A startup success story
ClearAccess' Ken Hood defied odds, proved Vancouver can abet high-tech
Saturday, September 22, 2012
Tips for entrepreneurs
Richard Biggs, an international business development consultant, has worked extensively with Clark County small businesses and is a leader in Clark County PubTalk, where he assists fledgling companies in getting on their feet.
Biggs, who lives in West Linn, Ore., says entrepreneurs make common mistakes as they work through the early stages of a company's development.
Here's his list of potential dangers for business startups:
• A lack of forward-looking planning, especially in operational structure: Many small businesses start off by creating limited liability corporations, unaware that most investors don't like to invest in LLCs. The startups then have to restructure themselves to attract investment.
• Poor advisers in all areas, from legal to accounting and marketing: For investors, "often a company is judged by the company it keeps," Biggs says.
• Personal finance problems of key business team members: Any signs of poor personal credit or bankruptcy could jeopardize a deal.
• Risk: Investors will stay away if they don't have a good feeling about how much risk they're being asked to take on.
• A business idea that's not fully developed: Failure is likely if a product is not essential and the business team has unknown track record and lacks financial planning.
• Not shaking the right money tree: Business owners need to request funding from the venture capital firms or angel investors whose funding priorities match their company's stage of development.
• Lack of market understanding: Competition, barriers to entry, legal issues, and getting products to market are often overlooked by entrepreneurs who just want to build their widget. "Build it and they often won't come, or care," Biggs says.
-- Gordon Oliver
Ken Hood landed back in Vancouver some seven years ago with no job and no specific plans, just a desire to raise his family in the town where he'd grown up.
"I made the decision to move back to Vancouver before I had any idea what I was going to do," says Hood, a 44-year-old father of three young children who had most recently lived in Florida. "It was the first time in my life I made a move based on non-business criteria."
For many, such an uncertain move could become a formula for financial distress. But Hood was hardly a candidate for failure. His unusually fertile business mind had already created a résumé of success in launching and expanding technology companies.
A week after his arrival, Hood turned a brainstorm into a PowerPoint outline of a home network management system that would drive creation of a new Vancouver-based company, ClearAccess. That was in 2005. This year, Hood split the company in two, selling its software components to Silicon Valley networking giant Cisco.
Hood and about 25 employees, including ClearAccess co-founder Joel Pennington, moved to Cisco's office in Lake Oswego, Ore. ClearAccess' hardware unit became a new company, called SmartRG, which remains in Vancouver with about 20 employees.
ClearAccess is one of a handful, at most, of Clark County technology startups to have followed the entrepreneur's desired arc of success: building a company based on a solid idea for a product or service by attracting a potent mix of talent and venture capital funding, and finally attracting a suitor to purchase the business.
ClearAccess' successful "exit strategy" not only rewarded investors and employees financially, it also preserved jobs for those who had built the company. "Every single person got a job. That was really hard, but it's one of the things I'm most proud about," Hood says.
When the company sold last spring, Hood kept a low profile in order to keep the public focus on the company and its employees. He publicly discussed the company's acquisition for the first time at last week's Clark County PubTalk networking event and in a recent interview with The Columbian.
In his interview, Hood said wanted to prove to himself and others that he could create a successful technology startup in Vancouver, despite naysayers who argued that the community lacked the talent and venture capital financing to nourish and build a successful technology startup.
"I was a believer that you could do this in Clark County," he said. "I took a lot of pride in that."
Making a difference
Hood, a Columbia River High School graduate, never saw himself as a computer geek, although he always felt that he would be a leader in some field. His sense of professional purpose, he says, "was not necessarily defined by industry, but by how to make a difference and work with great people."
He earned an undergraduate degree in international relations from California's Pomona College and a master's in business administration from Stanford University. He cut his teeth as a technology entrepreneur in California's Silicon Valley during the Internet's infancy, working with and around the industry's pioneers.
Hood built one large company's small-business unit to $100 million in assets, was an early employee at a startup that allowed a lucrative sale to slip away by setting too high a price, and sold a technology company.
"I learned both good and bad habits," he said. "I came back here with more knowledge."
The homecoming to Vancouver followed a four-year stint in Florida, where he helped guide the transition of his firm to new owners. His decision to launch a startup in Vancouver, far detached from the industry's pools of cash and talent, pushed Hood to the outer limits of his risk-taking comfort zone.
Despite stories of instant billionaires whose success seemed effortless, launching and building a successful technology startup is a daunting challenge even in wealthy and talent-rich Silicon Valley. It requires finding an idea that can tap a market, at times with a product or service that people may not even have thought about.
Then it's a matter of finding partners and startup employees by offering a professionally challenging and fun atmosphere even in an intense work environment; attracting a new wave of employees to help the company scale up its size once it's established; attracting financing from angel investors and venture capitalists who drive hard bargains; and, in preparing the company for sale, preserving jobs for those who have babied it from infancy.
None of it is easy. "It's not that a business just forms," he said. "That comes from drive and creativity. You're going to end up going against a lot of forces that would naturally pull you to the ground."
Those forces were particularly strong as he set out to launch ClearAccess. People questioned whether he could create a company in Vancouver, without the Silicon Valley's talent pool of people experienced at working in a startup's compressed life cycle. They were skeptical about the chances for a company that produced both software and hardware, and which had a service component. And Hood was working on just a shoestring budget.
He launched the company in a garage with a tin roof, where temperatures sometimes hit 110 degrees in the summer and chilled out in winter. He slowly developed a core team -- too slowly, Hood now says, noting that hiring a senior engineer and chief technical officer earlier would have sped the company's development. He learned that finding people who could embrace the fast-paced, quick-changing startup culture was essential.
Hood said he kept going despite skepticism of outsiders. "You need to take into account all the new information coming in and you need to be aware of the facts," he said. "But if you're not zealously pursuing your mission, you won't have the fortitude to persevere."
For Hood, that meant persevering with an idea that few people understood. ClearAccess was developing software and services to simplify and improve the home network. But when the company started seven years ago, few people saw the need. That was before the proliferation of home wireless devices -- computers, phones, Xboxes, iPads -- that made the family home as complex as the small-business office of the past.
He recalls hearing Apple co-founder Steve Jobs talk at Stanford about his sense of creating products that appeal to the market. Jobs said his approach is to focus on creating simple products, and then wait for the market to come around.
While careful not to compare himself with the legendary Jobs, Hood says he recognizes the truth of Jobs' insight. "I feel like there's a little of that with ClearAccess," he says.
A limited market
A big difference between ClearAccess and Apple, though, is that ClearAccess set out to sell its products to a small group of service providers -- cable companies and other home network installers. A mere 100 customers represent 90 percent of the market, he says.
In such a narrow spectrum, attracting the first customer was tough. Attracting 10 more was easier, and revenue climbed to $1 million in the company's second year. When the big cable companies realized they needed to manage the proliferation of wireless products, ClearAccess was out in front of any competitor.
He also had to find funding to build the company, and took on two rounds of venture capital. His track record of business success helped, of course. But local technology companies suffer from a lack of venture capital in the Portland-Vancouver area in comparison to the Puget Sound region and, especially, Silicon Valley, Hood notes. While Puget Sound's wealthy entrepreneurs have built a critical mass of investment funding, the Portland area "has gone the other way," having lost locally based companies such as Tektronix that were once key technology anchors.
The company turned profitable in 2011. By then Cisco, which had partnered with ClearAccess, was interested in a deal. Hood faced a new challenge of negotiating while keeping the company and its staff on task. "If you focus on the bright shiny object, you can lose sight of your customers," he said at PubTalk. But being profitable was a big plus in the discussions.
"We negotiated from a position of not having to take the deal," he says.
Hood now faces a long daily commute to Portland's south suburb, but is eagerly embracing this new phase as an opportunity to take the idea that started as a simple PowerPoint presentation to the world.
It's one thing to start a company, build it up and sell it," he says. "It's another … to proliferate our technology on a global scale.
"If we can achieve that," he says, "I think that will be a second win."