time. You have been very generous. Thank you so so much. It has been an honor to have you on the show today.

Kevin O’Connor: Thanks, Alejandro. It has been great. I appreciate you taking the time with me.

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