Founders share secrets to launching successful companies
Santa Barbara is known for several things, but it’s not seen as a startup hub like its neighbors to the south, Los Angeles, or the north, San Francisco.
But Dan Engel, the founder of FastSpring, a software e-service platform, sees Santa Barbara’s quietness as a positive, not a negative. When he founded FastSpring in 2005, the company was entirely remote — something that is more common now but pretty extreme 20 years ago.
However extreme, it worked as FastSpring was generating nearly $100 million in revenue when Engel left the company in 2013.
“That really allowed us to hire the best talent in the world for whatever we wanted to accomplish, wherever they are,” Engel told a packed room at the Cabrillo Pavilion. “I think there are great advantages to being a little bit away from the noise, where you can think and then still go to San Francisco whenever you need to.”
Engel was one of three panelists at Ventech’s March 25 event, How I Built This – Santa Barbara Edition. Other panelists included Sonos Founder John MacFarlane and Seek Thermal Co-Founder Bill Parrish. The panel was moderated by Ventech board member Marcus Chevitarese.
Engel’s startup journey started before FastSpring in 2005. A college student through 1998, Engel tried his hand at the startup scene in the late 90s, founding GrapeApe.com, which he described as Amazon for magazines at the time.
He noted that the 90s were “perhaps the first time in human history, when a 21-year-old was encouraged to be a CEO.”
“I don’t think it happened much before and hasn’t really happened since, but that’s what times were like back then,” Engel said.
So even after GrapeApe failed and Engel went through a few companies, he knew he wanted to get back to the startup game, eventually founding FastSpring in Santa Barbara.
“To have success, you have to be willing to try lots of stuff,” Engel said. “When I had success with FastSpring, I was building three companies at once. Why would I do that? Play the odds. Get them in my favor.”
Engel added that “California’s a wonderful and the best place to build a business.”
“You got to pay to play. That’s part of the deal. You can go to Florida and save some money. It’s not much of a business climate out there like it is here,” he said.
MacFarlane founded the now very reputable Sonos, a maker of audio products, back in 2002, alongside Craig Shelburne, Tom Cullen, and Trung Mai. They eventually launched their first product in 2005.
Sonos was founded as a way to revolutionize home audio by making it easy to play any song, in any room, wirelessly. MacFarlane noted how, at the time, it was a cumbersome process to listen to music at home, owning a slew of CDs, the right sound systems, and having it all connected, etc.
“It was pretty awful,” he said.
One thing he and his co-founders underestimated, however, was how difficult the hardware space is. MacFarlane’s previous venture was software.com, “which had 97% gross margins.”
“Sonos only had about 50% gross margins,” he said.
Still, MacFarlane noted how proud he was to be in the industry at the time, calling it “a very exciting time to be in music.”
MacFarlane left Sonos in 2017 after leading the company as CEO for 15 years. A big part of his decision to step down was the fact that his wife at the time was fighting breast cancer.
“I cooked myself and I was never the same after that. So after a couple of years, I realized I just didn’t have the same attitude that I prided myself on,” he said. “You will run into every limitation you have as a founder, and how you deal with them will be the most important thing of all.”
Parrish founded Seek Thermal alongside Tim Fitzgibbons in Santa Barbara in 2012. Unlike Engel and MacFarlane, Parrish was never the CEO; instead being the CTO of Seek Thermal. He is also still at Seek Thermal.
His most important advice for young entrepreneurs was to make sure to partner with the right people. He noted that Seek Thermal’s 14 years haven’t been an explosive boom of growth but rather steady, coordinated growth as a bootstrapped company.
“If you don’t have the capability as an entrepreneur, you’d better find some partners who do have the capabilities you need. Trying to do it all yourself is very, very difficult. So having some partners in this thing that have different talents and different ways to organize this, it’s very helpful,” Parrish said.
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