For nearly two decades, Adam Smith has experienced the Triangle’s startup community from virtually every angle. After getting his MBA from UNC’s Kenan-Flagler business school in 1999, he spent nearly seven years at CED, ultimately as its Vice President of Programs, helping early-stage startups get off the ground and then grow. Next came four years at Square 1 Bank, where he again focused on helping early-stage startups.
Early in his time at Square 1, he began working with entrepreneur Robbie Allen, a decorated engineer at Cisco who wanted to turn his passion for college basketball into a business. That business became Automated Insights, and the first product was turning college basketball boxscores and advanced statistics into prose narratives—“game stories”—via an automated process.
Smith joined Automated Insights fulltime in 2011 as VP of Operations, the company’s first hire on the business side, and is now Chief Operating Officer. Over time Automated Insights has expanded and refined its focus, moving first into other sports, then into news (such as automated stories generated from public companies’ quarterly earnings reports), and now focusing much of its effort on business intelligence (BI). Through it all, the heart of the business has been transforming numbers and other raw data into readable prose that tells a story.
We asked Adam Three Questions about the Triangle startup ecosystem. This is our (edited) conversation.
GrepBeat: You had a career supporting and advising startups at CED and Square 1, and now a long career in operations at a startup. What have you learned on the operational side that you wish you knew back when you were trying to help startups?
Adam Smith: I think at CED or a lot of early-stage technology organizations they kind of celebrate you for raising your Series A round. It’s like you think you’re done or that’s some sort of real milestone, where really you’ve just proven that somebody would fund you, versus figuring out what the real market is and who your real customers are, and what need for those customers you’re actually going to solve. I think that there was a big learning curve for me there. The real challenge—especially for a technology like ours that was pretty early and we were kind of defining the space—is finding out who really could get utility, ROI [return on equity], from what you were building and how could you shape that in a way that would do that for them, and kind of stay alive long enough to really prove that out.
Another one is that I’ve always found it interesting that you raise on the idea, and you can almost raise more money on just an idea. It’s like the minute you start getting traction, people fund you on that traction—or they don’t, because you’re early and they don’t know where you’re going to go. I think that’s a lot of the reason why investors fall back to repeat founders, because they know that maybe they can navigate that better than others, even though part of that is probably confirmation bias.
I think a lot of times, companies that I’ve worked with—and we worked hard not to make this mistake—they end up raising money and they’ve got a couple milestones they want to achieve with those like maybe hiring a key person, a technology milestone and a customer milestone and they say, “With this money we’ll hit these three things.” But all of those three things take a while to get, so you end up using all your money. If you only raise six months or a year [of funding] you’ve got to start raising again in six months or nine months, and if you haven’t hit one or two of those milestones, you haven’t shown enough traction to really get there. So I think to the extent that you can self-fund to the point where you really understand who that customer is, it can be a really powerful thing. We didn’t do that, but I kind of wish we had.
GB: As a startup gets over the “viability” hurdle and enters the growth stage and then becoming a larger and more mature company, what new challenges arise?
AS: I always thought it was funny that people would say the minute companies raise their A round, they start coming back as mentors to things like CED or they start getting shopped around like they did this big thing, whereas they don’t know anything more than the guy who is one step before or is still trying to get the term sheet. Now all they have is a kind of burden to prove something and to actually use that money and to showcase they can spend it to achieve what they said. A lot of times there’s a pressure that appears on you that you weren’t expecting. And once you start raising that money, you’re kind of geared in the system to continue to raise money because you’ve got to hit those milestones, and to do that you’re kind of spending ahead. Then you’re a growth story, so you need keep growing like that.
I had never really believed the communication challenge issue you got from 25 employees to 50 to 75 to 100 employees that people talk about, but we have run into that a little bit. So making sure that as you grow that people are understanding where you’re going, understanding why you’re doing that, understanding how you’re going about it, what things you’re vetting to get to that next step, what things you’re learning, and how you’re reacting off those learnings. It’s easy when there’s like 12 people around—and this is a cliché—but around like a ping-pong table. It’s much harder when some of those 12 people are now not necessarily in those meetings and you’ve got new folks in there, and you’re communicating a couple of layers deep. Just making sure that message reaches them all is a challenge.
GB: What are some things that this startup ecosystem might be missing, or could be better at?
AS: I’ve been in Seattle a lot for meetings over the years and I remember thinking in 2000 that Seattle was basically an even market with us as far as a young technology market. Obviously, they had Microsoft and that was a huge company that was headquartered there and we didn’t really have that equivalent. We’ve had SAS and Red Hat and we’ve had some other companies, but Seattle now has Tableau, they’ve got Amazon, they’ve got Microsoft, they’ve got old-school things like Boeing, they have Expedia, and even a company like Starbucks. They’ve been able to scale and show that scale, and I think there’s a virtuous cycle of people coming out of those companies and starting new startups. And we’ve seen that in the Triangle—I don’t want to say we haven’t seen that—but the scale is different.
Each city, as you look at these different markets, has different stories like this about who starts there. Austin has Dell and Boulder has Workday, but for any market, can you demonstrate that you can build a big industry-defining leader there that then gives you this pool of talent, this managerial talent that you need to scale, that I don’t know that we’ve always had in the Triangle.
We had trouble raising money from local investors. They were interested and we had some supportive guys like IDEA Fund Partners, but most of our money came externally later from customers like the AP [Associated Press] and venture funds that were in D.C., and Chicago, and Philly, and other outside cities. And part of that was we were kind of a new technology. I know that a lot of that stuff is timing, but I think we’ve got kind of a gap there on funding. It seems like some of our VC’s, they’re still kind of early-stage, but they’re looking for a lot of traction by the time you get there. I’m not as acquainted with the early-stage market as I used to be; I think there’s more angels out there.
I think we’ve got a lot of talented entrepreneurs that are coming back into it. I think in the old days when I was at CED and Square 1 people would tend to do an exit and retire, whereas in other markets you would do an exit and you’d be back at it. I guess that’s the double-edged sword of living in a place that’s really affordable. Here you can exit and then be done, whereas if you want to continue to live well in San Francisco, you better get back out there. There’s a lot more guys now that are doing it again—Jesse Lipson [ShareFile founder now launching Real Magic, profiled here], Robbie Allen [Automated Insights and now Infinia ML]. There’s other guys like that that have stayed and not moved away, that you’re hoping will come off the sidelines. That all helps build a critical mass, so that as startups scale they can pick up a ton of managerial talent that have done it before. I don’t know if we quite have that critical mass yet here like a San Francisco or even a Seattle.