Neil Senturia Interview – March 27, 2014
CARUSO: Today is the 27th of March, 2014. I’m David Caruso. I’m here for the San Diego Technology Archive project. I’m sitting with Neil Senturia. Did I pronounce that correctly?
SENTURIA: Perfect.
CARUSO: And this is an interview session contributing to a better understanding of the San Diego area and its relationship to technology and technological innovation and development. Thank you again for taking the time to meet with me. As I mentioned what I would like to start with is just getting a sense of where you’re coming from generally. Where did you grow up, where did you go to school, what did you study and then how did you make your way or how did you come to be in the San Diego area?
SENTURIA: Ok. I grew up in St. Louis, Missouri. I went to a high school there called St. Louis Country Day School which was intellectually rigorous. There were 52 students in our high school class and I think 18 of them or 19 were merit or scholastic scholarships winners. So there were a bunch of smart guys. I left high school and went to college at Tufts University. At Tufts I studied English because I didn’t know any better. And that qualified me to do nothing. Although when I got out of college you could still get a job which you probably can’t get today. Today being March 27th, 2014. So I had a good time in college. I enjoyed English. I participated in a bunch of things and actually in [fall of] ’64 I went down to Selma and marched so I guess I’m a liberal social Jewish Democrat. In my senior year, I was the editor of the yearbook. During the summers of my high school and college years I was a professional photographer and I got paid a couple of dollars to go to Europe and photograph castles and restaurants for a travel agent which I enjoyed. When I graduated from college I [attended graduate school for one year and then] ended up in the Army. I was in both the Army and the Army Reserves.
CARUSO: You chose to enlist?
SENTURIA: Yes, and I actually enjoyed my time in the Army. My best story about the Army was it’s the summer of ’68 or ’69 anyway and I’m going to go to basic training which is in Ft. Polk, Louisiana, Now this has nothing to do with technology Mr. Caruso, but you’ll enjoy the story. So you’ve got to understand you go to Ft. Polk, Louisiana in August and I’m telling you it’s H-O-T-T. So you’ve got this kind of white middle class Jewish Midwestern guy going down to spend 10 – 12 weeks with Bubba and it was hilarious. And I was determined to be successful. I mean what I’m going to suggest here, this is a little bit about me, but maybe it’s about technology which is some of those characteristics which is I was determined to win I think are endemic to entrepreneurs. So I know you’re talking about technology and San Diego, but I have a grand passion for entrepreneurship. I study it, be it, teach it. So anyway the end of the story is you go through basic training. It’s 8 or 10 weeks and on the last day there’s the physical training test, 6 events. I don’t know what they were. There was a mile run. You carry somebody on your back. You do some sit ups, pushups. I don’t remember. All I know is this. There were 212 guys in my company and I finished, I remember I finished eighth. Eighth out of 212. The first ten guys get served breakfast in bed and this guy Riggs, 6’3’’, black, gorgeous drill sergeant serves me breakfast in bed and I’m telling you that is one of the highlights of my life. So I showed them. [At the University of Missouri] I studied photo journalism. I was passionate about the great photo journalists over the ‘40s, ‘50s, and ‘60s. I won’t list them all. Everybody knows who they are starting with Henri Cartier-Bresson, onward and I did well. There was a professor there, [Cliff] Odom. He was a character. Anyway I spent a year there in graduate school in photo journalism and I competed in the college photographer of the year and came in third. Not bad. Not first, but third. I decided I would go get a job at the National Geographic, get an interview at the National Geographic and they pretty much explained to me that short Jewish people were really not going to be hired at the National Geographic in the late 1960s so that job didn’t materialize. I realize that the business that I loved which was photography was dying. So this is the era of Look magazine, Life magazine. So what used to be the outlets for contemporary photo journalism were not going to be there anymore. I could see – I’m not that smart, but I could sense in the future that these organizations were not going to be around. So I’m going to go to film. I go to film school at NYU for two years, I get a Masters in film, and I’m really successful in New York. I make some movies. I win some awards. I go and I con a guy into giving me $15,000 to make a short film which I will point out opened in New York at the something theater as the short – this is back after the Civil War where they still showed shorts and the movie opened in front of Woody Allen’s, I think it was Bananas. So this is not bad. And that gets me from NYU to the American Film Institute, American Film Institute, Beverley Hills and that’s something where they invited 12 people to be in the second class of fellows. Now you go to AFI and you have to pay them, but back then –
CARUSO: Did they pay you?
SENTURIA: No, but you didn’t have to pay. So here’s this kid from – I mean I’d never been west of Colorado. I’ve skied a few times in Aspen serving as a babysitter, but I’d never been to California and sure enough I fly out from New York, land there, get in a taxi and you take a taxi down Sunset Boulevard to go to the American Film Institute for your interview in Greystone Mansion. Unbelievable. So I go to the AFI and I spend a couple years there and that gets me to – I make a couple of movies and now I’m going to make my way in the screenwriting business. I’m going to be famous. I’m going to be a director. This is the era of George Lucas, Francis Ford Coppola, Steven Spielberg, Terry Malick. So that was my era. These are like gods. I was going to do it. Just pause for a minute. Is this too much detail or am I boring you to tears?
CARUSO: No. No.
SENTURIA: This is ok with you?
CARUSO: Yes.
SENTURIA: Ok. We’ll be done some time around 7:00 PM I’m sure. So it’s hard to remember all this. So I spend seven years in Hollywood and my story in Hollywood is you can sort of make a living being unsuccessful. You can get paid to write things that never get made, never get done. There’s a big market for paying to have a lot of stuff they don’t use. And the way I lived, the way I made money was I was a telephone salesman. I used to get up at 5:00 in the morning. Again this is I think endemic of my particular personality. I was determined to be able to have enough money to live on so I’d get up in the morning and I’d sell stuff on the phone. They used to call them boiler rooms. I didn’t sell stock. I sold toner and pens and paper and junk and I was really good at it. So what happens was I’d get up at 5:00, I’d work from 6:00 to 9:00 and then I’m done and then I’d write from 9:00 to 5:00. I mean I was rigorous. I wrote every day and I ended up writing stuff, some of the stuff got bought, some got made. I wrote screenplays. I had sitcoms, but I was not really very successful. I mean I was not. I was marginal. I kicked around. I didn’t look good in a black t-shirt. I think I was funny, but maybe I wasn’t funny enough. The best story is that I’m writing a made for TV movie and I bring it in and the guy says “This is just hilarious. It’s just hilarious, but unfortunately Neil we’re only buying dramas.” I said “Ok. I’ll be back in six weeks” so I go back and I write a drama and I give it to the guy so he has – finally get called. I have an interview. I get called in. The guy says “Six handkerchiefs. I cried for an hour. But unfortunately the studio is only buying comedies” whereupon, this is a true story, I reached across the desk, I grabbed him by the collar of the shirt, open shirt and I began to strangle the guy. And I realized it was time for me to leave Hollywood. So next I took business classes at night at UCLA. I’m a big fan of night school and more importantly I’m a big fan of education. One of my themes would be that there is a rigor to stuff meaning how to start a company. You can learn that. It’s not something you can make up. There are things you can learn and I focused on the legal and real estate and I never got an MBA, but I would go to night school. So I’ve got the morning I’m selling stuff on the phone, in the middle of the day I’m writing and in the evening I’m going to school so I was pretty focused. I was busy.
CARUSO: So why did you decide to go to night school especially in the area that you chose? Was it arbitrary? Was it something that you were thinking that you’d like to move into?
SENTURIA: Well in the ‘70s in LA if you bought a building – real estate was booming and I’m a curious fellow so I wasn’t going to just be an investor. I was going to learn something. So I wanted to know real estate. I thought that that was something that I hadn’t – my best story is my father. [When I was a kid], we [would] go to Aspen for a summer music festival and I say “Dad. Why don’t we buy a condo?” and dad says “No. I don’t want to buy a second home in Aspen anywhere, any time.” I think at that time the condo was $68,000. Today it’s $1.8 million. So I thought there was something to be said for real estate and I enjoyed it and I was good at it and I began to buy a couple buildings. I put together a syndicate. I mean I have this kind of promoter personality and I made a lot of money. I don’t think I was that smart. You could sort of throw a dart in LA in the 70s and it was ok, but I actually learned a lot so it wasn’t random. I’m a big believer in education so I think things can be taught, should be learned. So eventually I pretty much had it with Hollywood and the reason was this. I was good, not great. I was marginal. And Hollywood is a place that eats people up. I loved it. I mean if you can survive Hollywood, the only business worse than Hollywood is the used car salesman business followed slowly by the legal profession. So I triumphed in spite of it. I think it’s a rotten business. It feeds on the worst kind of ego and kind of what I’ll call taker mentality, but I liked it and some of the stuff I wrote was ok. I was a pretty good writer. So then I decide that the only way I’m going to be able to survive is to be in the real estate business so I just shift. One day I just take the typewriter and put it in the drawer and I’m going to be a real estate broker, get a broker’s license.. It wasn’t hard to get one. I get a license and I go set about selling real estate and I’m doing pretty well. I’m selling commercial buildings, buildings and apartments and land. There’s one great story. So it’s 1982 or 3 and there’s an apartment complex in Oxnard and it’s great, 168 units, and I know it’s great and I’ve got a buyer and I have to convince the buyer that it’s great. And one day I wake up and I say “Why am I convincing this guy to buy the building? I know more about this than he does. I should be buying the building.” And I realized at that moment I no longer wanted to be a broker. I wanted to be a principle because I’m not a middle man. I’ve got to be in the deal. So I no longer was – I wasn’t going to be a middle man. That’s a business I don’t like. That’s the investment banking business where you introduce Smith to Jones and you get a $22 million fee, but you really didn’t do anything. You kind of had a guy who knew a guy. I want to be the guy that actually wrote the check for the $22 million or the $220 million. So I get a job. I go to interview in a savings and loan called Brookside Savings.
CARUSO: Where are you at this time? Are you still in LA?
SENTURIA: I’m in LA.
CARUSO: Ok.
SENTURIA: I’m living in LA and I go to get a job. Two guys run this savings and loan. They are good friends of mine, Michael Moers and Art Pastel. They’re friends now. I didn’t know them from Adam when I interviewed. And the guy that runs it is Michael Moers and he’s probably the first or second smartest guy I’ve ever met. I mean he’s just wickedly smart. He’s also difficult and can be charming and I like him, but he’s smart. So I said “I’d like a job” and he said “Here’s what I’ll do for you.” And he gives me a spreadsheet. Now back then – remember this is like prehistoric. You had those huge sheets of paper this size, 11 by – 17
CARUSO: The green and white dot matrix?
SENTURIA: Yeah. The green and white 11 by 17 or 11 by 24 giant with perfs.
CARUSO: Yep.
SENTURIA: Not perks, perfs.
CARUSO: Yeah.
SENTURIA: Not perps either. That’s crime. And he gives me a printout. Now they were in the business of doing what was called wrap-around mortgages so this is the rock and roll era of savings and loans. This is when it was unregulated. So Michael grew the business from $60 million in assets to $600 million in a year. Just add air and water. So he gives me this printout. This is kind of interesting. It tells you a little bit about myself I guess. And it’s the secret document on how they make the loans. Ok. Lots of columns and little numbers. I mean it’s really dense. No formulas. He says “I tell you what. If you can figure out all the formulas, I’ll give you a job.” I thought that was great. So by now I’d already had a – I’d given up the phone business. I’d actually started my own phone business and then I got rid of the business so I’m now available from 5:00 to 9:00 again. The world doesn’t wake up at 5:00, but I do so from 5:00 to 9:00 every morning for eight weeks I would try to figure out the formulas. Now remember he gave you one set of numbers so you can use the one set of formulas to get the numbers, but they have to work in all instances.
CARUSO: Right.
SENTURIA: Complicated. After eight weeks I’m pretty close. I get an interview. I call him back and I show him my work. It was 98 percent. I’d made two mistakes, but I’d actually classically reverse engineered with permission I guess, reverse engineered the spreadsheet. So I got a job. I worked at a savings and loan. It was great. It was the era of rock and roll money and I loved it and I was the guy that lent money. Here I am 50 years later lending money in Dealstruck, but that’s a company we can discuss. So it was great. It was like being a junior junior junior Mike Milken. I had three screens. I had a junior analyst. I had a lot of fun and I’m the inventor of the expandable, the expanding wrap-around mortgage. I don’t know if there’s a patent on it, but we figured out how to lend this guy money and then as the rents increased to increase the loan inside the loan which was wrapped around the underlying mortgage. We did this for two years and at the end of two years – remember so this is similar to the “I don’t want to be a broker.” I realized that whatever he was paying me which I think at the time was $120,000 or something. I said “I can do this” so I quit. By now I’m off on my own and I’m going to be a real estate developer. In the interim I built some apartments in Phoenix with a friend of mine and I built something in LA. I was just kicking around, but I’m going to be a developer. And the reason I chose development is that it had the greatest amount of leverage. I’m a big fan of leverage. One of the things I love about a startup is I can put $100,000 in and I can lose it all or turn it into $5 million. So I like unfair advantage and I like leverage. And you can increase the success of leverage on education, on team, on market so you’ll see that the principle behind starting a company in some ways is to maximize the leverage of your capital either real or human. So I’ll tell you another story. If you get bored it’s ok. It’s nothing to do with technology. It’s just stories. You ok with stories?
CARUSO: I’m ok with stories.
SENTURIA: I love stories. So it’s 1985 or in ‘86, ‘85 or ‘86, and a friend of mine who’s an actor – mean time I’m doing deals. I’m scrambling around. I’m tying up this, I’m tying up that and a guy comes to me and says “We’ve got to have lunch today.” I guess its ’85 because I’m still at the S&L. He says “We have to have lunch today.” I said “I’m busy.” He said “No. You don’t understand. We have to have lunch today.” And now this is an important sentence so this is one of my very good friends. He’d been an actor in one of my movies. So when a best friend says “We have to have lunch today” you have to stop what you’re doing and you have to have lunch. We go to lunch. It’s a Thai restaurant around the street, around the corner and another guy is there. I forget his name. And my friend Bill says “There’s a piece of land in downtown San Diego. It’s amazing and you need to buy it and it’s right now. You have to do it right now.” Ok and I listen to it and they have a friend who’s got a cousin that used to know a guy who had a friend who might be able to tie it up. It was all screwed up, but nothing I like better than a screwed up deal. So I said “Ok, Bill. I’m going to do it.” So I go. I fly down to San Diego and I see this piece of land which is a goofy kind of L-shaped piece of land across from what was going to become – this is downtown San Diego, the convention center. And I buy this piece of land. It’s zoned incorrectly. It’s the wrong shape. You can’t build on it, probably has toxicity. I don’t know if they’re going to build a convention center. There’s one chance in 50 we’re going to figure this out. And still I convince my friends to do the deal. They said “we’re in.” My kind guys, I love them. So we buy the land and we horse around for the next two and a half years. We’re fighting with the city; we fight with the city council. There was something downtown called the – what was it called? It was the CCDC, the Center City Development Corporation. So little by little kind of put this piece of land together and then we put another piece of land and then we talked the city into giving us another little piece of land. And little by little we took this little 30,000 square foot L-shaped piece of junk and we assembled a 93,000 square foot parcel on which you could actually build something and so we built what was then called 1 Harbor Drive which is the twin towers downtown. We were the second high rise condo in downtown after the Meridian. And my development partner was Bruce Stark. And it turned out to be, for myself, particularly quite successful. And so I had begun a real estate career. So now you take from sort of the mid-80s to 93 or 94 and in that nine year period I build almost two million square feet of real estate, hotel, condo, office, parking, medical. We built a lot of stuff with a bunch of people. I won’t bore you with all the details of all the deals.
CARUSO: In San Diego or –
SENTURIA: All in San Diego.
CARUSO: Ok.
SENTURIA: And by now I’ve moved because I have two kids. They’re six and four and it’s a better place to raise children so I take my wife, the children, move to San Diego and I become a downtown real estate developer. That gets up – we’ll just jump along, jump to ’94. You get to ’94 and the real estate market is terrible, interest rates are 130 percent and I realize that I’m not going to be able to make – this is not going to work for me long term.
CARUSO: So can I ask you one question? In terms of the things that you were developing, the buildings, the spaces do you know who was then using those spaces? Do you know what types of –?
SENTURIA: Well I knew what I was building.
CARUSO: Right. I just mean – I’m wondering – so I know this is a period of time where there is a boom in the biotech industry.
SENTURIA: Yeah. I didn’t build that. I only built downtown.
CARUSO: Ok.
SENTURIA: So I get to ’93 and my wife leaves me. I view that as an error in her judgment, but that’s ok. And I meet Barbara Bry who you’ve interviewed, Barbara Bry who worked at CONNECT and [developed many of their award winning programs]. I think it’s fair to say I fell in love and I began to drive for her. So I take her places and I park the car and I go to these CONNECT events. I’m going to reinvent myself from real estate developer into technologist. So one of the things I would say to young people is look – the era of I’m going to work for General Motors for 40 years and get a watch is over. And the second thing I’d say is, it is not only a – it’s important and a requirement to reinvent yourself. So I believe that young people today when they say “I’m going to get a job” they will have five jobs, ten jobs. They may have four careers, really changes of careers. I mean I spent ten years writing sitcoms. I spent 12 years building buildings and I’ve spent the last 17 years starting companies. None of them – the progression of each is not logical. You wouldn’t go to get a degree in English to learn how to be a – but I think the theme is that as landscapes changed I reinvented myself and to accommodate what I perceived at the time would be the most fortuitous reality. So the rest is sort of boring which is in ’95 we started, Barbara and I were involved in the first company together.
CARUSO: No. I mean I think this is part of what we are trying to capture. I mean let me before we get into that. So what was it about going to these CONNECT events that made you want to as you say become a technologist?
SENTURIA: Well I wasn’t a technologist. What I was good at, in retrospect, is I was good at assembling a team. I was a reasonably good leader. I was a leader in the Army. I was a leader in college. I was the editor, I led the yearbook. I understood the value of assembling a team and I understood and I mentioned it previously, the idea of leverage. So I liked real estate because at that time in that 10 – 12 year period that I did it you could tie up $100 million worth of stuff with $87.06. Now all of that’s changed. You can’t do that today. I wouldn’t be a developer today. It’s tough business. Remember my business was I had no money so if you have a lot of money and you want to buy something you take out your checkbook and a pen and you write a check and you buy something. You actually pay for what you want. If you have no money what you have to do is sort of a magic trick with a house of cards and a bunch of little, like the three card monty, because you need to tie it up long enough to get a time to find a guy who’s got the money to give me the money to tie it up to actually close on what you promised you would buy, but didn’t have the money to buy at the time.
CARUSO: Right.
SENTURIA: I like that. I like magic. I love magic. We go to see Penn and Teller and every magician. We’ve seen them all. I’m even an investor in a magician so I love magic. And to some extent that’s a magic trick because I didn’t have any money so I used everything, but cash to tie up everything, to have long enough to figure it out and believe me along the way while I built two million square feet and I made a lot of dough there was a few times that I dropped half a million bucks just like that. So it’s like any business. You don’t bat 1,000. I would tell that to the startup technology community. I’m a big fan of Dan Kahneman. Dan Kahneman is the Nobel Prize winner in economics. He’s famous for what I would call rational man behavior. He is famous for how people behave, how they make business decisions and how to act in your own best, keyword here, perceived self interest. What Kahneman says – he says a lot and his most recent book is called Thinking, Fast and Slow. His famous book that he won the Nobel for was Choices, Values and Frames. It’s 800 pages. I’ve read it twice. It’s put me to bed for 11 years. So he talked about adverse selection. That means all the things that are common today in psychology and how people make decisions he was the original thinker. So his last book has a wonderful sentence in it. Two things that are important. I’ll give you the last sentence first. So he finishes the book and he says “Here I am, the expert, the absolute guru on rational man behavior and I’m going to tell you” he’s telling the audience of the book. He’s saying “In my own personal life I get it wrong 15 to 20 percent of the time.” The master. It is so hard to truly understand what is in your best self interest and I’ve spent the last 17 years as I mentor younger people, companies that I built. Any successes I think are correlated to that axiom and one of the rules in my book – I’ll put a plug in for the book, I’m There for You Baby: The Entrepreneur’s Guide to the Galaxy. One of the rules says more money is lost to neurotic behavior than through bad business decisions. And the landscape is living. Here’s the best part of Kahneman’s book so I’m getting back to why I liked technology. Remember, I barely could turn on the computer. When they did client server I thought that meant at a restaurant somebody who brought you water. So he says “Look. I’m going to tell you the truth. This is an important truth. A big amount of success – I don’t know if it’s 80 percent, but its well over 40, is attributable to luck.” Now here’s what he’d say. “Luck is not random. Luck is a force in the world that appears on like a Sine [algebra] curve. It washes through the world.” He says “What you have to do is you’ve got to be standing on the platform when the train comes through. When the luck train comes through if you’re standing on the platform you get on it, but you’ve got to be standing on the platform. It’s not random. It will come through. It doesn’t have a schedule, doesn’t come through at the 8:07, the 12:04 and the 4:17. It comes through and you’ve got to be on the platform.” So another way to say that is you’ve got to stay in the game. You can be on the field. You can be in the dugout. You can be in the stands. You can be a vendor who serves hotdogs. But what you can’t be is in the parking lot because you can’t get it when you’re in the parking lot. I love that. So if you take that thing that interested me and understanding that I could leverage. Remember I liked leverage. So if I could assemble five really smart people I get five squared. I get five to the fifth cubed. I get way more than five. I understood that leverage was a function of people and skills and I am a – have a somewhat patriarchal personality so I like to take care of people. I want to make them happy. I want to empower them. I really care about that. I really do not have an unreasonable ego. I mean one of the great questions I ask in the class I say “Look David, do you want to be rich or do you want to be king?” There’s only one answer pal. You want to be rich because if you want to be king I’m not writing you a check because kings have problems with control and kings end up with owning 87 percent of a delicatessen and people who want to get rich own 0.04 percent of Google. There’s no contest.
CARUSO: So what was the landscape like of sort of the technology industry that you were getting into in the mid 90s? What sort of companies were out there?
SENTURIA: Well at that time CONNECT at UCSD San Diego was still – come on. We were a backwater compared to Silicon Valley.
CARUSO: Right.
SENTURIA: We’ve always had a booming biotech business. Now Ivor Royston and some of the real geniuses of biotech, Kevin Kinsella and Larry Bock, they might say it is not so booming. But by and large biotech has survived down here. I mean the Mesa, UCSD, Scripps. I mean it’s just the list. We’ve got more geniuses in biotech than we have in – other than the outlier which is Qualcomm. You can’t – it’s unfair. Irwin is a friend and he’s brilliant and Andrew Viterbi. They’re amazing, but we don’t have 20 Qualcomms. We don’t have 20 PayPals. We don’t. So in ’95 what you saw was kind of – CONNECT was – it was like you could see that there was something happening in the world [and I wanted to be a part of it]. I had a friend named Jim Nicholas, we’d done some real estate deals together. Every two weeks we’d go to have Vietnamese food at a restaurant in North Park. I don’t know if it’s still there or not. And we’d have a game. We’d see what stupid idea we could come up with to lose money with this time. So we go to one of the lunches. It’s in the summer, late summer, August, September, August of 1995 and Newsweek had just run an article on cyber cafes. You could now get a cup of coffee and connect to the internet. You’ve got to understand, ’95 the internet was like whoa.
CARUSO: Yeah.
SENTURIA: I mean it’s like electricity.
CARUSO: I mean it’s still dial up.
SENTURIA: So we look at each other and he says “What do you think? What do you think?” and I say “Nah. I don’t want to be in the restaurant business, a cyber café. But I’ll tell you what Jimmy. What if you could get your email in a public place? I mean I really like this email stuff. What if you could like go to the airport or a railroad station or somewhere and get your email?” So I said that’s a good idea. So we decided at lunch truthfully that’s a really good idea. So I said “Well here’s what we’ll do. We’ll make a little kiosk and you kind of plug in and you get…” I’m making this up literally on a napkin. This is a true story. And he owns an apartment house across the street. The apartment house is called The Egyptian. I said “Great. We’ll make it in the shape of a pyramid.” True story. It’s like bizarre. So we start and I cannot do this without Barbara and CONNECT which is in the business of helping you take an idea and introducing you to the people you need to meet. So I met lawyers and I met the accountants. I assembled a team of brilliant people to build this half baked napkin that I drew a picture on. Here’s an interesting story about the team. I’m good at assembling teams. That’s very interesting as I think back on it because we built – if you go back to Harbor Drive I mean we built this 40 story building – By the way if you had said to me, prior to building that 40 story building what were your other development accomplishments Mr. Senturia? I’d say “Well I built a two story apartment house in Phoenix.” “Oh you don’t think there’s anything for like walk before you run. I mean there’s a little bit of so you went from a two story wood frame $25,000 a unit apartment house in Phoenix to a 40 story, $97 million high rise and you didn’t stop in between?” “No. I was in a big hurry. What can I tell you?” So this probably tells you more about me than it tells you about technology. So I go to get – I’ve got to get somebody to build the [software] code because I drew a picture so I knew that you could get your email in a public place so then we had to go find somebody to build it and we convinced a genius –named Peter Van Horne, to leave an existing company. He’s got a great job. He’s the number two guy at a [software development] company in San Diego. And I go and I say to the head guy “I’d like to have you build this for me.” The head guy is named Mark Fackler. He’s terrific. We love him. He says no. I said, “No. You don’t understand Mr. Fackler. I’d like to pay you to build this for me.” And he says “We’re not interested.” I said “You don’t understand.” He says “You don’t understand.” You’ll hear this story. This comes back frequently. So I have to leave, but I don’t take no. Remember all entrepreneurs, no is simply a speed bump on the road to yes, ok? So I come back a couple of weeks later and I’m going to convince Mr. Fackler again. I said “Look. I’ll pay you and I’ll give you a piece of the deal” and this and that. Mean time his number two genius Mr. Van Horn is kind of poking around. “This seems kind of interesting. I think we can do this.” So he’s interested in the problem. He was not interested just in the money. He was interested in the problem. “Can I solve that problem?” Because you’ve got to remember, middle ‘90s, there were very few laptops and if you traveled you couldn’t get your email or access the Internet.
CARUSO: It was predominantly the university systems first.
SENTURIA: Right. So I convinced Peter to leave an existing job to take a chance on a half baked semi-funded startup called Atcom and he becomes the CTO, VP of Engineering, head of worldwide and I decide I’ll be the CEO and we set out to do this and we build a couple of kiosks, we get some jobs. This is an old story, but so this is the power of – now there’s a certain amount of luck. I told you about luck and now I’ll tell you about I guess I’ll call it advertising. It isn’t even advertising. Let’s just call it luck. So we build one kiosk – it sort of works. We get one at the convention center, we plug it in, it’s a big deal. We still haven’t figured out how we can make any money doing this. We raise some money, all friends and family. Eventually we get a venture round. I won’t bore you with all of that, but the best part of the story is this. There’s a lady in town at that time named Jackie Townsend. She’s wonderful. We love her. She has the Townsend Agency and it’s a PR firm. So I call her up. I say “Jackie can you help me?” She says “Well do you have – have you built this kiosk?” I said, “No.” She said, “Do you have a picture?” I said, “Yeah.” So I get a designer. I get an artist. One of the things about entrepreneurs is you cannot be limited by reality. Reality is interesting, but malleable. It isn’t really real. This is a little bit of the Steve Jobs. Now I can’t tie Steve Jobs shoelace. I can’t even hold his shoelace. So let’s be really clear that I have no confusion, but when you read Jobs’ book, read about him with the book written by –
CARUSO: Isaacson.
SENTURIA: Isaacson. You have this issue. Jobs has this sort of reality – what’s it called?
CARUSO: Distortion. Distortion field.
SENTURIA: Right. Distortion field which is that’s interesting, but I’m going to ignore that reality and create my own. So I had a tiny – I mean a molecule of that in my – [phone ringing] this is important.
CARUSO: We were talking about Jackie Townsend PR firm.
SENTURIA: Oh ok. So about reality and Steve Jobs. Are we back on.
CARUSO: Yes.
SENTURIA: Ok. So I want to be sure that your listeners or researchers don’t have any kind of a sense of unreasonable arrogance. So I go get an artist to draw a picture of a kiosk floating in outer space, stars, it’s beautiful. And Jackie is able to get this picture, this little picture, on the last page of Business Week in the winter of [1996]. Coming to an airport soon. It’s maybe six column inches, maybe, maybe it’s only five. It’s like boop boop boop. With a picture – now this is important for entrepreneurs – of something that doesn’t exist. That’s really an important concept. You’ve got to remember this sort of ties to all the other things I’ve done all my life which mostly you’re out of your mind if you’re going to build a 40 story building. It’s ok. It was a good idea at the time. So the phone rings about a week later and I have a company that consists of a secretary, a bunch of geniuses that are working somewhere writing code and the phone rings and a guy tells my secretary that he’s Gary Avery. He’s with GTE in Dallas and he’d like to talk to Mr. Senturia. I decided that’s a joke because she said somebody – she didn’t have the name, but she said somebody from GTE is calling. So somebody is working me over from the article so I say “Get a number. I’ll call him back.” So I wait about five, ten minutes, I called back and when I called the number the lady that answers the phone said GTE. I can’t believe it. I said “Can I speak to Mr. Avery?” Mr. Avery says, “Hey. I saw that picture in Business Week and I’d like to order 20 of those for the Dallas Ft. Worth airport. I’m in charge of the airport communications.” Huh? He says “When can you deliver them?” I said, “April? May?” He says, “That will work.” I said, “Great. We’ll deliver. I’ll start sending the contract and the email.” We’d never built one of them, but now we had a business. We had an order for 20 of these gizmos at the Dallas Ft. Worth airport and we were in business. So we build a bunch of those. We go to La Guardia. We got to a couple other airports. We’ve got a business. It’s not a great business, but it’s a business and little by little we realized we’re trying to raise money, we’re talking to venture capitalists, I get rejected by 75 people because you’ve never been a CEO before. “Who are you? Do you have a degree in computer science? No? Are you, have you ever been a CEO? Have you ever owned a startup? No? Then we can’t…” “But don’t you understand. I’m really good at this.” “No. No. No.” So I’m telling all entrepreneurs no is ok. No is just like – it’s like “do you want milk in your coffee?” “No.” It’s ok. So we screw around for a couple of years and then something – and this is a long story and I won’t bore you. We won some awards. We get some money from Microsoft. But the best part of the story is this. We’re installing in La Guardia and we send a guy named David Pattison. Smart, I love smart. And he goes to La Guardia to hook it up and install the stuff and to ship it across and you’ve got to get to the internet and the internet’s – remember in the mid-90s the internet’s not exactly – you couldn’t just push a button and say welcome internet. He’s flying back. He comes to see me the next day. He says “I had an idea. Why are we doing this in a kiosk? It’s heavy. Why don’t we take the software which is really brilliant and put it in hotel rooms?” Now what’s important here is that good ideas do not come necessarily from you, the CEO, Sir or Ma’am. They come from your team. Learn to listen carefully. This was an enlightening moment. Didn’t need all wood, the kiosks. Why don’t we just put it in a hotel room and let the business traveler which was our customer, connect to it. That was a big deal. So anyway there was a lot of – I’ll give you one last story. We raised some money. We develop the software.
CARUSO: No. I was just checking.
SENTURIA: I’m ok. I’m going to – you’re not bored to tears?
CARUSO: No.
SENTURIA: Here’s what’s important. We raised some money, we built some things, we get some hotel contracts and then you get to the summer, the spring of ’99. Now the spring of ’99 you could sell a paper cup for $11 million. It was wild. We need to raise a lot of money because this was a screwy business. You had to put the stuff in and then you get paid over time, 18 cents a minutes, $25 a month, $100. It didn’t matter, but you got it. The hotel says “Hey. We’re the hotel. We’re not paying for anything. If you want to put this stuff, this jack…” We had a little thing in the wall where you plugged your laptop in. By now there are laptops and business travelers wanted high speed internet in hotel rooms. We said, “You can charge $12 or $13 high speed internet in hotel rooms.” So we get to the spring of ’99 and a company called CAIS Internet, C-A-I-S, CAIS internet goes public and raises $107 million and they’re in the same business we’re in. They’re in the internet telecom business, but their software is lousy. Fair is fair. And 250,000 rooms come up for bid in the summer of ’99. So we don’t like each other. It’s run by a guy named Ulysses Auger III. Unfortunately Ulysses died a couple years ago. And I would argue that one of the themes for entrepreneurship, people don’t really do it for fame and they don’t do it for fortune. What they do it for is revenge. They want to show their mother, their father who hated them, the mother thought you were worthless, my music teacher gave me a C. I mean you take all the accumulated slights and hurts and pains of all the time you spent and you amalgam them, you compress them into a single laser lighted ball and that’s the way you light your startup. You are doing it I think because you want to show somebody. And I’ll give you my best example of that. So there’s a guy in the Silicon Valley name Zuckerberg. He starts a small company and why? Because he couldn’t get laid with his girlfriend who said no to him and he said “I’m going to show you” and $48 billion later I think he really did. I believe that that is a driving theme for entrepreneurship. There are lots of other themes, but that’s one that interests me. So we get to the summer of 1999, I call up Ulysses and I say ‘Ulysses. Look. There are 250,000 rooms here and we keep lowering the price. You’re bidding $4. I’m bidding $3.80. We’re killing each other. We’re both going to go broke. This is insane. Why don’t we work together?” He says, what did he say? He thought about it. He wasn’t sure he wanted to do that. And then I said “Well look. Let me put it to you this way Ulysses. This is really crazy. The space isn’t really big enough for the two of us so I’ve decided that I’m going to buy your company.” You’ve got to stop for a minute. You’ve got to go back a little bit. So let me ask you a question Neil. How much money did you have in the bank in August of [’99]? You have two months of payrolls left. And you call up Ulysses and you say “This town isn’t big enough for the both of us and if anybody’s going to – I’m going to, I’ve decided I’ll buy your company and we’ll consolidate. I have the best software.” Now Ulysses – remember Ulysses Auger III so he had, there was a Ulysses Auger II and I’d been to a dinner with him so he’s somewhat privileged. He says, “Mr. Senturia if anybody’s going to do any of the buying it’s going to be me.” I said “Ok.” And I sold the company to him for $80 million, closed it 60 days later. Now I’d say to Ulysses that if you ever bothered to look at the balance sheet we had no money. We would be out of business in 60 days. You could have had the software for a nickel, but sometimes ego and pride and luck come in to play. So that was the first company and then we’ve had seven or eight others. Half a dozen successes, couple of failures, one we ran into the ground, one we tried to bend the laws of physics, but I don’t think each company is as interesting as the principles behind them at least for me. So if you’re asking about how I think about technology I’m interested in like anybody big markets, great technology, but I’m really interested in people. I spend a lot of time interviewing people. Can I bet on this person? Mostly I’ve been right. Occasionally I’ve been wickedly wrong. And I spend a lot of time saying “What mistakes did I make?” I’ll tell you that if you put 100 CEOs in a room and asked them what’s the biggest mistake they ever made 99 would say the following. “I waited too long.” Hiring is 40 percent of the CEO’s job, maybe 50. I think you’re constantly working the room. You’re constantly recruiting. You’re constantly thinking about how to improve the team. These are critical functions. Now I would also say that I’ve had the benefit because I had a miserable childhood. I’ve had almost 40 years of either psychoanalysis or psychiatry or – I mean I have – the only person more than me is Woody, Woody Allen. I mean so actually got good at this and I’ve learned something so I’m somewhat good at interviewing people because I spent 40 years in a sense interviewing myself. I’ve reached a point with my therapy now where every other session I sit in his chair and he tells me how he’d like to be an entrepreneur. And so you come to today which is I recently just this morning sold my stock in my last company to my partner very pleasantly. I’ve got no complaints. I’m not going to be the CEO ever again. It’s interesting. People get confused. The founder comes to us all the time. I write checks. I fund companies. I’m a small time VC and often, frequently, at least 70 percent, 60 percent of the time the founder is not the CEO. Now he doesn’t know that. He comes in and he says “I’m the founder and I’m the CEO.” As a matter of fact he’ll say “I’m the CEO, Chairman, President and head of worldwide global strategic advisory services.” And I say “I’m not so sure, but I think you are the founder.” I will tell you the CEO job is a lousy job. It’s the hardest job. It’s the worst job. You don’t want that job. What you want to be is the founder with the largest amount of early common stock at 1/100th of a cent. You do not want to be the CEO. That is a tough job so I’m not going to be the CEO anymore. What interests me is that the young people who come to me often get confused with you can be the founder and you can own a lot of it, but if you’ve never sold consumer electronics and if the thing you’re building is a consumer electronic why don’t we get a CEO who’s actually from the consumer electronic business.
CARUSO: Right.
SENTURIA: And they say “No. I have a vision. I can do it.” And I say “Great. But not with my money.”
CARUSO: So I do have two questions if you still have time.
SENTURIA: I’ve decided that you are my afternoon’s work.
CARUSO: Ok. So one thing I’m curious about and given – and we don’t have to sit here and talk about all the different startups, but I’m wondering if there was something about this area, the San Diego area, that helped foster the ability to create those startups around here.
SENTURIA: Yeah. That’s a great question.
CARUSO: You mentioned briefly. I know UCSD has and CONNECT, that has been a heavy involvement. There was in some ways the tradition of the biotech for a number of years before you started getting in to it. I’m wondering what it is about the area that really contributed to the ability to do those things or is it more just –
SENTURIA: I think there is a reasonably strong ability to collaborate [in San Diego]. Now I’m going to tell you that I think that’s also changed. I’m going to be a little bit dark. I think if you look at the ‘90s and the 2000s, 2000 to 2010 let’s say. I mean those were difficult years for venture, but there was a collaborative quality. I mean I was able to hire great people. I shared a vision. I thought we could make something good. We could maybe make some money. I was able to attract high quality talent. I was fortunate. I was blessed. I was the beneficiary of an environment in which entrepreneurship began to not only blossom, but burgeon. It exploded. What I’d say to you over the last couple of years is that there’s almost if you will – this is a little arrogant. Too much. Now let me give you an example. San Diego currently has 17, 17 I know for a fact because I was on the panel, incubators or accelerators currently today. So you have this slight sense that there’s – if everybody’s an entrepreneur starting their company then there’s nobody to work at any of the companies. You literally – if everybody’s the CEO then nobody’s doing anything. You can’t build anything. Look at what Peter Thiel is doing. He says “I’ll give you $100,000 if you don’t go to college, leads to a – this is going to sound terrible. Sort of a get rich quick, gold rush mentality that doesn’t feel as collaborative as it once was. Now you can discount that with “You’re an old man. You don’t know shit.” I mean that’s possible, but the environment today is rife, its full. There’s lots of activity in this town, but I was fortunate. I was lucky that I came along at the right – now I mean let’s go back to Kahneman. I’ve been standing on that train platform all my life and I have been the beneficiary of it. I caught the best of the middle of the years of sitcoms. It was great. I caught the best of the real estate boom when you could tie up $100 million for $11.07 and I caught the best of the technology boom in the late ‘90s and certainly through the middle 2000s, before 2008. And I was lucky in finding teams and people. Now you get a little bit of credit in that you can’t be lucky 10 times so you must have had some qualities that enticed or encouraged people or empowered people, but I was lucky. And the collaborative nature today appears to be a little less. The other sentence about San Diego is in 2000 and 2001 we had 14 venture firms, Enterprise, Windward, Mission, Shepherd, Hamilton and others. Today we have many in biotech, in technology maybe you’ve got three. I don’t even know if you can name them. Maybe two. You’ve got a lot of angels and you can have a whole other discussion about how angels have supplanted the seed round or the A round or the whatever, but the sort of – the media’s fascination with short term gain meaning an app, an app that sells for $100 million.
CARUSO: Right.
SENTURIA: Not solving a hard problem like cancer. Not solving a hard problem like what Venture did with the genome, but sort of a get rich quick mentality has dumbed down – that’s not quite the right word – has negatived. I don’t have a word for it, the collaborative, let’s do something hard and let’s do it well. So San Diego is at this moment where there’s essentially one incubator for every 29 members of, people who live in San Diego and everybody says “I’d like to start my own company. I want to be an entrepreneur.” Here’s what I’ll tell you. I teach entrepreneurship. I don’t think you can be one. I can’t teach you to be one. I can teach you the principles of how to think in an entrepreneurial way. I can’t teach you to be one. It’s not something you can, I’m going to be a plumber. You know how you be a plumber? You go to plumbing school. I don’t think there’s any school for entrepreneurship. So there’s this – you go to your parents. They just spent four years. You went to Yale, cost $165,000 - $200,000. You come home and you say “Well I was going to be an art history major and now I’m going to be an entrepreneur” and they disown you. I don’t know.
CARUSO: So earlier we were talking about the notion of do you want to be king or do you want to be rich. You also mentioned the revenge mentality as part of the drive to build a company, to develop something. Do you think in some ways –? [Phone ringing]
SENTURIA: That one I can ignore.
CARUSO: Do you think in some ways the revenge component is no longer in there? It’s no longer about proving something to someone else, but since it’s now focused on just the money.
SENTURIA: Well it’s really – that is an enormously perceptive comment and I want to thank you because I hadn’t considered that until just now. If you – this will be, only time will tell, but it’s very possible that if you went and looked at the very first entrepreneurs, the guys who built HP and Intel and think they’re, they were technologists. They were brilliant and they solved hard problems like silicon chips. I think there’s a 15 or 20 year period in the middle where passion, discipline, dedication and to some extent my theme of revenge, of showing either showing somebody that they’re wrong or that I can do it better or that I can find a solution had some component. And I think it’s a very interesting comment. I’m not sure that the young people who come to see us. Remember I see – I don’t know, 15 deals a week. So me and my partner we see a lot of stuff. I mean it’s nothing unique. We’re not – if you’re looking for money there’s 11 places. You stop. We have an address. And if you said to me how many times do you see sort of that characteristic which is, yeah, I know there’s a wall there, but I don’t see it. That wall doesn’t – I’m walking through that wall. I need to walk through that wall. I need to demonstrate – one of the things that I like – look, I love engineers. I’ve hired lots of them. I feed them. I take care of them. I pay them. I massage them. I love engineers just the way 25 – 30 years ago I loved architects. I have a little letter signed by all the downtown architects that called me – I was the father of downtown architecture. It was nice. It was probably wrong. So I like that kind of creativity. I mean engineers are brilliant. I’m not sure that in the characteristic of the entrepreneur, yeah, it’s sort of I need to do it. If you were a writer, people who write, you don’t elect to be a writer. Writing picks you. You say “I have no choice. I need to be a writer. I need to write.” It is what happens with acting. “How did you become an actor?” I didn’t say “I went to college and I think what I’m going to be…” You get picked. It forces you. It grabs you. It insists that you become and I think for me, remember I’m over 60. For me entrepreneurship was I had to. I had to. It was important to me. I refused to fail. Believe me, I failed, but it was hard to – I didn’t – that was not an outcome that I anticipated. I intellectually knew, yes, you’re going to drop dead, you’re going to pay taxes and you have a chance of failing, but I didn’t buy the third one. And I don’t know if that’s the case today because of the environment. It’s a little too much get rich quick. It used to be the exit. There was no exit. Jim Collins wrote Good to Great and Built to Last. Did you build a company to flip? Built to last or built to flip? That’s the speech. If you go back to the great companies they were built to last. And I hear somehow if you say to them “What do you think the exit is?” “Oh I’m going to get somebody to buy it.” That’s like the famous broker story where you buy all the stock and finally you say sell and the broker says “To whom? You own the company.” So I don’t know. I don’t know. You asked a hard question.
CARUSO: Just following on that and certainly you also have spoken about hiring high quality talent engineers that were great. I’m curious to know where you found those people. Were they here? Or were you making connections maybe through CONNECT itself, finding people outside of the area, across the US? Like where were you finding these people?
SENTURIA: Well, you can build a technology team – one of the companies I built was called LonoCloud. We had a dozen engineers and only one lived in San Diego so you can do that. Let’s go to the real sentence. The question you should be asking is if you’re a talented engineer are you going to stay in San Diego or go to Silicon Valley? That’s the hard – that’s the dark question. They’re going to pay you more in Silicon Valley without question. It might cost – cost of living might be more. Here’s the dark sentence about the engineering story. So the great engineers say “I’m going to take a job in the valley because if it doesn’t work out there are ten other companies that I could go to. If I take a job in San Diego and it doesn’t work out there’s really only three other companies.” So the engineer he’s not stupid. He’s going to hedge his bet. He’s going to try to get on a rocket ship. He knows there’s risk. Leaving aside the differential between paying somebody in San Diego 120 and 170, let’s pretend the differential didn’t exist. But the dark sentence is your community here doesn’t have as much opportunity in case I fail at the one I picked. We’ve been lucky. We’ve attracted great engineers and ironically a few of the engineers that worked for me in companies one and two now work for me in companies seven and eight so that just shows they have poor judgment. There’s no magic to it. I will tell you the best story I once got about engineers. All the engineers listening or reading this will love it. So I have an older guy – I’m young at the time. The older guy says “Do you know the difference between a good engineer and a great engineer?” I said “No.” He says “You’re going to pay a good engineer 95. You’re going to pay a great engineer 115. But the difference is the great engineer is worth a million [dollars].” The difference between good and great in those skill sets, that’s magic. It’s magic. Now you try to tell – I tell you what’s interesting about engineers and magic. So we teach this class and we have like 40 students. Half are working toward their PhD and a third are working computer science engineers. They’ve come to us to ostensibly learn how to start a company and you say to them well see, we do something simple like “Well how do I value my company? What’s the pre-money evaluation of my company?” He said “Well you make it up.” It’s sort of there’s no formula. “What do you mean there’s no formula. I’m an engineer.” See an engineer there’s got to be a formula. No. No. It’s magic. So it’s really hard. What do I spend time on? I try to teach engineers magic. I love it. I love it. And I’ll give you another sentence. So one of the things I teach in entrepreneurship I say “Entrepreneur needs to not only tolerate ambiguity. It means to embrace ambiguity.” I mean I love that. Can you go to bed and sleep well enough at night with it unresolved? Can you tolerate and actually embrace unresolvedness. Now I happen to love four dimensional chess. I’m really good at 17 moves ahead. It’s something – it’s like being a savant in this one little – I’m good at that. I didn’t learn it. I’m good at that and I’m ok that I don’t know exactly where that road is going. I only know that tomorrow I’m ok and tomorrow I’m ok even though it’s not figured out. And it’s hard for the engineer who grew up his whole life two and two are four. Two and two are four. They’re not 3.973. They are four. They are. If you say “I wonder. Could they be five and a quarter? Could we…” Huh? Wow. I mean that’s hard stuff. I happen to love it.
CARUSO: So I now have three kind of broad questions. One of them is I’d like to hear a little bit about your perspective as someone who both went to VCs for funding and now serves as a VC. What have your experiences done to shape your perspectives on funding people who are looking for money?
SENTURIA: I’d love to answer.
CARUSO: Ok. So we’ll start there then.
SENTURIA: So first company we tried to get funded I think it’s nothing original. We talked to 60 people. We actually, the very first company that I ever got funded was funded by the Patricof Company, Alan Patricof. He’s famous. He’s the dean of entrepreneurship. He’s in New York City. He’s a god. Go to see him. First time I don’t get to see Allen. I see his junior guy Tom Hirschfeld. I love Tom. Tom says “Interesting. No.” I said, “Ok.” But I’m relentless. That’s another characteristic I think you can’t teach, but ok. So about six, seven months later I stay in touch. I go fly back to New York. I go see Tom again. This time I see Tom and Gene Levy, who both work for Patricof. “Interesting. No.” Ok. Then I get an interesting turn of events. Alan Patricof’s son at that time is going to college and he wants to go into the kiosk business. Holy shit. Can you believe this? And Alan calls and says “Can you talk my son out of that business?” I said “If you’ll fund my company.” Anyway they finally did and they made a lot of money. But in general the answer is I think that the venture business certainly has changed. It is a broken business. There’s 100 guys who will tell you why. I think what was happening for me in the ‘90s. I’m in San Diego. I’m a nobody. I’ve never done it before and I didn’t have a pedigree and I was too old. I heard on the NPR today that the maximum age that venture capitalists today in the Valley will fund is 32. What? Are you telling me – on NPR this morning it says after they’re not funding. It’s like you can’t have a baby after 40. What are you talking about? Thirty-two. Well when I started this racket after having been in the movie business and the real estate business I was 41 or 42. You’re too old and you’re not a computer – so my experience of them was lousy. I didn’t like them. I think they’re kind of arrogant. Now here’s the sentence they won’t tell you. There’s a great – remember I was in the movie business so there’s a famous guy named William Goldman. William Goldman wrote a lot of great movies, one of which is Butch Cassidy and the Sundance Kid. He’s won Oscars. He’s great. And he says the following when he talks about the movie studios. He says “Nobody knows nothing.” The corollary to that sentence is if you were a studio executive and you said no to every single script that came to you you’d be right 84 percent of the time. I mean think about a business where you’re right 84 percent of the time and all you have to do is say no. So I think the venture business as I experienced it is a lot of nos. They don’t exactly know what they really are looking for. It’s hard to figure it out. They wrote up – you know the 2 and 20 racket is really about how big of fund. They live off the fees. They never really get a carry. It is a rotten business. They tell you that they’re going to be active, that they’re going to help you and they don’t. Now having said that, the corollary, you asked me the question what do I do differently? I say no quickly or yes. I really write a check. It’s my money so I pay close attention and I try to be helpful in telling the truth. Now let’s spend a minute here. So remember there’s this whole incubator accelerator ecosystem. And by and large they’re in the business of “That’s good Tommy. Keep going.” They don’t tell Tommy that’s a terrible picture. “Tommy, you can’t draw. Tommy, the last thing you should be is an artist.” So the business is it’s like “Oh that’s good.” It’s hard for people to say no. I think that they’re entitled to real truths so if somebody comes to see me I say “Look. Here’s what I think” and I’m firm, hopefully constructive, try not to be rude. I’m never late. I don’t make people wait. I mean it’s constant. You fly up and they say “Oh he’s got a better meeting. He’ll call you tomorrow.” I just flew up. I spent $800. I took the whole day off. I’m in Silicon Valley. “I’m sorry. Mr. Jones is not available.” That kind of behavior is unacceptable whether – it doesn’t matter what business you’re in. You can’t do that. So at least if you come to see me I actually am there within five minutes of when the time is. I think that’s really important. I think telling the truth is really important. The classic VC says “That’s interesting. I’ll take it to my partners. I’ll get back to you in three weeks.” They don’t call back. The reason people hate VCs is that they’re rude. They treat you badly. Now remember they’re in the business of trying to find good people, great companies, good deals. You wouldn’t act badly if you were like – it’s adverse selection. It’s like bizarre. So I guess that’s how I view it. What I’ve changed is this. Remember I still don’t have [a real fund]. I mean comparatively I’m still a pisher. So the way we think about deals, the way I think about deals is don’t come to me after you’ve raised $3 million and ask me for $500,000. That’s not my deal. Come to me when you haven’t even started the company, you have an idea, you took my class, you graduated from UCSD, – I’ll take an idea and I’ll help you build a real company and I’ll write the first $100,000 - $200,000 - $300,000. I’m glad to do it, but I need to be at the beginning because I really don’t have a fund. I don’t have $200 million that I’ve raised from pension funds. It’s my dough. I’m writing the check and I want to be early where I can have some impact. It’s also it’s a lot more risk at the beginning. You’re going to get your brains handed to you. That’s ok.
CARUSO: So along those lines this was one of my other questions. I know that San Diego generally, the city, university, the institutes out here have done stuff over the years to foster the community, its development, its growth. Making sure land is available, working with producers. I know the university re-envisioned their patent system and things like that.
SENTURIA: Whoa. Whoa. Before you finish that question put a pin in tech transfer and go ask some people about that.
CARUSO: I know so I’ve spoken to some people at the university so it’s coming from a certain perspective. But I’m just wondering if there are, if there are things currently happening in this area that either continue to benefit or foster this, these developments, these companies or are there any limitations in place. I mean one thing I did hear about a lot is how much it costs to live in San Diego. And people wanting to start up here it’s not going to be as cheap as it was 30 years ago.
SENTURIA: Yeah. I don’t buy that. The places that have, where there’s action. Boston, nothing cheap in Boston. New York, San Francisco, Los Angeles, San Diego, Austin, Texas a little bit. I could live with that, little Chicago-ish, but gentlemen the irony is the places of the greatest concentration of both money and talent also happen to be really desirable places to live because there’s money and talent there. I don’t think anybody is limited. It’s a little arrogant. Yeah, it’s expensive to live in San Diego. It’s certainly cheaper to live in Salina, Kansas, but you’re not going to get a startup in Kansas because you’re not going to be able to build a team because the great engineer don’t live in Salina, Kansas. If you’re a great engineer you come to San Diego, Los Angeles, Orange County, San Francisco, Palo Alto, I made my point, Seattle. I mean Microsoft owns Seattle. So that’s not the limiting factor. The limiting factor is good ideas [according to Bill Sahlman], a famous [entrepreneurship professor at Harvard Business School]. He says “There’s never been a time in history when there wasn’t more money than good ideas.” He said it more beautifully. It’s in my slide deck. An oversupply of ideas and – so there’s also a little bit of a sense of rush. Now remember that may be because you’re old so I’m discounting that sentence. But it used to take longer and more money to build a company. Let’s put this on hold for a minute. [brief break] So I was talking about – you asked about some limitations. Well I’m going to tell you that the cost of housing is not a limitation. I’m going to tell you that in San Diego when you get done with everything one of the big limitations is we are a poor stepchild of Silicon Valley. It may change. I’m not sure. You might not ever be able to really solve that problem. It’s too glib an answer to say it’s just money. It’s not just money. I’ll give you another bad sentence, not necessarily true. If you go to the venture capital boys in the valley they’ll say “You can’t build a big company in San Diego.” You say “Why?” “You don’t have enough talent.” They, Silicon Valley, would say that there’s a shortage of management talent and technical talent. You can’t build a 400 person company here in technology. Qualcomm is unique and of course it started in the ‘80s. I don’t know that what they say is true. I’m simply telling you what they say. We do have big companies [in San Diego]. Illumina is a giant biotech company. We had WebSense which has a couple hundred people active, had a couple of hundred. So it’s a little bit bullshit from the valley. But what we don’t have – let’s tell the real dark truth. We have no super angels. Let’s tell the real truth. The limiting factor in this town is that I am in the top ten of the angels and I’m a nobody. I mean in the valley there are 100 graduates from various tech companies and they all have 20, 30, 40, million and they’re players. They’re super angels. They write checks for $200,000 - $300,000 - $400,000 and they’ll write 20 of them and there is no one, not one in this town who really is a super angel. I mean I always make the joke to Barbara. I say “Look. If I’m the – if you look in the mirror and you’re the super angel sweetie this town is in trouble.” You can fill in that’s a blank. So that’s the truth. And you say “Well why?” and I’ll say because [in San Diego], we have had comparatively few monster exits. So watch how it works together. If you had a dozen, ok, so the valley, 30 exits of $500 million to $1 billion over a ten year period. You’ve created several thousand angels who are young angels meaning less than 50. They didn’t make their money in electronics in Kansas and move to San Diego. Let’s tell the truth. Most of our angels made their money selling electronics or clothing or whatever in Kansas or Kentucky or Michigan. They come to San Diego to retire. They want to be an angel. It’s $25,000 - $50,000 - $25,000. Bupkis. That’s a legal term, bupkis. There’s no super angels because there have been no monster exits in this town to create indigenous living here and still committed less than 50 year old super angels. That’s the darkest sentence of them all. That’s why you won’t really build big companies here. You can get pretty good sized companies. You can get companies you can flip. You can get companies you can sell. You can get companies that will go to the valley. You can even get companies that go public, but you don’t have 50 – 100 super angels. And today – now watch how it fits together because the venture business both is rotten, stinks, and doesn’t work and has had literally to be in the top 25, top quartile of the venture funds started in 2000 you had to simply return 92 cents to the dollar. If you lost money you were in the top 25 percent. Give me a break. So we don’t have – we’ve got an ecosystem of CONNECT and incubators and accelerators and UCSD and SDSU and USD and we’ve got Scripps and [Sanford-Burnham and Salk] and we’ve got Thornton and we’ve got the in San Diego. We’re loaded with talent. What’s happening is the venture business is moving upstream meaning they only do a series A of $5 million to $10 million for funded companies that have traction, that have revenue, that have customers. Then earlier stage funding falls to the angels and our angels, they’ve got very short wings. I think it’s unlikely that that will change in the next five to ten years. They sort of grew up here. They come – if you’re in St. Louis, Missouri you’re not going to pick San Diego over Palo Alto. You’re going to go like Zuckerberg did to San Francisco. You’re not coming here. And the money that comes is money made in a different time in a different business. So we’ve got a lot of rich people. They live in Rancho Santa Fe, Del Mar, La Jolla. We’ve got a lot of money, but without the history, without the imprimateur, without the motivation to invest in the startup community. And that is the truth and that is a real and dark sentence. You can wave your arms all you want and talk about collaboration and incubation and operation and masturbation. It doesn’t matter. You’re not going to have at this time enough real dough. It’s kind of depressing. I mean that’s the truth. That’s different from me telling you it’s a wonderful thing and everything’s great and everybody’s happy, we’re building lots of companies. Yeah. That’s not – it’s sort of true but it’s like not really true. It’s a little bit of the emperor has, he has some clothes, he’s wearing Munsingwear underwear, but he doesn’t have pants yet.
CARUSO: So my last question has to do with – I am curious about your – I’m lumping all of this together, but feel free to break it up if it’s more appropriate, your columns, your book and your interest in teaching.
SENTURIA: Well, I’ll tell you a story. As you can tell I like to tell stories. So in 2008, my wife and I start a company called SDNN, San Diego News Network and remember there’s a slide in my teaching that says “Don’t bet against the macro.” So in September of 2008 we start a company. We get the wrong team, the wrong idea, the wrong – everything’s wrong and on September 15th I believe you’d be aware Lehman Brother’s goes broke. Great, you’re doing great Neil. You’re just doing great. We get to the spring of ’09. We need money. We’re running out of money and sure enough the market at that time, April 17th, 2009 is 6600. Today it’s 16,000 so good job, Neil. And we hang on for a year because we care deeply. My wife was a journalist. She worked at the Sacramento Bee. She worked at the LA Times. She was a Harvard MBA and she’s a journalist. She cared deeply. So here it was. We were going to take the print, revolutionize print. Everybody’s tried to do this and digitize and make new media. We were going to bring it online. We run it into the ground and in the [fall] of ’10 we give up. We go broke, take our loss and lick our wounds and this one really almost killed our marriage. I mean really we were – it was hard. Everybody says – I’m reading a book. I’ll give you – this is the next thing you’ve got to read. Ben Horowitz, The Hard Thing about Hard Things is they’re hard. This is like real. This is the hard thing about hard things. That’s why they’re hard. Everybody wants to be the CEO. It’s hard. I want to make it really clear it’s hard. So I get to the June of ’10 and I realize I’ll never work again and I am a total and complete and abject failure. Now remember I’ve had a lot of successes, but I can’t feel any of them. That’s my own nutsiness. And since I’ll never work again what I’m going to do is I’m going to be a consultant.
CARUSO: Ok.
SENTURIA: Oh my God. So I go to talk to a consultant. Consultant says “If you want to be a consultant you have to have a book. You can’t be a consultant without a book.” I said “I’m there.” So I play golf and I say to my golfing pal Kent Smith, I say “I’m going to write a book. Kent later tells the story. He’s in the book. And he says “I’ve heard that from a thousand people, but the strange thing about Senturia is he told me in June and in September he finished the book.” So here’s how I did, a book of 220 pages is 74,000 words. You need that. You cut it down to about 65,000 words. Remember I was a writer so I simply sat down every few days. I had set times and I wrote 1,000 words, 2,000 words, 2,000 words, 2,000 words until I’d written 75,000 words and then I edited to 62,000 words. And the theme of the book was this. I was angry that no one told the truth. I was angry that they lied to you, they conned you, they – everything’s wonderful. Everybody gets gold stars. So I wanted to write a book that said here’s the truth which is what I did. And of course “I’m there for you baby” is what every Hollywood producer says after they – I believe the word starts with an ‘F,’ but I can’t use it. That’s what Hollywood producers do and they say, the other thing is I think the book’s right there. I’ll give you a copy. Hold on. I don’t remember my words anymore, but you haven’t read the book so I’ll give you a copy of the book. Three things this book starts with. Oh yeah. Here are the three things that Hollywood producers say. “Let’s do lunch.” “I’ll get right back to you.” And the one thing that brings it all home, the granddaddy of them all, and “Hey, I’m there for you baby.” So the book was important. Now here’s another example of sort of – I wouldn’t call it unintended consequences, but I’d call it – I don’t have a word for it. So the book costs, to do this – it’s a hardcover book. It’s a beautiful book. It has 223 pages. It has 215 rules, lots of rules. It’s beautifully done. It has a lovely cover. There’s a picture. It has a Library of Congress. It’s a book.
CARUSO: Yes.
SENTURIA: And of course no one will publish it. Actually what happens is I send the book to a guy who was a big shot in town who has written books. I say “What do you think?” He takes two weeks, he writes back and he says it stinks. He says “Furthermore you’ve got way too many rules. You can’t have more than seven rules.” Ok. What? Like you can’t fund anybody over 30. You can’t have more than seven rules. I said “All right.” So anyway I publish it myself. The total cost of the book published, out the door, $15,000 - $16,000. I get a Sherpa to help me. I found somebody to help me. I knew what I didn’t know. The book turned out to be enormously valuable. It became a calling card, like a calling card. So I literally have raised from people who have read the book over $25 million. $25 million has come from people who have read the book and said “You’re a great guy.” So it became like business card, but it was 220 pages long. And what I liked about it is did you have any expectation that there would be any monetary recompense from the book? The answer is no. I expected to lose money. I was ok losing money. I wanted to do it because I wanted to do it because I wanted to prove, back to revenge, that I could write a book. And then ironically I ended up being quite successful. The book sold a couple thousand copies, it’s on Amazon, but it’s not – I’m not going to live off the book, but it became who you were and you could tell somebody “If you read my book you’ll know a lot about me in which case you can decide whether or not you want to be an investor.”
CARUSO: Right.
SENTURIA: So that’s the book. That was how the book came to pass. So here’s how the column comes to pass. In the meantime I had taught at SDSU in the business school. I had been a – I’ll tell you a great story. So I got a job teaching a real for credit at SDSU in the graduate business school. I taught a course on entrepreneurship and I taught it for five years. I left. You say “Well why did you stop?” Well I’ll tell you a story why I stopped. So I was somewhat of a difficult – how could you possibly imagine that, person in that I said “Look. I want to teach starting at 6:00 and I want to be done at 9:00.” See we have blocks. Ok.” I said “No. You don’t understand. I’m only going to start at 6:00. Like 7:00 is too late. I’ll be asleep.” See the classrooms are all booked 4:00 to 7:00, 7:00 to 10:00 and you want to start at 6:00 so you fuck up like two sets of classrooms. But they agreed that I was a good enough teacher that I actually got the highest marks of any of the teachers. So anyways here’s the story. So this is SDSU. This is 2002 through 2007 I’m teaching and I’m using a blackboard. Can’t stand a blackboard. Chalk, blackboard? So here’s what I say to the dean of the business school. I say “I’ll tell you what I’ll do. I will pay for my classroom. I’ll pay $1,000 and I’ll put up a white board, the kind with the erasable stuff. It’s a gift. I’ll pay to buy it. It’s 10 feet by 6 feet, whatever. I’ll pay to mount it and you can keep it. It can stay there. It’s a gift. Just let me – when I teach I get to use that room.” The guy said yes. I said “Great.” About three weeks later I get a phone call from the dean. He says we can’t do it. Huh? Well by this time I’ve already sent the check. Now they’re not stupid. I sent the $1,000. It only cost $800 plus shipping. I had it wired. He says “Well you see we can’t. If we take the blackboard down somebody else might want the blackboard and we can’t really put this so we can’t do it. We can’t do it. But what we’d like to do is to take your money to use it to buy some laptops for other professors.” I said, “Ok.” But then the next year I stopped. I stopped teaching. It was not as satisfying as I thought it would be. Look. I loved the five years and I liked teaching, but then I’ll give you an example. So I’m a teacher, but I also at that time was the CEO of like three companies so I was pretty busy. So I had an assistant, a young man that had been a student of mine named Elliot Hicks, brilliant, MIT, terrific guy. So I say, “El would you be my teaching assistant? Take care of the junk that I can’t do. I don’t do it very well. Just manage that and I’ll pay you an extra $500 bucks” and he’s thrilled. He does this for a few years. About the fourth year I’m doing this somebody finds out. I inadvertently say “We’ll I’ll have Elliot…” “Well who’s Elliot?” “He’s my teaching…” “You can’t have teaching assistant.” What? At SDSU the teaching assistants have a union. They have a union. Now huh? So Elliot was not in the union so either you take a union TA or you can’t use Elliot or you can’t teach. Now I love these stories because this is what makes entrepreneurs crazy. So I’m the highest rated teacher. Everybody was happy. I’d gotten lots of good marks. I was willing to give you $1,000 for a white board. You turned that down and then you want me to have Elliot join a union? And that’s when I said “I can’t stand it any longer.” I took a few years off and then we came back to teach at UCSD. I think – and the reasoning behind the teaching is again the premise is to tell the truth. There were lots of programs that say – like for example famous people get up on a panel and they say “Well I started the company. I went to the venture capitalist. I raised $10 million and I sold it for $100 million.” But you didn’t tell me the truth. You learn more from the failures than you do from successes. You know this. So I decided that Barbara and I would teach a real course the way they teach it at Harvard, case study. We would rigorously have eight or ten cases. You would write a paper. I was going to try to legitimize. That’s a little arrogant. Again I’ll apologize, but to make more rigorous the learning of how to think in an entrepreneurial way. That’s what I started this whole discussion we had. I said “I can’t teach you to be one, but I can teach you how to think like one” and it’s not like you wave your arms and you start up and it’s all fun. It’s like there’s something to learn and you can learn from cases. She had been at Harvard of course. So we took Harvard cases and for four years we taught that at Von Liebig at UCSD and we had guest speakers and I told some of these war stories that became important because here’s the truth. The irony is this. The reason I was a high rated teacher at SDSU is because I wasn’t an academic. I could never be a real teacher because I don’t have a PhD, but I had a Masters. It was in the movie business, but it qualified under state limitations so the students when they heard the real story – I mean again you’ve got to take that with a grain of salt. Of course they liked the teacher that tells the stories as opposed to the academics who say “We’ve learned the following in a book, but I never started a company or did it.”
CARUSO: Right.
SENTURIA: And that’s the Ben Horowitz. That’s the hard thing about hard things is you can’t learn them in a book.
CARUSO: Right.
SENTURIA: And then here’s how the column comes to pass. So after the book gets written, I send it to Jeff Light who’s the editor of the San Diego Union-Tribune, U-T San Diego. We don’t hear anything for a few weeks and we figure eh eh. Finally the phone rings and it’s Jeff Light. He says “This is really an interesting book. I’d like to have lunch with you.” This is great. So we had lunch and he says “This is really funny and terrific. Would you like to write a column?” I said “Yes.” It was that simple. He said “Would you like to write occasionally?” I said “no. We’re going to write once a week. We want to be on the front page of the business section and it’s called I’m There for You Baby by Barbara Bry and Neil Senturia.” And we’ve been writing it for two and a half years. I think we’ve missed four weeks. We take two weeks vacation. So again it’s that principle of rigorous. We deliver almost 50 columns a year and we love it. We love it. They’re 700 words. I’m not Nick Kristof. I’m not Paul Krugman. But I’ve got a place to stand and it’s a combination of interviews, real people, real stories, real issues, but always around entrepreneurship, always around promoting the good stuff in the community and also telling the truth. I mean one of the columns I wrote just three, four weeks ago was the column about being fired. I was the CEO of this alternative energy company and the boys in Texas flew up and they said “We’ve thought about it and you’re fired.” And I said “Look. That’s ok. It comes with the territory. When you get the letters CEO you need to expect you’ll be fired.” Here’s a statistic. What percent of founding CEOs of funded startups are fired within the first three years?
CARUSO: I would guess 90 percent.
SENTURIA: No. That’s a little high, 52.
CARUSO: Fifty-two.
SENTURIA: Fifty-two percent. This is a real statistic. I didn’t make this up. So it’s ok. So when we wrote that column people said “My God. You told the truth.” So we’ve developed, it’s a little again slightly arrogant, a little bit of a following. We get tremendous pleasure out of it. And so I’ll end with this. And so a book, a friend of mine gives me a book called Give and Take by Adam Grant. It’s a best seller and I read it about six, eight, ten weeks ago and it moves me deeply. Grant’s theme is simple. He says “There’s three kinds of people. There’s takers, matchers and givers.” And he’s a Wharton professor. He didn’t write this in his spare time. And he backs it up with real statistics and he gives a dozen examples. And of course the argument is that you do better as a giver than you do as a taker or a matcher. So I’ve come to a place in my life today, in the spring of 2014. When I looked in the mirror in January or February I said “I think I’m 55 giver, 45 matcher. I don’t think I’m a taker. And I’ve made as a commitment that in December of ’14 when I look in the mirror I’d like to get to 70/30. So all of these things – they don’t pay us for the column. We now teach for free. We’ve changed our business model. We’d rather give – we’ll teach for free. What’s the advantage of that? All I want to do is meet one genius. If I meet one genius every time I teach twice a year, I did great. So I have an agenda that I’ll give it away. It was like six, eight months ago and my wife says “what are you going to do?” I said “I’ll be an executive coach.” She said “You’re really good at that.” I go and I ask a few people and they say “Wow. You’d be a terrific executive coach” and I actually get six clients in less than two weeks. I’m now an executive coach. What I realize is I can’t charge. I don’t want to do anything for $200 an hour. I’d rather it’s a gift. I’m in the gift mode now. The new me is I’m an executive coach, I’m delighted to be a mentor, anything you want, but I’m not sending you a bill and we’ll see what happens. It’s ok. It’s an ok model.
CARUSO: Anything else? At the end I always like to ask if there’s anything that I didn’t ask about that you’d like to talk about.
SENTURIA: No. What worries me is I gave you stories about me and I didn’t tell you about San Diego enough.
CARUSO: But the stories about you are telling me about San Diego.
SENTURIA: If you think you got what you bargained for.
CARUSO: I think so. More than I bargained for actually.
SENTURIA: I love what you do. I think what I’d like somebody who reads this to feel, I really love what I do and what I tell you is this; at the end of teaching six or eight weeks we learned more than the students. It was great. It’s great. And if you said to me “Where does the teaching come from?” Remember I told you about my childhood and how this leads to revenge and what you wanted to do so here’s the end. I’ll tie it all together. My father was a radiologist and he was both talented and famous and he taught students, the interns, the residents in radiology at the Jewish hospital in St. Louis under the aegus of Washington University. So he was the famous blah, blah, blah professor and all of my childhood I was confronted every summer with “Well let’s go fishing dad” and he said “I can’t really go fishing. I have the residents. I teach.” And I will tell you that 50 years later in a sense I honor my father in a tangential way I guess by teaching. While I was a resentful young man that why did the medical residents, why are the medical students more important than your son? Here it is 50 years later and what I’d say is I get it. Teaching is a great and honorable thing to do and I care deeply about it and we do it pretty well. I mean we get – you can always get better, but we don’t phone it in.
CARUSO: All right. Thank you very much.
SENTURIA: Thank you.
END OF INTERVIEW