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Wednesday, September 23, 2009
Born in the Recession
How the 1987 stock market crash helped Avid Technology
Online video firms target small video publishing companies
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MHT's Efrain Viscarolasaga: Preparing the smart grid for more power
I started Avid Technology Inc. in September 1987, at the age of 32. Back then, before the Internet took off, that was considered young. While I had seven years in high tech since graduating from MIT, my executive experience consisted of six months managing one guy named Saul.
I believe that when you start a company, you need a mix of hope, bravado, skill, luck and a little bit of insanity. But one month after I started, we had the biggest stock market crash since the Great Depression. Many people said, “Oh boy, now you’ve had it. You’ll never raise the money for a new company now.”
Maybe I was naive, but I wasn’t concerned. I had learned there’s a difference between macroeconomics (nationwide recession) and microeconomics (my company’s needs). I just plugged on. I had started Avid with a total of $100,000, some from selling a house in the strong real estate market, and some from my Dad. So for now I was okay.
Then I found that the stock-market crash and the downturn offered some interesting and beneficial effects. I found it was easy to hire great people. I found that consultants would work for reduced rates. I found that people seemed remarkably open to new ideas, even radical ones.
We started building Avid’s first product — the Media Composer. It would go on to become an industry standard, but in 1987 it was a huge risk. I was proposing that we could make digital video into a workhorse tool using personal computers. Yet, no one had even played motion video on a PC, let alone recorded it.
In a downturn, customers become more open. Yes, a bad economy might hurt their ability to buy immediately, but developing a product takes time. We found many great companies willing to give feedback as we went along. As the economy improved, we were ready, and so were they.
Bad times are good times for entrepreneurs, and I lived that in 1987 and 1988. Bill Kaiser, whom I worked with at Apollo, had gone to Greylock Partners. He invested in Avid’s first round in 1988 when we had only a rough prototype, and we were claiming that we would build a $50 million business by targeting mostly small post-production houses. It was not your typical deal. We only asked for $500,000, and we got it.
Our claim of building a $50 million company, was based on matching the biggest competitor. What we didn’t realize was that the change to digital editing expanded the market by what turned out to be a factor of 10. Avid quickly grew to $500 million in sales, fueled in part by having the right products and from steady GDP growth after 1990.
I believe that the fertility of an innovation economy is in many ways inversely related to how well it’s doing currently. So yes, good times can be bad times — all the resources get absorbed, and everyone knows the “right way” to do things based on current success.
Today, one of my passions is to help the local economy by connecting early-stage entrepreneurs with seasoned experts. Now is the time to take fledgling ideas and turn them into real companies that meet future needs. And I’ll bet there are some markets that will surprise all of us by being much larger than we thought.
Last year, Tom Hopcroft, Heather Johnson, James Geshwiler and I launched the MassTLC Innovation unConference. I was thrilled to have the chance to design a conference from the ground up to help early-stage entrepreneurs make connections. Now in its second year, the unConference will be held in Burlington on Oct. 1. It is a high-energy day built around a simple idea: There are people with great ideas, and there are people with the skills to help them. Let’s put them together in a clever, new way, and stir. I encourage you to come and take part.
Bill Warner now runs a software development firm that offers a collaborative workspace for entrepreneurs. He is a co-organizer of MassTLC’s unConference. He can be reached at bill@warnerresearch.com.
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