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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip FINANCE Investing: Europe Annual Reports Bloomberg BW50 SCOREBOARDS Hot Growth Companies: 2008 Mutual Funds Info Tech 100 B-SCHOOLS Undergrad Programs Rankings & Profiles | | MARCH 26, 2003 ENTREPRENEUR Q&A "You Must Hire the Right People" So says Chili!Soft founder Charlie Crystle, whose candid comments about his startup are a sobering lesson for starry-eyed entrepreneurs
The first was to donate the bulk of his newly acquired fortune to charities fostering development in the Third World. The second concerned his next planned venture, Mission Research, which was inspired his observation that nongovernment aid agencies need software that reduces administrative overheads and allows more money to be spent in the field, where it can do the most good. And the third decision? As Crystle explains to BusinessWeek Online's Alison Ogden, it was to avoid at all costs the sort of pitfalls and personality clashes that he now blames for robbing ChiliSoft of its chance at an IPO. Edited excerpts of their conversation follow: Q: Charlie, let's start at the beginning. How was Chili!Soft born? A: I started Chili!Soft out of the ashes of my services company, which was hitting some singles but no home runs. We had developed some cool technology and I saw "home run" written all over it. So, in 1996, we changed course. Q: How did you initially fund the idea? A: Through the remnants of the services income, then mom. My friend Paul Zimmerman bailed us out when the sheriff came around to shut us down for nonpayment of bills in the summer of '97. But it was mostly Mom -- she took loans against her house, and I took no salary for about a year. Things were really cooking for me and my team...best of PC Expo, lots of attention from Microsoft, real customers. We all knew something big could happen. Q: When did you guys get your first big investment break? A: When [VC outfit] Draper Fisher Jurvetson (DJF) gave us a term sheet. We had a consultant who had negotiated the deal, and had negotiated herself into the president's slot without my knowledge, so her name was on the term sheet as the signatory. She miscalculated. DFJ was happy to fund us with or without her, so we went ahead without her, and went with another CEO -- yet another big mistake. We signed the deal at midnight in a casino bar in Las Vegas! Q: It sounds like there were some leadership and management decisions you regret making. A: DFJ worked with me well early on to help build the initial team. We all made the mistake of not vetting the proposed management team well enough, and we ended up hiring people whose performance was mediocre. We had a lot of questionable advice from mediocre consultants but we didn't know any better at the time because everyone had what seemed like impressive experience to us and they all seemed like nice people, and DFJ isn't in the business of deep background checks. Q: Would things have turned out differently if you had done comprehensive background checks? A: We would have had a better company and gone through a lot less pain. We would have had a shot at an IPO.
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