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Raising Early Stage Startup Investment

Patrick Henry QuestFusion Rory Moore Ron Reedy

Interview with Rory Moore and Dr. Ron Reedy, Co-Founders of Peregrine Semiconductor

There are a unique set of challenges in raising early stage startup investment from family, friends, early Angel investors and strategic partners. Most companies start with a bootstrapping phase from the founders of the company, but what happens when the founders that are ready to launch their idea but don’t have sufficient funds?

In this discussion with Rory Moore, the founder and CEO of EvoNexus, and Rory’s co-founder at Peregrine Semiconductor, Dr. Ron Reedy, we talked about the process of raising capital from friends and family, from early Angel investors, and from strategic partners.

Rory Moore was the seed round investor, co-founder of Peregrine Semiconductor Corp. (NASDAQ: PSMI), one of the world’s leading providers of radio frequency integrated circuits (RFICs) for the wireless communications and aerospace markets. Peregrine ships millions of chips every week to cell phone manufacturers around the globe. Rory was also the seed round investor and founding CEO of Silicon Wave, Inc., now owned by Qualcomm. Silicon Wave produced the world’s first Bluetooth chips. Bluetooth chips are now in billions of devices from cell phones to automobiles. Rory was a cofounder of, Georg!a Now and Optical River. In 2009 Rory founded a pro-bono technology incubator called EvoNexus with Vice Admiral Walter Davis, a board member of CommNexus (now EvoNexus). A University of Michigan graduate, Rory continues to make angel investments in technology firms throughout the region. His other passions include unlimited aerobatic competition flying, scuba diving and surfing.

Ron Reedy, Ph.D. is an American businessman, scientist and researcher. He is most notably recognized for his work in the semiconductor industry where he advanced silicon on sapphire (SOS) and CMOS technology. In 1969, Reedy graduated from the United States Naval Academy in Annapolis with a BSEE. He then earned a MSEE degree from Naval Postgraduate School in Monterey. In 1983, he received his Ph.D. in EE & Applied Physics from UC San Diego. Reedy began his career at the NOSC (US Naval Ocean Systems Center) where he worked on silicon CMOS processing. In 1988, Reedy along with NOSC colleagues Mark Burgener and Graham Garcia published a research paper in IEEE Electron Device Letters that proved that SOS films thinned to 100 nm were suitable for application to high-performance down-scaled CMOS circuitry. It was with this advancement that Reedy decided to commercialize the technology. Their research findings were instrumental to the industry and have since been cited in 13 IEEE research papers and 58 patents. In 1990, Reedy co-founded Peregrine Semiconductor to commercialize the advanced technology. Peregrine became a fabless chip designer that was publicly traded on the NASDAQ until the company was acquired by Murata in December 2014 for $471 million. Reedy served as the company’s founding CEO and the company’s CTO before retiring in early 2015. Reedy now holds the title of CTO emeritus of Peregrine Semiconductor. Reedy sits on the Council of Advisors for UCSD’s Jacobs School of Engineering and its Gordon Leadership Center. Over the course of his career, Reedy has been listed as an inventor on dozens of patents,

Rory and Ron both have extensive experience in raising money for their companies and are also Angel investors themselves. Some of the challenges and strategies for raising pre-seed and seed capital differ from the methodology outlined in my book, PLAN COMMIT WIN: 90 Days to Creating a Fundable Startup, but many are the same. Some of the key topics we cover include:

  • Raising money from friends and family
  • Securing early Angel investment from key domain and technology experts
  • Working with strategic partners on operational issues for non-recurring engineering (NRE) revenue
  • Securing investment from strategic partners
  • Using early Angel investors to help with operational problems and partnerships
  • Transparency in dealing with private investors
  • Forming a board of directors

Check-out the interview for some unique insights and perspectives about raising early capital to launch and build your company.

Patrick: This is Patrick Henry, the CEO of QuestFusion with the Real Deal…What Matters. I’m here today with Dr. Ron Reedy and Rory More. Both of them are good friends of mine and serial entrepreneurs.

They’ve held multiple C-level positions in multiple companies. They’ve been angel investors for a very long time. They’ve both raised a lot of angel investment money for some of their companies. They co-founded a company called Peregrine Semiconductor. They’re a wealth of knowledge.

I was on Rory’s board at EvoNexus. He was gracious enough to read an advanced reader copy of my new book, Plan, Commit, Win: 90 Days to Creating a Fundable Startup. One of the things that he mentioned was, the focus of the book is on your first institutional round of financing.

Once you’re past the bootstrapping phase and the friends and family stage, you’re ready to approach venture capitalists or very high net worth angel investors. There is a lot of work that goes into funding a company prior to that.

These guys both have a lot of experience with that. I thought it would be great for the entrepreneur audience to hear their perspective. Why don’t both of you give us more of your background and then we’ll jump into the questions.

Dr. Reedy: Rory and I go back to high school. We were basically juvenile delinquents. We have a long track record of getting ourselves into trouble. His parents always said, “You’re a smart guy. Maybe you’ll invent something. When you do, call us for financing.”

I didn’t know what that meant. I picked up the phone, called Rory and said, “I have this idea.” Rory said, “I’ll be over tomorrow. We’ll talk about it.” That’s how we got started on Peregrine.

Rory: That’s true. Ron and I go back to the high school days. He went in the Navy. I went in the Air Force. We stayed in touch with each other. He ended up working at the Navy lab in San Diego, then called Naval Ocean Systems Center. He was running the microelectronics lab. I had owned some companies in Phoenix at the time. Ron indicated there was a technology in the Navy lab that had some commercial potential. But he needed angel money. He needed seed capital.

He also needed a co-founder. I signed up for all three. That got me to move to San Diego, found the company with Dr. Reedy and Dr. Mark Burgener, our third co-founder. That led to an exciting, new career for me personally. But it also led to reinventing myself as an individual, and ultimately to EvoNexus, the incubator.

Patrick: Tell me about the original idea with Peregrine Semiconductor. Did it evolve over time? Tell us about the early years of the company.

Dr. Reedy: In hindsight, Mark and I had a meeting once. We both said, “We want to invent a new way to have a company fail.” That sounds idiotic. What we meant was, if it’s in a book somewhere, we wanted to learn from other people’s past experiences. If we were going to fail, we didn’t want to walk through an airport and say, “We just did what they told us not to do.”

Nowadays, they say, don’t start a company based on technology. Start a company based on products, markets, customers and outcomes. Now, almost the first question is, “How are you going to get out of this thing?”

Peregrine was a technology startup. It was at the very end of the era of what I would call the great era of semiconductor technology-based startups. They started because they wanted to do MOS. All of the great companies of the 70s and 80s were based on a semiconductor processing trick.

The fabless model changed all that. We were the end of an era. When I talked to Rory, I said, “I know how transistors work. I know how all this stuff works. But we have to figure out what to do with this technology.” That’s why I wanted a business-oriented co-founder. To me, whether Peregrine was a great startup or not, most great startups had a team that started it. You had Jobs and Wozniak. Neither of them gets Apple by themselves. You have Hewlett and Packard. You have Noyce and Moore. You can see it over and over again. I was smart enough to know that I only knew this piece of technology. I really needed business, finance and all the other things that Rory knew how to do. He had run companies. That’s why I reached out to Rory and said, “I need more than your first check. I need you to be involved.”

Patrick: The data proves it out. I wrote an article for Entrepreneur about this very topic, why startups succeed, and why the vast majority fail. This was one of the big things. You need to have that combination of the business capability as well as the technical capability from a product standpoint. Very few companies make it if they don’t have that combination of capabilities.

Did you bootstrap this thing for a year out of your own pocket? Tell us about the early funding of the company.

Rory: The early funding of the company was when Mark and Ron worked at the Navy lab. They were living hand to mouth as government service employees. They need someone to come in and provide seed capital but also some of the things he described with the business aspect, and access to other people’s capital.

Ron and I sat down and said, “We both have a lot of connections. Beyond my quarter-million dollars, who can we go to next?” We put together a list, including his family, my family and extended family. The first $1 million we raised was literally from family and friends. We did it in less than 60 days. It was a total leap of faith trust in the team.

Patrick: This was a belief in you as individuals, and probably not understanding the idea that much. Peregrine was a very technology driven company. There could have been some friends and family that might have been engineers. The vast majority were betting on you as individuals.

Rory: I think we had one engineer in the semiconductor world. That was his brother-in-law. But the rest of the investors really didn’t know the difference between chips and chocolate chips. But they believed in us, and what we presented we were going to do with our technology.

Patrick: You put in friends and family bootstrapping money. How far did that get you from a time standpoint as well as proof points for the technology, and what you were trying to do as a company.

Rory: It gave us the ability to start. It enabled Ron and Mark to quit their day job in the Navy. We had to have them full time. It enabled us to then grow a little team, myself, Ron and Mark. We added another person along the way. It allowed us the ability to create some chips at the Navy lab that we paid for. We basically used the Navy lab as a fab. That was unique.

Dr. Reedy: Yes, that was our first fab. I’m going to correct Rory a little bit. In addition to my brother-in-law who happened to be the guy running the Merced project at Intel, he was a very senior guy. He introduced us to Intel. Rory had a friend in Scottsdale who introduced us to a guy named Bernie Vonderschmitt who was the CEO of Xilinx. Bernie personally invested.

Patrick: They were early angels.

Rory: Bernie was in the B round.

Dr. Reedy: I met with Bernie before I left the government. He was a huge advisor to us. What we realized was that we had to figure out what we were going to do with this technology. We had the insight knowledge that, after 10 years and $10 million of government funding, Mark and I knew the technology absolutely worked.

We had built chip after chip. We could prove it. We didn’t have any nagging thoughts of, “What if this doesn’t work?” A lot of people have that. We owned a fab for 10 years at the Navy. I remember in the very early round we went to CES in Las Vegas. Mark and I had the advantage over Rory.

We knew the semiconductor industry and how competitive it was. Rory had the advantage over us that he didn’t. My edict was, “We’re CMOS. That’s the good news. It’s going to win over everything.” At the time, IBM would have told you, “No. You’ll never make a computer out of CMOS.” What I told everyone was that we were a specialty version of CMOS. When I talked with Bernie and others, I would say, “What can we do differently?”

We found at CES that radio was the next big thing. Computer wars were over. Intel won it. IBM lost it. Micro processing was going to win and there was this juggernaut in 1990. The rule was, do not do anything that anyone else was doing. The radio was not considered to be an important market, other than military.

Cell phones were toys for Hollywood starlets or real estate agents. We went to CES. Rory was highly skeptical. I was looking out a little farther than Rory was used to looking out. He wanted something a little nearer term. I said, “Everyone go around CES and take a pad with you. For every portable computer you see someone using, put a tick mark on your paper. For every portable telephone you see someone using, put a tick mark. We’ll add them up at the end of the three days.”

It was 42-to-1 cell phone over computer. That’s when we said, “We are going to be in the wireless market. The emerging opportunity is the cell phone. I know it looks farther out there but we can establish ourselves in CMOS in radios before anyone else. Then we’ll be different.” That was probably one of the things we did right. We anticipated that RF and wireless was where we were going to use this technology.

Patrick: Did that first $1 million get you to a prototype or some type of minimum viable product?

Rory: No, it did not give us a product. It got us to the next round. The next round, we raised $3 million.

Patrick: This is where Bernie Vonderschmitt came in?

Rory: Bernie invested. We had some smart people that invested. More of the angels re-upped than we originally acquired. It was a $3 million round, and it did get us into a fab beyond the Navy lab with IBM. First was TRW. They closed down on us before we got far enough along. They closed the fab and then we quickly moved to IBM in Rochester, Minnesota.

Dr. Reedy: The guy who got us into that fab was Bernie Vonderschmitt. Bernie was funding us by then. He believed our technology could help his products, FPGAs. Intel was funding us. Union Carbide was funding us. We reached NREs. That gave us a lot of credibility.

When the TRW fab closed, I said, “Bernie, where do we go?” He said, “You have two choices. Go to IBM for the best technology or you have to get to Japan for the best cost.” Those days, that’s where all the great foundries were. That gave us a roadmap. Unfortunately, it was this constant every two years, the fabs closed. We were just getting products out and the fab would close, which was our Achilles’ heel.

Patrick: Getting back to the financing portion, it was based on your personal credibility to get the first $1 million in, primarily through friends and family. I really like what you were doing. You were seeding the idea with people beyond the first investors, from the time you had the first investors. A lot of entrepreneurs don’t do this.

They see fundraising as an event versus a process. As a startup CEO, even when you’re not raising a funding round, if you know you’re going to have to eventually raise more money, you should always be out there evangelizing, socializing and talking about the progress you’re making. Talk to us about that, Roy. What were you doing during that first year-plus when you were going through the first $1 million? How did Bernie get more excited about it over time?

Roy: The individuals in that industry that also invested in this B round gave confidence to the early investors.

Patrick: That’s why they re-upped.

Roy: They re-upped. That also gave confidence to the strategic partners that we were talking to, like IBM. The NRE that we received from Xilinx and Intel at the time, we also got to leverage that.

Patrick: Yes. You trade off other people’s credibility. These people believe in us, so we must be on to something.

Rory: Right. It was about continuing to work the network. Ron and I used to feel that, if you’re not raising money, you’re not doing your job. You have to be raising money all the time as a startup. Even though you just closed a round, that next round has already started.

You have to put together an investor list that’s a pipeline. The pipeline changes. The pipeline could be all over the country. You have to go where the investors are. I’m going to guess that we had investors in 20 different states in the country. They were in the Midwest, on the East Coast and all over. You have to go where the investors are.

The other area where we did really well, even though we weren’t required to, we had shareholder meetings. Once a year, the shareholders would fly into San Diego. They would spend the night. We had actual stockholder meetings. We ran it like a public company.

We had newsletters that we sent out on a monthly basis with how we’re doing, highlights and low lights. They were not all highlights. Ron would hate to write a newsletter that said, “We just lost a fab,” but we would tell them that. Don’t hide it. Get it out. They trusted us. Then, when we had great news, they celebrated with us. It’s about investor relations. We had the best investor relations of any startup I’ve ever seen. That’s where a lot of startups fail.

Patrick: Did you have board members beyond the founding team?

Roy: Yes, we did. We had board members. His brother-in-law joined our board, from Intel. I had a chance to gain an investor in the A round who, at the time, was Chairman and CEO of 3M. He not only invested in the company, he joined our board. We did have a board of directors made up of shareholders.

Every board member we had was an investor as well. That was a requirement. If you were on our board, you also invested. The last question I wanted to have asked when I was seeking other people’s money was, “Has your board invested?” I wanted to say “yes” to that question.

Dr. Reedy: I think we did a good job early on of recognizing that corporate partners provide huge credibility. They provide resources that you can’t possibly afford to pay for. They provide a network. We had Bernie with Xilinx. I used to go up to Intel on a monthly basis.

After my meeting with the research people that were funding us, I got lucky enough that I met Gordon Moore through Lew Lehr, the 3M guy. He said, “I want you to come in here and tell me what’s going on in my own company.” I would be with Gordon Moore for an hour or two. I thought, “I can’t believe I’m in the room with the industry.” We kept it clean.

What these corporate partners did for us, the one thing they really don’t want to do is put in capital pay for the capitalization of your company. They’ll give you R&D to do something, but if you say, “I want you to buy five computers,” they will say, “No, that’s on you. That’s a balance sheet item. We’re funding you through.” They want an arm’s distance.

We relied on investors to put the equity in and corporate partners to do all this heavy lifting. IBM put in $5 million to $10 million worth of development. They refined our process from what we left the Navy lab with, which was an R&D process. They put in place an absolutely manufacturable process that Peregrine uses to this day.

When we had to go to the next fab, we walked in with four moving boxes full of documents. Those fabs wanted to do all of this due diligence. We said, “Here, read this. It says IBM on it.” They said, “We’re done. We’ll just do what they said.” Startup can’t do that. Even Xilinx can’t do that. They were fabulous. At the time, IBM was, and still is, the gold standard for technology.

We did a good job of understanding when and how to use a corporate partner. I think a lot of mistakes that young entrepreneurs make are because they want to go to an Intel and have them fund them, invest in them and promise to buy things. It’s just too hard for those big guys to do.

Patrick: At Entropic, we did have a lot of corporate strategic investors, but it’s a different group than the actual operating group. If you can get a non-recurring engineering contract, NRE, from the actual people that are the customers or partners, in many ways, that’s more valuable.

There is this weird conflict of interest that exists as you get corporate strategics on your board or as board observers. I think there is value from a credibility standpoint. In either case, it’s good to get these companies that are potential acquirers and key partners involved in your company in some way.

Dr. Reedy: I would keep the two functions somewhat separate. For example, we gained an enormous amount from our corporate involvement with Intel, in terms of credibility and product. We asked for a license to the 486. They came that close to giving it to us.

Subsequently, Intel put in ten to the sevens of dollars in Peregrine. A few years later, that was Intel capital. A few years later, when Intel was fed up with their tax rate, they walked away from the whole investment. The net present value of the tax write-off is greater than the net present value they saw in our company.

We recognized that the investment was one thing. It was Intel capital. The due diligence and the support from what they were doing, we maintained that value for life. It’s not that there’s anything wrong with corporate money. It’s just that, especially nowadays, it is from an Intel capital.

Patrick: We had both types. Comcast had their own venture group. Intel had their own venture group. Other companies, like Cox Communications, were family oriented businesses, even though they’re huge. They’re huge in media. They’re huge in cable. It was really the corporate guys. They didn’t have a venture arm. It was interesting.

It gets to the point of credibility with institutional investors, whether they’re corporate strategics on the investment side or strategic partners on the NRE side and co-development and partnership side. All of those things build your credibility.

Rory: Qualcomm is a perfect example. That worked incredibly well. They had early funding from Sprint and South Korea Inc.

Patrick: It was the same way with Broadcom. Broadcom had early investment from 3Com, Scientific Atlanta, General Instruments and TRW. In fact, they never had to raise venture money. That’s why the Henrys have maintained so much of their net worth. It’s because they never got venture capital involved in their company.

This was the mid-90s at this point. There were a lot of ups and downs with Peregrine over the years. Eventually the company went public and then was sold to Murata. Let’s fast forward to today. I want to get your perspective now that you’re on the angel investing side. We’re not in Silicon Valley.

Silicon Valley is unique in terms of how incubators, angel investors and venture capital works. There is an enormous amount of innovation and really creative companies outside of Silicon Valley. Rory, you’re involved in running EvoNexus, a major technology incubator in Southern California.

Ron, you’re involved in a variety of different angel investments. Talk to me about that. Based on your experience with what you’re doing today, what are some of the key points about attracting the right angel investors and corporate strategics.

Rory: The technique to secure angel money has not changed at all. It’s still there. It’s still based on what we just described. How to raise angel money starts with friends and family, and their friends, credibility, showing the angels that you’re a really good steward of their capital. You’re keeping them informed. It hasn’t changed.

What’s changed is venture. That’s the big change. Venture, by and large in Southern California, disappeared. There used to be a number of large venture funds in Southern California. They have completely gone out of business. They’re no longer around. They’re no longer around because they didn’t return returns to limited partners. The venture funds in the Valley, there is only a small number of them that actually return the fund.

Patrick: It’s primarily based on massive grand slam homeruns that more than make the fund. If you weren’t in Google, Yahoo, Facebook or some of these spectacular deals, you probably didn’t do very well.

Dr. Reedy: But that was their model. I always described it like a roulette wheel, one you’d find at a casino online. In roulette, the average is 36 numbers. There is one on that board that’s going to pay 360 to 1. If you know that, you cover the board. The one pays it off. The big part of what’s happened to venture is that. The number of public companies is down. The number of startups is down. The statistics have changed. It’s more and more expensive.

Patrick: That’s why they’ve moved upstream. The returns weren’t there. It was largely due to the amount of early investment, which was very high risk. The venture industry has become more like a bank and less like an aggressive equity investor. The amount of risks they’re willing to take is much lower. They still expect pretty spectacular returns.

Dr. Reedy: Rory said the angel game hasn’t changed much. He knows that better than I do because he’s so involved with it. I gave this advice to a group just this week. My absolute favorite book on this whole question of starting a company is still Bill Davidow’s book, Marketing High Technology. If I boil that down to four words, it’s be different or die.

That was one thing Peregrine had for it in spades. We were doing something no one in the Valley was doing. When I put down the risks and rewards, my number one risk was, “Our technology has such a terrible history. We’ll never get past that. We’ll get kicked out.”

It turns out, people were willing to listen. We got past that. We could easily articulate our difference. A lot of times, I’ll say to Rory, “How’s it going at EvoNexus.” He’ll say, “If I see one more app company come in here and say they’re going to open an app for the iPhone and flip the company for $5 million, I’m going to blow my brains out.” It goes back to, be different or die. Who needs another app? Why does an angel investor need to invest in something like that, given all the risks? They’re better off putting their money in a hedge fund and taking their risk-adjusted 10%.

Rory: What’s happened in the Silicon Valley is the venture funds have moved away from early seed and A round investing to later rounds, B, C and D rounds that have been de-risked. That early stage money is coming from angels.

Patrick: Yes, angels and super angels.

Rory: They really are super angels. In my opinion, a legitimate angel here is someone that can write a $25,000 check and not have to call home to see if that’s okay. An angel up there can write a $1 million check and not have to ask his wife if that’s okay. These are angels who are worth $500 million or $600 million. They’re writing very large checks, very early on. That’s the difference. We don’t have that here.

Patrick: I don’t think anyone has it to the level that Silicon Valley has it. It’s a unique situation in the San Francisco Bay area. I don’t think it will ever be duplicated. The ecosystem is too well established. You have so many top tier VCs. You have Stanford. You have Berkeley. You have so much talent, and the talent is very mobile.

There’s one thing that I’ve noticed. I worked in Silicon Valley for 10 years prior to moving to California to run a few companies. The maturity of the senior management capability up there is also so strong and mobile. When you’re building a company outside of Silicon Valley, it’s really tough.

You get to a certain level of the game. Bringing in the right talent is very challenging. There are companies like Illumina, the genome sequencing company that still has their headquarters here. I talked to Jay Flatley who was their early CO. He said half the VPs are in Silicon Valley. It’s because that’s where a lot of the talent is. It’s really fascinating how that works when you get to certain levels of scale.

Rory, you’re dealing with hundreds of entrepreneurs in your incubator. Is this understanding of how to raise friends and family rounds and angel rounds well established within the entrepreneurial community?

Rory: No. There are seminars that the law firms provide. There are seminars you can get at other locations about how to raise angel money. The angel money has to be raised by the founders. You can’t broker it out. The founders and CEO have to raise the money. They have to understand the investor. This means sitting down at a dinner table at night with the investor and the investor’s spouse. If we didn’t have the spouse there, we probably weren’t going to close that investor. It’s a family decision at that level.

The investors that I see invest in companies at EvoNexus believe in the team. They know that the challenge is going to be huge. They know that there is going to be time to market. There are going to be competitors, but they believe in the team. I don’t believe that the current entrepreneur realizes how strong of a network they really have. They just have to utilize it.

It’s okay to ask your parents to invest, if they’re qualified investors and meet the Reg D requirements. It’s okay. In fact, they would like to invest. If they lose the money, it doesn’t matter. They’ve invested in you, their son, cousin or nephew. If you return their money and then some, now you’re really a favorite.

Patrick: I have some friends that are venture capitalists. The only reason why they’re still my friends is because they’ve made money.

Dr. Reedy: Of the many hundreds of private investors we had, we could probably count about five or ten who really carried a grudge along with the fact that, for all of the things that Peregrine did do, it was not a great investment. It just wasn’t. That’s a burden both Rory and I carry around. We would have loved to have been like Google or Facebook. We just weren’t. The statistics are against everyone. We ended up not at the worst, which would be a washout. Rory taught me this. I said, “Who can we go to?” He said, “We have to go to everyone we know.”

Rory: Everyone who is a qualified investor.

Dr. Reedy: You’d be surprised what people have. We went to teachers. Everyone has a chance. That’s what Rory said. He said, “Suppose you don’t go to your parents, your siblings or high school buddies. Suppose this is a homerun. How do you face them then? Don’t just imagine facing them if it fails. Imagine if it blows the doors off, and you didn’t offer it to them. You have both sides of that coin.” I thought that was interesting. It’s really their decision.

Patrick: You provided transparency throughout. You had investor meetings. That’s essential. These are adults. These are people making decisions about what they’re going to do financially. You are good stewards of the money. Yes, there are challenges. That’s life. I remember in the early days of Intel, they almost went out of business. They went to six-day work weeks, ten hours a day. IBM was funding them because IBM couldn’t afford for them to go out of business.

Dr. Reedy: There was a 15% pay cut. In our presentations, I remember this was an interesting thing. I wanted to put in a lot of the risks. Rory said, “When people walk into a house, they don’t ask how low the floor is. They ask how high the ceiling is.” We had to compromise. The engineer in me, I wanted to say, “This is where the risks are.”

If you didn’t, we always got the most troubling question that we couldn’t answer. It was, “If this is so good, why hasn’t Motorola bought you?” The answer is, “You’re going to have to ask them.” They see it differently from their perspective. If they saw what you saw, they’d be doing it.

Patrick: This has been fantastic.

Rory: Can I ask you some questions?

Patrick: Yes.

Rory: You brought up a founding team. You mentioned Entropic, which was a terrific IPO in San Diego. What was it about the founders at Entropic that made them realize they needed someone like you?

Patrick: There were four founders at Entropic. They were all engineers. When you have four engineers, they all take different roles. One is a CEO. One is the head of engineering. One is the head of marketing. One is the head of technology or business development.

It was the lead founder, Itzhak Gurantz, who saw, based on his experience of building other companies, that they needed someone complementary to him, to his team that had more of the business experience to take things to the next level from a commercialization standpoint.

I think that was a combination of board members, but also Itzhak being very receptive to it. I had two other companies that I had run where there was significant founder-itis. The board forced me into a situation versus the founder really wanting me there. That is always a bad movie. The movie always turns out the same way.

I was very sensitive to that when I was interviewing with Entropic. It was clear that Itzhak really did want someone there. We weren’t close friends, but we had known each other for over a decade. We knew of each other. I think that helped. We had a lot of relationships in common. We could talk about things.

He was a total gentleman, a brilliant technologist and still a great friend today. I think that’s a part of it. You need to have founders that really want to have you there. There is a clear partition of roles and responsibilities.

I think that’s one of the things that was clear with the both of you. You were very complementary in terms of how you worked with each other. You had that yin and yang. There are the stories about your optimism versus your conservativism.

I ran into that at Entropic. The engineers wanted the product to be perfect. I said, “It doesn’t have to be perfect. It just has to be better than everything else that’s out there. Let’s start selling some of this stuff.”

Rory: That’s a great example of founders realizing that they needed something different.

Patrick: This has been wonderful. Do you have any closing thoughts you’d like to leave for the entrepreneurial audience?

Rory: If you have a great idea that you think is something that no one has done before, come to EvoNexus.

Patrick: This has been wonderful. This is Patrick Henry, the CEO of QuestFusion with The Real Deal…What Matters.

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This is Patrick Henry, CEO of QuestFusion, with The Real Deal…What Matter.