Nov 16, 2004 By Rafe Needleman
Confidence, experience and financial freedom bring some entrepreneurs a flexibility of mind that they lacked when they focused on numbers (or more importantly, their VCs' numbers). Money lets people indulge their passions (or their fetishes or their psychoses), and when you combine a strong passion, a lot of money, and experience starting companies, you can end up with some very interesting businesses. I have two examples.
Dan Schwinn was the founder and CEO of Shiva Systems, a networking company that went public in 1994. What did Dan know about airplane instruments before he could afford to start a company to make them? Not much. But money enabled him to indulge his passion for flying (true for many tech entrepreneurs, it turns out), and when he found himself sitting around post-Shiva, with a pilot's license, time, and a healthy dislike of the avionics he was getting trained on, he saw opportunity.
There is a huge difference between selling networking equipment and selling instruments for airplanes. Dan believed, probably naively, that simply making a better product would be enough. As he found out, though, his target customers were very conservative and had a mature technology supply base. For instance, industry leader Cessna had a thoughtful but maddeningly deliberate strategy for adopting the advanced monitor-based (as opposed to hardwired dials) "glass cockpit" products that Dan was designing: It wanted to sit out the early innovation cycle, and be the 2nd or 3rd company to offer these avionics in its airplanes.
Nonetheless, Dan persevered, bringing a clean design slate (initially, a Windows/Intel architecture) to his products as well as the freedom of not having a legacy line of equipment to support. His product is a computer-based system of two or three flat-panel displays and software-defined buttons that replaces the dozens of electrical, mechanical, and pneumatic dials and controls that have traditionally been installed in airplanes. He won a few small clients, got a big boost when other companies started needing his technology to chase NASA's AGATE (Advanced General Aviation Transport Experiments) program, and is now finally stirring things up in the industry by winning customers such as Piper, Cirrus and yes, Cessna. The company is currently profitable.
Coming from outside the industry, Dan couldn't have succeeded without a lot of creativity and a new concept (his products are based around the user interface and assume a rich data link to the outside world). He also had a willingness to take nothing in his target market for granted. It's the kind of fresh thinking that rarely comes from within established companies - or industries, for that matter.
Post-bubble, he wanted to do something in the wine business. Actually making wine was too risky; he felt he was unlikely to rise to the top of the market, much less survive. However, he realized that his own collection was becoming unmanageable, so he created a solution to his own problem. Unlike Dan, Steve had the advantage of moving into a market with no technologically-advanced incumbent and in which most of his potential competitors have regional business models that don't scale. Steve's company is very young, so it's too early to say if Vinfolio will take off, but I talked to him for long time and came away impressed with the depth of his thinking, and the way the different parts of his business model all link together to serve what I'm sure is a very picky, yet very affluent, customer base.
There's not much in common between the business models of Avidyne and Vinfolio, but both were started by men who made good money in technology, found themselves with time on their hands, and had a problem they thought they could solve better than anybody burdened by actual experience in the field they were about to enter. It's important to reiterate a key point here, though: While both CEOs started their companies because they were passionate about the ideas behind them, they are not hobbyists. You can't launch a successful company as a pastime. But neither can you expect to change an industry if you don't have a fire inside driving you to do so.