20VC How Entrepreneurs Should Manage Their Board & Why Time Constraints Are Always The Key To Progress with Paul Berberian @ Sphero

Summary Notes


In this episode of "20 Minutes VC" with host Harry Stebbings, serial entrepreneur Paul Barbarian, CEO of Robotics and creator of the smartphone-controlled robotic ball Sphero, shares his extensive entrepreneurial journey. Barbarian recounts starting businesses post-Air Force, including a badge-making venture and Raindance Communications, which went public. After a serious car accident and recovery, he ventured into other businesses, including Market Force Information, and experienced failures before becoming CEO of Sphero. He discusses the challenges of raising funds for hardware startups, emphasizing the importance of investor relationships and the significant role Techstars played in Sphero's success. Barbarian also touches on leadership, focusing on product development, and the future of connected play, aiming to transform the toy industry with innovative robotic experiences.

Summary Notes

Introduction to the Podcast Episode

  • The podcast episode is from "20 Minutes VC" hosted by Harry Stebings.
  • Harry introduces the guest, Paul Berberian, who is a serial entrepreneur and CEO of Robotics, the company behind Sphero.
  • The episode is part of a double feature on hardware, with the first part featuring Ben Einstein from Bolt.
  • Harry also briefly promotes Eve mattresses before handing over to Paul Berberian.

Harry Stebings at H stepbings on Snapchat. And today I'm very excited to bring you our second parter to this double on hardware, with the first being on Wednesday with Ben Einstein at Bolt.

This quote introduces the host and sets up the episode's focus on hardware entrepreneurship, hinting at the first part of the series for context.

Go to Evemattress Co. UK, enter 20 vc for 50 pounds off and it'll be with you the next day.

This quote is a promotion for Eve mattresses, suggesting the podcast has commercial sponsorships.

Paul Berberian's Entrepreneurial Journey

  • Paul Berberian has run seven businesses and is currently the CEO of Robotics.
  • He started his first business after leaving the Air Force in 1992, which was making plastic badges.
  • He then moved into video conferencing with Link VTC, which was sold in 1995.
  • Berberian co-founded Raindance Communications, which went public and was sold in 2006.
  • He left Raindance after a family car accident and later started Market Force Information.
  • After a period of travel, Berberian experienced two business failures, one being a complex mix of social networking and lava lamps.
  • He struggled to raise funding for a high-tech solar panel business during 2009.
  • Berberian became involved with Techstars in 2010 and subsequently joined Sphero as CEO.

This is my 7th company, and I started running businesses when I got out of the Air Force in 1992.

This quote provides a brief overview of Paul Berberian's entrepreneurial background, emphasizing his experience and the number of companies he's been involved with.

So in 2010, I had several successes. Early in my career, I had a couple of failures back to back and I didn't know what to do next.

Paul Berberian reflects on his career trajectory, acknowledging both his successes and failures, and the uncertainty that can follow entrepreneurial setbacks.

Paul Berberian's Leadership and Self-Assessment

  • Paul Berberian believes a leader's role is to focus resources, people, and money towards an objective.
  • He identifies as a product-focused CEO, concentrating on delivering to the customer.
  • Berberian admits to sometimes making products overly complex, which can be a challenge for his team.
  • He reflects on the need to find the essence of the products without overcomplicating them.

At least my vision of a leader is you have resources, you have people, and you have money, and you get to focus them on some objective.

This quote outlines Paul Berberian's fundamental view of leadership as the strategic allocation of resources towards achieving goals.

I become extremely focused and maniacal about it. And I think in some of the cases where it hasn't gone well is what you mentioned in my description of one of my failed businesses is lack of focus.

Paul Berberian discusses his intense focus on product development and how a lack of focus has led to past business failures, highlighting the importance of balance in leadership.

Establishing Focus in Product Lineup and Hardware Landscape

  • Recognizing the challenge of establishing focus in both hardware and software.
  • The importance of team communication and collaboration.
  • External events can drive focus by providing a hard deadline.
  • CES 2011 was a pivotal moment for the company, necessitating traction and funding.
  • A strict deadline led to a significant team effort and a successful outcome.

"Well, that's our constant struggle every day within the company. It's a challenge."

This quote emphasizes the ongoing challenge of maintaining focus within a company that deals with both hardware and software.

"So the very first one was CES 2011, which was just a few months after the Techstars program ended, and we needed to show some traction for the little bit of venture money that we raised."

This quote highlights the urgency and importance of the Consumer Electronics Show (CES) 2011 as a milestone that required the team to demonstrate progress to secure further funding.

Balancing Internal and External Deadlines

  • Internal deadlines can create a stressful environment, akin to a "totalitarian regime."
  • External deadlines do not require playing the role of "bad cop."
  • The launch of the new Star Wars toy line was a significant external driver with a non-negotiable deadline.
  • External launch dates drive the internal development cycle and focus.

"If you are so rigid on internal deadlines and people are busting their ass to get to these internal deadlines, you feel like you're a cruel person because they're not being able to spend time with their families."

This quote reflects the moral dilemma faced by managers when imposing strict internal deadlines on their teams, potentially at the cost of personal time and well-being.

"That was a hard deadline we had to get our product on the shelves and the software had to be done."

The quote underlines the necessity of meeting external deadlines for product launches, which can act as a powerful motivator for the team.

  • The trend towards increased direct to consumer (DTC) sales, especially online.
  • The necessity of an omnichannel approach for global expansion.
  • The U.S. market is more conditioned to online shopping compared to other regions.

"We started off maybe having 10% direct to consumer and I'd consider sites like Amazon more direct to consumer than a brick and mortar."

This quote indicates the initial state of the company's sales distribution and the recognition of online platforms like Amazon as a form of DTC.

"In other markets, it's still very much brick and mortar. And so you have to take an omnichannel approach."

This quote acknowledges the variation in shopping habits across different markets, necessitating a flexible and inclusive retail strategy.

Managing Disagreements with the Board

  • Listening and being thoughtful is crucial when disagreements arise with the board.
  • Avoiding arguments during board meetings is important.
  • The CEO should process board feedback and respond thoughtfully or allow themselves to be swayed if convinced.

"If you are arguing with your board in the middle of a board meeting, you need a mental, some little light needs to go off saying you're doing something wrong."

This quote advises against confrontation during board meetings and suggests self-awareness and reflection when disagreements occur.

"So first thing is you listen, and then I process it, and then I try to come back to them with something thoughtful or I see if they can sway me in their viewpoint."

This quote outlines the speaker's approach to resolving disagreements with the board, emphasizing the importance of listening, processing, and responding thoughtfully.

Board Management and Strategy

  • Achieving unanimous decisions on company strategy with the board is a priority.
  • Keeping a board happy involves avoiding surprises through proactive communication.
  • Board meetings should not contain unexpected information as this can lead to dissatisfaction.
  • Familiarity with daily operations can lead to assumptions that the board is equally informed, which may not be the case.

"I always try to get unanimous decisions around the strategy of the company with the board. So how do you keep a happy board? The way to keep a happy board is to never surprise them, always get in front of them."

This quote emphasizes the importance of consensus and transparency in board management to maintain trust and alignment on company strategy.

Effective Communication with Board Members

  • Advance individual communication with board members is crucial.
  • Personal phone calls or face-to-face meetings before board meetings help align understanding and expectations.
  • Using tools like Voxer for asynchronous communication keeps the dialogue open on strategic issues post board meeting.

"And you want to communicate in advance of the board meeting, one on one with each board member. So make sure you have a phone call a week or two before board meeting with each board member."

This quote underscores the proactive approach to engaging with board members individually to ensure they are well-informed and in agreement with the company's direction.

Fundraising Journey for Sphero

  • Raising money for Sphero, a hardware company, has been challenging due to industry skepticism.
  • Success in fundraising was attributed to incremental progress and continued support from a key VC, Brad Feld and the Foundry Group.
  • Sphero's fundraising strategy involved raising smaller amounts and demonstrating progress to secure subsequent funding rounds.
  • Keeping the fundraising efforts transparent from the rest of the company can help maintain focus on business goals.

"What made the difference for us is we had one vc that believed in us time and time again and that was Brad Feld and the foundry group."

This quote highlights the significance of having a committed venture capital investor who supports the company through multiple funding rounds.

Fundraising Timing and Strategy

  • Beginning the fundraising process early is advisable, with nine months being an ideal runway.
  • The speaker agrees with starting early but notes that in his case, it would mean continuous fundraising due to the frequency of their funding rounds.
  • A targeted approach to seeking investors (using a rifle rather than a shotgun) is preferred to increase chances of success.

"Yes, I agree that you want to start raising money as early as possible. Nine months is a great Runway."

The quote concurs with the suggested nine-month runway for fundraising, reflecting the need for ample time to build investor relationships and secure funding.

Investor Sentiment and Experience Across Different Ventures

  • Investor sentiment and behavior have remained consistent across different companies and industries.
  • Despite changes in the economic climate or the nature of the company, the fundraising experience and investor responses are similar.
  • Decisiveness is a valued trait in VCs, as opposed to those who are non-committal and place potential investments into a "maybe" category.

"It's the same thing time and time again. You could just change the name of the company, change it like, oh, we're software as a service now, or we're making physical products. The story changes, but the behavior of the investors is pretty much the same."

This quote reflects the speaker's observation that regardless of the company's focus, the process and investor attitudes encountered during fundraising remain largely unchanged.

Venture Capital and Hardware Investments

  • Hardware investments are not a primary focus for most venture capitalists (VCs).
  • VCs occasionally invest in hardware on a one-off basis, often due to personal relationships.
  • There is a lack of strong investment thesis around hardware being transformed by software and new manufacturing economics.

"Every VC has one or two investments but it's not a serious vector for them it's not an investment theme and so you're always trying to get the one off investment and those typically are relationships."

The quote highlights the speaker's view that venture capitalists do not prioritize hardware investments and that such investments are often made based on personal connections rather than a strategic investment thesis.

Reading Preferences

  • Speaker C does not prefer business books and seeks books that offer new perspectives.
  • Interests include science, math, stories of discovery, lifestyles from different cultures, and science fiction.
  • Reading is seen as a mental vacation, a break from daily work.

"I really like to read books that expand my thinking into areas that I'm not thinking about all the time."

This quote explains Speaker C's preference for reading material that broadens his horizons and introduces him to unfamiliar concepts and lifestyles.

Impact of Techstars on Sphero

  • Techstars played a crucial role in the development and success of Sphero.
  • It provided networking with mentors and investors, which was vital for the company's growth.
  • The Disney Accelerator program, in particular, had a transformative impact on the company's trajectory.

"The company was birthed through techstars, really."

This quote emphasizes the significance of the Techstars accelerator program in the founding and initial growth phase of Sphero.

Favorite Blogs or Newsletters

  • Speaker C enjoys Quora for its intriguing questions and has an interest in aviation.
  • He appreciates content that is both thought-provoking and related to his past experiences as a pilot.
  • Distinguishes between silly questions and those that are genuinely fascinating.

"I've been getting a little bit addicted to Quora, getting some of these interesting questions, and I go down a rat hole there for a while."

The quote conveys Speaker C's engagement with Quora and how it captivates his interest with various questions, leading him to explore topics in depth.

Leadership Lessons from Aviation

  • The most transferable skill from being a pilot to a CEO is managing people and aligning them toward a common goal.
  • The military instilled focus and communication skills essential for leadership.
  • Emphasis on the importance of discipline in achieving objectives.

"It's all about managing people. It's all about getting people to move towards a common goal."

This quote ties the skills of people management and goal alignment directly to Speaker C's experiences in the military and as a pilot, which he now applies in his role as a CEO.

Future of Sphero

  • Sphero plans to develop multiple products simultaneously to expand beyond their initial offerings.
  • The focus will be on creating distinct product lines within the company to facilitate growth.
  • Ambition to become a dominant force in connected play and transform the nature of toys.

"I think you're going to see some really cool products coming out. We're now developing multiple products simultaneously."

Speaker C indicates the strategic direction for Sphero, highlighting the development of new products and the company's goal to innovate in the toy industry.

Appreciation and Acknowledgments

  • Gratitude expressed towards Paul and Brad for their time and introductions.
  • Encouragement for listeners to stay connected through social media and newsletters.
  • Promotion of Eve mattresses, emphasizing their quality and customer-friendly policies.

"A huge hand to Paul for giving up his time today to be on the show. And to Brad for making the introduction to Paul really am very grateful."

This quote shows appreciation for the guests and contributors to the podcast, acknowledging their role in making the episode possible.

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