Howard Morgan, Ph.D. '68, Describes How He Turns Ideas Into Companies
|Following his talk, Morgan joined other alumni at a dinner with undergraduate students, hosted by the Cornell Engineering Alumni Association, which also sponsors the Colloquium. He spoke with Pamela Hidajat ORIE '11.
In a talk to the Enterprise Engineering Colloquium, Howard Morgan, Ph.D. '68, contrasted two ways of participating in new companies, comparing the relative level of involvement to that of the hen and the pig in the provisioning of bacon and eggs. Like the hen, the venture capitalist is involved in the new company. By contrast, in the new form of organization exemplified by Idealab, of which Morgan is Director, individuals are as committed as the pig is, in contributing bacon to the dish.
Morgan has extensive experience with both forms of entrepreneurship. He was a lead investor in and remains a Director of Idealab, started in 1996 by Bill Gross. Idealab is designed to move ideas forward by providing a shared infrastructure, enabling a focus on ideas, product features and functions, and achieving a short time to market. Morgan is also a Managing Partner of venture capital firm First Round Capital.
Morgan describes himself as a 'lapsed academic.' After receiving his ORIE Ph.D., he joined the Cornell faculty and then the faculty of the Wharton School of the University of Pennsylvania. He was an early adopter of the internet (on machine #50) and of electronic mail.
In his talk about Idealab, Morgan discussed the basic concepts, such as starting with 100%-owned ideas and working to create 100 companies of 100 employees each rather than one 10,000 employee company; and the Idealab methodology, which includes creating a 'college dorm effect' in an open plan space that fosters high energy and ease in learning how to get things done, just as older students help younger ones in an actual dorm or fraternity.
To illustrate the methodology Morgan traced the evolution of several of the more than 80 companies started by Idealab. These include goto.com, eventually purchased by Google; utility.com, a victim of the Enron-induced crash; carsdirect.com, sold to Internet Brands; eSolar, which has devised a way to enable the continual automatic alignment of a large number of small mirrors to point to a tower that concentrates the sun's rays on a thermal collector; and Aptera, manufacturer of a "superdynamic" 3 wheel vehicle that achieves 250 miles per gallon.
The successful transformation of the underlying ideas for such companies into thriving businesses required Morgan's "6 Ps" - people, product, plans, profits, passion, and persistence. Capital is important too, but Morgan points out it is not necessary to raise much money for internet-based ideas. And measurement: "it's all about having the metrics and being able to sense, respond, and changed based on those metrics," he said.
As an example of the relative ease in which some new ideas can become companies, Morgan traced an idea of one of his Ph.D. students at Wharton, Michael Zisman. Zisman founded Softswitch, a company that facilitated the interconnection of diverse electronic mail systems. Softswitch was bought by Lotus Development Corporation, which was then acquired by IBM, where Zisman retired as Vice President of Corporate Strategy. In retirement, Zisman, a golfer, saw the problem of scheduling golf trips as an integer programming problem. used rentacoder.com (now vworker.com) to locate programmers, and in 24 hours had recruited a programmer to set up golftripgenius.com. The site required just 3 weeks and $8000 to get started.
However the work of turning ideas into companies is not without challenges, such as getting realistic schedules for things that have never been done, and appropriately allocating credit among creative team members, according to Morgan. Effective execution is essential, he added, quoting Broadway composer and lyricist Stephen Sondheim: "Having just the vision's no solution, everything depends on execution."
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