5 Lessons from CEO Diane Greene’s long, slow slog with VMWare

We’re written already about virtualization software company “VMWare”:http://www.vmware.com/ and it’s blockbuster IPO earlier this summer, the biggest tech stock offering since Google’s debut in 2004. We, and others, have pointed out that it was a long, slow slog through the desert for this Silicon Valley success story. In our earlier Found|READ post we questioned whether VMWare’s path was preferrable to the quickie exit of a copycat startup called ZenSource, that, just three years old, was snapped up one day after VMWare’s IPO in a follow-on acquisition.
Anyway, a recent profile in the San Jose Mercury News extolled some of the virutes of VMWare cofounder and CEO Diane Greene. A follow up post by Jeff Nolan on Venture Chronicles explained some of the reasons why Greene and her three cofounders took the long route to their riches (VMWare has a $26 billion marketcap).
There are a few lessons here for Found|READers (namely, that VCs don’t know everything).
As Jeff writes:

There is an interesting backstory on VMWare about their early days. This deal was shopped heavily and a lot of investors looked at the deal and passed because they just couldn’t understand why virtualization would be important when everything we know tells us that hardware prices would continue to fall. …

Lesson #1: Contrary to what VC like to say — they don’t usually invest with a “long view.” For example, if a VC is investing in a first-order technology improvement (hardware efficiency), but your company promises a second order technology improvement (less hardware, a.k.a, virtualization), don’t be surprised if they say ‘No.’ They won’t want to fund something that diminishes the value of a company already in their portfolio. And, of course, they might also just lack vision.

…other factors in their early fundraising story were that venture investors don’t like husband and wife teams, especially when the wife is as understated as Diane Greene is. SAP passed on an early opportunity to invest primarily because of the husband and wife factor.

Lesson #2: VCs don’t always understand the concept of ‘team.’ (Greene’s husband invented the technology.)

…investors had to consider their ability to replace her given the voting power [her and her husband’s] combined stock guaranteed.

Lesson #3: If you own too much, potential investors see too little upside for themselves, and too little opportunity for control. Which just goes to show…they always want control.

a lot of investors overestimated the ability of competitors and open source projects to replicate what VMWare is doing… It’s a super complex product to deliver and VMWare had demonstrated that they do it better than anyone else, a barrier not likely to be breached any time soon.

Lesson #4: You are the closest to your product. You have the best sense of how easly it can be replicated. If you know you’ve got something difficult to replicate, stick to your guns.
And finally:

…venture investors often experience inability to unstick their paradigm when they come across a deal like VMWare that isn’t about sex appeal, consumer flash, and in-the-tornado founder charisma. Invariably, venture investors look at something…and try to fit it into a predefined bucket based on other investments they have made, or things they have looked at…

Lesson #5: Be different.
In the end, these “handicaps” or the short-comings of VC investors who lacked vision along the way, benefitted VMWare and its employeers. Because Greene and her cofounders HAD to bootstrap the company, all of the early stakeholders and employees made a lot money. Whether or not their individual ROIs could have been even fatter had Greene et al “exited” faster — like startup ZenSource, which benefitted from VMWare’s IPO with its own “follow-on acquisition”:http://www.foundread.com/view/question-of-the-day133 is still a fair question. But VMWare is still a great case study for why entrepreneurs must have faith in themselves, and press on…as we said like tortoises, if not hares. Your job, as founders, is to finish.

Pong with a Twist for MacBook/Pro

Nothing more than a terrific [and FUN] waste of time, Tilt SCREAM Pong takes full advantage of your MacBook’s sensory input devices. By tilting your Mac notebook, you can move your paddle from side to side. Screaming at the mic on your MacBook will aid you in growing the size of your paddle for better chances. Shaking the notebook will speed the ball’s speed, while keeping it more steady will reduce the projectile speed.

Tilt SCREAM Pong is open source, so any budding (or otherwise) developers can see what it takes to utilize the motion sensor hardware if that’s your thing.

Apple Phone Biz is a Joke

No really! Apparently, a prank story on a spanish language website, Canal PDA, indicated that Apple was going to set up its own mobile carrier business. Low and behold, like everything that is Apple related, the news spread across the blogs, and even major Mac enthusiast sites like MacMerc, MacDaily News, Apple Insiders and several others fell for this one. It was actually a joke of a story.

On December 28, most Spanish-speaking countries celebrate the Innocent Saints Day. Besides hanging little paper dolls from the back of victims’ overcoats in the street, it is customary that newspapers and other media publish a fake and usually weird news item, as a joke to share with their audience. Yesterday, CanalPDA.com joined this time-honoured journalistic tradition, posting a story about a supposed project by Apple Computer to become a mobile phone carrier. Of course, such information was completely false, to the point of including statements by an Albert Slope, Apple’s VP of Mobile Platforms and Services, whose name was just the Spanish translation of CanalPDA.com’s publisher, Albert Cuesta. Both Apple’s project and the technical details in the story were completely faked by our editors.

Now this should be a warning for all of you – don’t believe everything you read in a blog!

Spam & Slashdot

Talk about Saturday morning good news bad news. No New York Times delievered this morning, no coffee in the apartment, slight hangover, and a massive spam attack that brought down the server because it used up nearly 2 GB of memory on the server. How about that for bad news? Good news, my little post on SBC is now on top of Slashdot. Oh back to cleaning out the spam!