Keeping the Edge Sharp

Albert DaValle Jr. on what it takes to become a successful entrepreneur.

Albert DaValle Jr. has nearly a quarter century of experience in the communications industry. He is currently a capital partner with JK&B Capital in Chicago, a venture capital firm focused in the software, IT, and communications markets with over $1.1 billion of capital under management. DaValle received his BA in electrical engineering from Purdue in 1980 and is currently on the College of Engineering Advisory Board. We sat down with DaValle to get his take on entrepreneurship and what it takes to make it.

Q: As a nearly 25-year veteran of the communications industry, what does entrepreneurship mean to you?

A: I don’t consider myself an expert on entrepreneurship, but I can offer what I think may be a useful perspective on the topic of entrepreneurship in the communications industry. Interestingly enough, this perspective comes not from being an entrepreneur but from spending 16 years in large, fairly bureaucratic telecom companies. These were companies where innovation was genuinely encouraged but then often summarily punished. The companies just didn’t know how to be entrepreneurial.

The 16 years bookended four years at a dynamic telecom startup and were followed by eight years as a venture capitalist helping start high-tech companies in Silicon Valley, Boston, and Europe—a highly dynamic and competitive environment, to say the least. These worlds are dramatically different. While each requires bright, talented and energetic people to succeed, the specific skills, attitudes and mindsets that enable people to rise to the top tend to be quite different.

I have seen dozens of very successful, very smart executives from large corporations try their hands at running high-tech startups. Most have failed, many times quite miserably, and often it is the first significant failure in their careers.

The question is, “Why are these otherwise very successful people failing?” On the other side of the coin, I have seen people who flounder and go nowhere in large corporations go on to flourish magnificently in small, scrappy, and unstructured startups.

The corresponding question is why and how do these people succeed?

It often seems nothing is quite as quick and easy as a successful startup. You begin with a great idea, a bunch of smart, energized people and in a few hardworking but relatively short years you get bought or go public, get rich and buy your big boat, sports car, vacation home, or whatever. The reality is few things are quite as difficult and rare as a truly successful high-tech startup company. The perception versus reality gap is huge. These people earn their success!

To me, an entrepreneur is someone who has a compelling vision about how to change the way people live their lives. Whether it is a new product or a new service; this change or innovation must be dramatically different and better than whatever has existed before it.

But that is the easy part. An entrepreneur must also possess a very deep sense of purpose, self confidence, willingness to persevere, and sacrifice the ability to accomplish much with very little resources and no creature comforts. He or she must also be able to communicate ideas in a way that inspires others to adopt their vision as their own and to sign up to work and sacrifice to make it a reality.

An entrepreneur must be very comfortable in a completely nebulous and unstructured environment where the realities change day by day and even hour by hour. Entrepreneurs resist hard and fast rules, preferring flexibility and creativity. They must have a “healthy” impatience with progress, no matter how fast or slow it is. While they are keen to celebrate and share success they also live in constant fear that their competitors are at their heels ready to pounce on their first misstep if they pause to take a break. The pace can be ruthless. Entrepreneurs are constantly evaluating their team’s performance, making sure they have the most capable people surrounding them.

This is an environment few successful large company people are truly comfortable in leading. They (and I include myself in this) tend to have become reliant on “big company” procedures, resources, and infrastructure.

On the other hand, entrepreneurs often get frustrated with the rules, processes, and general bureaucracy of large companies.

Large companies are very complex and even the best, most dynamic ones require unique leadership that is every bit as smart and talented as successful entrepreneurs but that also have very special communications and organizational skills to motivate large numbers of people.

So, large companies and small companies: two different worlds for two different kinds of people.

Q: What advice would you give to someone just entering the world of entrepreneurship who wants to stay ahead of the curve?

A: The first thing I would suggest is that you do an honest self-assessment of your own desires, skills, personality, and passion. We are each different and the world needs all types of people. We are not all made out to be successful entrepreneurs. I am not trying to discourage anyone; I do believe that many, many people possess the skills required to be successful entrepreneurs. But it takes far more than pure skill. It takes an immense amount of passion, desire, energy, flexibility, willingness to sacrifice and creative ingenuity. You need to have a fire in your belly that can’t be extinguished any other way. I think you know it when you have it.

You also need to have a tremendous amount of confidence in your abilities and a burning passion for your ideas. You need to be able to take rejection over and over again and you need to develop very thick skin. Most great entrepreneurial successes don’t come from tweaking someone else’s proven idea or from doing what seems obvious. They come from ideas and efforts that seem impossible to just about everyone except the entrepreneur. It will almost always be hard, against the odds and different than what everyone else is doing.

This isn’t an “8-to-6” job. The commitment required can be hugely demanding. I hate to say it, but it is a fairly rare person who can balance all the demands of running a successful startup company and maintain a sane and successful personal life. It can be done, and is done, but not by everyone who tries, and it isn’t easy.

So, if all these challenges and difficulties really turn you on, then you may just be a natural entrepreneur. If you are, my advice to you would be to go for it and don’t let anyone or anything stop you. It may happen quickly, it may take years, but in the end, you will finally succeed. Because that is what entrepreneurs do: they succeed in making their vision a reality.

Q: In terms of new technologies and product development, what challenges does the communications industry face on the global stage?

A: The telecommunications industry has been in a constant state of very rapid change (some would say chaos) since 1982 when the Department of Justice and AT&T settled the government’s antitrust lawsuit by breaking up the Bell System monopoly. This resulted in highly-competitive long distance and equipment markets. It enabled the creation of several great new competitive telecom companies such as MCI and Sprint and the emergence of many dynamic equipment companies such as Tellabs, ADC, and DSC.

The change accelerated during the 1990s with the Telecommunications Act of 1996, which created a whole new regulatory platform that opened up the local telephone service market to competition and enabled the creation of hundreds of competitive local telephone companies. At about the same time, the Internet and IP-based communications technology began to fundamentally rewrite the economic framework for building and operating communications networks. Emerging competitors had at their disposal new technologies that reduced the cost of building and operating networks by at least an order of magnitude. This stimulated billions of dollars of investment by both new and established telecom companies, each building their own new network and/or substantially modernizing their old networks. The result was a whole new round of industry consolidation among the older and established players. The one way these older companies (service providers and equipment makers) could remain competitive with the new, emerging lower-cost operators and suppliers of equipment was to get further down the economies of scale curve, thus lowering their costs. Communications was and remains fundamentally a scale industry—the bigger, the better. The trick is to stay responsive to ever-changing customer needs and expectations.

The creation of all these new networks as well as the modernization of the older networks flooded the equipment market with billions of dollars and stimulated the creation of thousands of young startup companies. Each of these companies was competing fiercely on many fronts. They each needed great ideas, innovative products that actually worked, access to capital and, most importantly, they needed many bright and talented people.

You know how the story goes from here, the vast majority of these companies never made it; they died. But in the process of trying to build their companies they reached out to other countries in search of the talent workforce they needed to design and build their products. This in turn has acted as a strong catalyst for the creation of very strong and dynamic high-tech design and engineering centers of excellence in places like India, China, Israel, and Western Europe. Because of the excellence of their people, these centers continue to thrive and take on more and more of the industry’s design, engineering, and manufacturing tasks. Soon, I predict, these new development and technology centers will spawn several world-class, high-tech multinational companies as large and well known as Cisco, Microsoft, and Hewlett-Packard.

With all this as the back drop, the real challenge for any and all players in the communications industry will be to stay innovative, customer driven, nimble and low cost enough to survive. The pace of change in this industry is not likely to change. As crazy as it is today, I think 20 years from now we will look back and think, “Isn’t that quaint? Things sure were much simpler back then!”

Q: What inspired you as a young man to pursue an entrepreneurial direction in your career?

A: Honestly…I have two confessions:

First, I wasn’t inspired to be an entrepreneur. My career kind of evolved in this direction. I have always been involved with new technology through a long series of engineering jobs in the telecom industry. My job immediately prior to becoming a venture capitalist was as vice president of Network Planning, Engineering and Construction for Ameritech/SBC. At that time a good friend offered me a partnership in his venture capital firm. It seemed like the right thing to do at the right time. So I guess I evolved into the situation.

Second, while I do not really consider myself an entrepreneur, I live in that world and I interact with entrepreneurs every day. I don’t think I could do what they do. As I said earlier, the world needs all types of people with all types of skills and interests. However, I do feel that my experience working for large and small companies as well as investing and sitting on the board of directors of several high tech startups has given me an interesting and, I hope, valuable perspective on entrepreneurship.

I find the entrepreneurial environment and entrepreneurs themselves to be fascinating. These folks are very, very smart and completely devoted to their vision. They also face great odds and almost impossible challenges on a daily basis, yet they remain confident, positive and determined. This is inspirational. They are a great group to be around and I learn and grow each day I spend with them.

So, while it wasn’t inspiration that brought me to this world of entrepreneurship, it certainly is inspiration that keeps me here.

–Interview by Barbara Leonard