Working In Silicon Valley
Working In Silicon Valley: The Billion-Dollar B-School Startups Lighting Up SanFran
In Silicon Valley, a brood of business school entrepreneurs is trying to engineer the future
Berkeley-Haas grad Gleb Budman founded Backblaze, a cloud stoarge rival to Amazon
Amid Silicon Valley’s co-working spaces and corporate tech campuses, a brood of business school entrepreneurs is trying to engineer the future.
The allure of the Bay Area, where teenage founders are trying to create the next Facebook and investors are throwing cash at start-ups, is coaxing students away from corporate captains. Instead, they are experimenting with cloud computing, financial technologies and innovative apps.
“Entrepreneurship is something the students are interested in,” says Maeve Richard, director of the Career Management Center at Stanford’s Graduate School of Business, a Valley neighbour. “It’s an attractive time to be in the Bay Area,” she says.
And many are minting fortunes in the process. According to PitchBook, a venture capital and private equity research firm, Harvard Business School has produced 10 billion-dollar companies alone, many in the Valley, such as video-games-maker Zynga.
Thomas Chalberg, co-founder and former chief executive of Nasdaq-listed Avalanche Biotechnologies, had a promising career at Genentech, a subsidiary of Roche, the Swiss healthcare corporation. But, after enrolling in the Berkeley-Haas MBA, he changed tack.
“Investing that time was valuable,” he says. Basing the company in the Bay Area provided access to investors, talent, and other entrepreneurs. “The degree of innovation and entrepreneurship in Silicon Valley is dizzying,” Thomas says.
One reason students are lusting over San Fran is that venture capital flows so freely into start-ups there. According to the latest data from PwC and the National Venture Capital Association, $7.9 billion was poured into Bay Area companies in the third quarter.
Despite the hype, most start-ups will fail. And many entrepreneurs put in hours that would make an investment banker wince.
No company is immune from going bust anymore, says Vincent Ponzo, director of the Eugene Lang Entrepreneurship Center at Columbia Business School: “This is the new reality.”
Below, BusinessBecause profiles three business school entrepreneurs who are lighting up San Fran.
School: Stanford GSB
Funding received: $1.77 billion
Valuation: $4 billion
Daniel Macklin, co-founder and vice president at SoFi, says the student loans provider is here to disrupt the banks. “Banks are not people’s best friends; people are crying out for better solutions delivered by better and quicker companies, and SoFi does that,” he says with a British twang that has a wisp of Oxbridge about it.
He would know. The one-year masters graduate cut his teeth at Standard Chartered Bank, including as head of medium enterprises for SME banking in China.
“I resigned during that year at Stanford because I fell in love with the place and Silicon Valley and the idea that you can start a company,” Daniel says.
Along with three co-founders — Mike Cagney, CEO and former head trader at Wells Fargo Bank; James Finnigan; and Ian Brady — he hit on the idea for SoFi while at Stanford.
“Business school gave us that advantage to be able to develop and incubate an idea in a safe environment,” Daniel says. The quad graduated on a Saturday in early June 2011. By Monday, SoFi was born in San Francisco.
A combination of sophisticated investors, talented employees, and potential customers make Silicon Valley “the best place in the world to launch a company”.
Among the benefits accrued from business school is the Stanford alumni network — one-quarter of which lives in the Bay Area. “There were about 40 or so [investors] in our early round, and every one was a Stanford alumnus,” Daniel says.
SoFi has grown to have 400 employees, 60,000 customers and is poised to hit $5 billion in loans funded. The company raised in September a $1 billion funding round led by Japan’s SoftBank and Third Point Ventures.
There is talk of an IPO but Daniel declines to comment: “We have a lot of funds to fuel our growth.”
School: MIT Sloan
Funding received: $230 million
Valuation: $1.2 billion
Frederic Kerrest, co-founder and chief operating officer of Okta, says his company is bringing the best tools to the cloud and mobile world.
The San Francisco-based start-up provides cloud software that ties together the myriad applications that enterprises and employees use. And it is testing the software titans such as Microsoft and VMWare, already netting big clients like LinkedIn and Western Union.
Its advantage, says Frederic, is that is has a “laser focus” on building the best cloud solution. “Okta’s business isn’t distracted by having to sell the kit and caboodle.”
He founded the company in 2009 with Todd McKinnon, the chief executive, whom he met while the pair worked at Salesforce, the cloud computing business, before its IPO in 2004. “I’ve always had the entrepreneurial bug,” says Frederic, who previously built a high-tech consultancy firm in Latin America, growing the venture to 40 employees and a $5 million run rate.
He left Salesforce to begin an MBA at MIT Sloan School in 2007, and says the key advantage is the mentors and even customers derived from the MIT network.
Professors, too, “helped drive my interest in entrepreneurship” and provided the tools he needed to build an enterprise technology company.
And build it he has. In September Okta raised $75 million from investors including Andreessen Horowitz, the Silicon Valley venture capital firm that backed Facebook and Airbnb, bringing the total pot to $230 million.
The Bay Area is an expensive place to grow a venture, in terms of real estate, the talent, “and the snacks and free lunch required to recruit”, Frederic jests.
But, he says, there is a strong network of venture capitalists, entrepreneurs and builders: “Silicon Valley can be a great place to start.”
Funding received: $5.3 million
Gleb Budman, chief executive of Backblaze, says the cloud storage company provides “a lower cost alternative to Amazon S3” and other competitors, with prices at about 1/4th of the internet giant’s.
Backblaze offers personal and business backup as well as cloud data storage, on the cheap. Unlimited data storage is just $50 a year and, its new product, B2, is directly challenging cloud storage options from large providers like Google Cloud and Microsoft Azure.
Despite raising just $5 million in venture capital, Backblaze is storing more than 150 petabytes of user data. It’s profitable too, and growing at a brisk pace: it achieved five-year revenue growth of 917%.
“It’s an incredibly exciting path for us, but a natural one, enabled by nearly a decade of building low-cost cloud storage,” says Gleb, a former program manager at General Electric and later management consultant at A.T Kearney.
In 2007 he quit as senior director at SonicWALL, later acquired by Dell, and banded together with five co-founders to solve the problem of consumers losing personal data.
“I love to create and build. Sometimes that opportunity is available in large companies. Sometimes you have to start a business,” he says.
He first divested from the corporate scene over a decade ago and founded netRelevance, a search start-up, while still at business school. The MBA has provided an investor, staff, and client introduction. But, most of all, it “helped shape my way of thinking and approaching business”.
Being located in the Bay Area allows Backblaze to profit from the entrepreneurial ecosystem.
“There is a sense in the air that anyone can do something great, a small company can compete with giants, [and] quitting your well-paid job to pursue an idea isn’t insane,” Gleb says.
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