From the highs and lows of Silicon Valley
KIWI entrepreneurs don’t fail well, says Havelock North businessman Hal Josephson.
“We need to change the mind-set around failure,” he said.
“Unfortunately people here start businesses with friend and family money and may have mortgaged their house, so when you fail you want a crawl under a rock. There are huge ramifications for those types of failures.”
He said where there was a network of investors there was the luxury of “OPM” – other people’s money.
“I was in the United States last year doing interviews with entrepreneurs and investors around failure. The general notion in California is failure is a badge of courage – you have prepared yourself for the future. You are a higher-percentage opportunity because you won’t make those mistakes again.
“Risky investors expect 70 to 80 per cent of their investments to fail. So it is not so bad – you can come back for more money if you feel like you have something and you have a good rapport.
“For my money, if somebody has failed three times I’ll go for fourth. In the United States there is even a conference call FailCon. I wanted to be invited for the 3GO story because that hasn’t really been told.”
It was one of few failures in the 20-year entrepreneurial part of his career.
Hal Josephson talks easily of his 20-year entrepreneurial career on the ground floor of the tech revolution because he is planning to write a book, distilling learnings.
It’s a career of historic failure and success, before the terms “startup” and “angel investor” were coined.
It’s a career that started in the 1970s when the New Jersey teen at Ohio’s Antioch College bought himself a Sony video camera.
“People had never seen themselves on television – it was like a mirror out of time.
“I decided there was an opportunity around it – I didn’t know exactly what it was – and so I started out recording people’s events, ranging from weddings to people doing workshops or giving speeches and they wanted to see themselves and how they came across.”
When he graduated from college he saw further opportunity with cable television.
“The Federal Communications Commission mandated that all cable television operators who had more than 3500 subscribers had to offer what was called Local Origination Public Access Television.”
In 1976, his production company was hired by Grass Roots TV 12 in Aspen Colorado, making TV shows and helping people make their own.
“It was one of the first experimental community television networks that was funded by the Government and donations to basically to see what would happened if you empowered a community to have its own video production.”
His documentaries were picked up by PBS including one about Claudine Longet, who preceded OJ Simpson in that she hired a team of expensive lawyers to escape a murder charge after she killed her live-in boyfriend, Olympian ski racer Vladimir “Spider” Sabich in their Aspen Colorado home. The Rolling Stones wrote a song about her but didn’t release it until 2011 for fear of litigation.
At a New York conference Hal met a video producer and was asked to run workshops in Washington DC for the Episcopalian Church.
That led to Episcopalian Television Network asking him to produce a televised concert featuring John Denver.
“We uplinked it and we connected to cable systems that wanted to carry it around the world. We set up downlinks in parishes all over North and South America, so ultimately more than 100,000 people saw it. It was one of the first live television events.
“I literally walked away from that with a nice cheque, thinking, I could start a company around this.
“I pivoted – I didn’t even know the term at the time – my then video production company into a video teleconferencing and events company.
“About 18 months later, after getting some finance and doing some early work with a lot of the vanguard companies doing this, I gave a talk at the Rocky Mountain branch of Meeting Planners International about how they could run a meeting in multiple locations.
“A guy literally came up to me and said, ‘Teleconferencing is sexy, I’m going to take you public’.
“We decided to take our little company, which wasn’t even incorporated, and work with this guy.
“It was a micro deal on the Denver penny stock market in 1982. There were 37.5 million shares issued at 2 cents a share.”
The company netted $650,000, moved its headquarters to Denver “and we started going after real clients”.
In two years the company doubled its revenue and had $500,000 in the bank but its board decided it wasn’t scaling-up fast enough.
“They merged us with a company needing $500,000 and they took us private, buying everybody out.
“We learned a lot about stockholder management and how you had to put out press releases. A first client actually sued us for putting out a press release because we were forced by the board to announce we were working with one of the biggest companies in America. Their legal arm sued us saying, you must have a contract that says you can’t say you are doing that work for us. But actually they never put that clause in our contract.
“Myself and my partner cashed out. She ended up going with another deal that went public on the penny stock market and I was offered 1 million shares to go into my second deal, which they were doing at 10 cents a share for 30 million shares.
“Then I discovered a whole other range of things – my new partners were dishonest. I wound up having to testify against them 16 months later in front of the Securities and Exchange Commission.
“That was another education, picking your partners.”
With his partner in the first penny stock market company they formed “a company to form companies”.
“Her husband had been head of Bosch America and then Droidworks, one of the divisions of Lucasfilm, but he decided that he wanted to be a start-up entrepreneur.”
Success was “mixed” from 1985 to 1989 when he was asked to join a startup by Trip Hawkins, the original director of marketing at Apple. Trip had left Apple to start successful game company Electronic Arts.
He wouldn’t tell Hal what the new company was about unless Hal joined the venture and signed a non-disclosure agreement.
“I decided, he probably has a good idea so I’ll just go with it.”
The 3DO’s company’s objective was to create a new home video gaming system which was manufactured by various partners and licensees.
It was also a new business model – 3DO would collect a royalty on consoles and games.
“We licensed technology to a company that had no idea how to make money out of it and wouldn’t listen to us.
“Most unfortunately we lost over $100 million for our investors and likely $500 million for our big technology-licensing partners, Panasonic and Matsushita.
“It was a great four-and-a-half year ride and I managed to parachute out, unloading my stock, before the company tanked.”
Trip Hawkins asked him to organise an event.
“He wanted to build better connections between Los Angeles and San Francisco – Los Angeles was the entertainment capital and San Francisco was the technology capital and they weren’t talking to each other.
“He basically said, I want to throw an event for the top 700 people in the tech, film, TV games and entertainment business. They were all either major content producers or publishers and the major studios.
“At the time Matsushita owned Universal Studios, so they were our partner, and they wanted to see something like this happening.
“Trip said, what would it cost to throw a party for 700?
“On the spot I said “say $1 million” and he said, okay.
“I produced the inaugural Hollywood Meets Silicon Valley conference event called Lights, Camera, Interaction!”
Motorola’s PR firm approached him to produce a similar-style event with a $3 million budget, to lift the Illinois company’s West Coast profile.
“This event was big. I shut down Blue Man Group’s New York show and brought them to Los Angeles.”
The performance artists scored Intel TV advertisements on the back of the event and are touring New Zealand in May.
Hal was hired by Australia Multimedia Enterprises (AME) to be its Silicon Valley liaison, making 20 trips Downunder from 1996 to 1999 to evaluate companies.
“The Howard Government shut AME down and it was sold off to a venture capital firm Allen & Buckeridge.
“They asked me to come out and on that trip I met the head of international banking for Westpac. He was seconded to the private sector-led economic development programme for the Sydney Olympics.
“It ran on the periphery of the Games to basically create foreign direct investment in New South Wales.”
He became a consultant, which involved trips to New Zealand because it was a major trading partner.
He built a network of friends in Auckland and met his current life partner Trish Gilmore, originally from Dannevirke.
Hal continued doing regional economic development around high-profile events like the Beijing Games and Shanghai World Expo, escorting delegations of US business people keen to access China.
“I would basically spend 10 to 15 days in San Francisco and 10 to 15 days in Beijing
and Shanghai. I did 40 of those trips between 2003 and 2010.”
They moved to Hawke’s Bay and live in Havelock North where Hal continued creating events.
He attended Rod Drury’s Accelerate 2011, inviting along John Wander of Giantstep Angel Network from San Francisco.
The same year Hal organised the Make Social Media Work for You conference and found persuading keynote speakers to New Zealand was not always difficult.
He invited a “social media guru” Californian friend who said: “If you set me up to play Cape Kidnappers I won’t charge you a speakers fee.”
One hundred attended: 12 from Auckland, 36 from Wellington, 44 from Hawke’s Bay and Jon Leland had a great round of golf.
Hal said it was a “good first event” but he took up his “New Zealand job” with the Auckland University of Technology.
He is Program Chair for The Project – thought leadership events focusing on innovation and creativity in technology and business.
In 2014 the theme was Digital Disruption, in 2015 the focus was Taking Innovation Global and this year it is titled Creativity in Business and Beyond, all utilising his network of contacts.
Contacts drive his world.
“You don’t burn bridges – why would you unless there is a really negative reason? The only people I’ve burned bridges with were dishonest, or have tried to do something illegal or unethical.”
He said technology such as Skype could not displace spending time with people.
“The past 20 years of my life has been projects that grew out of my business relationships and my networks.
“Business is all about relationships. People move from one company to another, but the relationship remains. If you nourish it and it is important to you, it transcends everything, even being in different countries, and you end up doing more and more business.”