Dan Roche started three companies before age 40. Now, as UMBC’s Venable Entrepreneur-in-Residence, he is helping other businesspeople get on their feet. He recently discussed his position at the school and his experiences in the technology field.
Describe your role at UMBC as the entrepreneur in residence.
Venable provided a grant to the UMBC tech center [incubator] to find somebody to come in and help some of the companies get to the next stage of wherever they are in their life cycle. Every company is a bit different. Some are seeking funding, some are working on business plans, and some are just trying to get their intellectual property in place and finish the R & D work that they are doing. Some are figuring out how to market themselves.
I spend a day or two a week over here meeting with companies and looking at where they are, helping them meet potential capital providers and other types of people that would help them. That’s probably 75-to-80 percent of what I do here.
And the other 15 or so percent is you teach a class to undergraduates?
I do. I teach a class called Introduction to Entrepreneurship. I also just in general help out with the tech center positioning itself, trying to determine what services it should offer to start-ups.
And you are still working in technology as well?
Yes, as a matter of fact, I just kicked off a company last week, which is going to focus on doing network security product and services.
So, this is not a case of “Those that can’t do, teach.” You are not hiding out at UMBC during this horrendous market.
Oh, no. Let me give you my story. I started a company in 1991 called Rapid System Solutions. I sold it in 1996, worked my employment agreement out and left them in the end of ’97. I then did a “roll-up,” bought 13 companies and IPOed them in February of ’98. I ran that for a couple of years and then just decided to take some time off. So, I’ve just been managing my investments for a year, year and a half.
A roll-up is when a company buys a lot of smaller companies to try to quickly collect all the different pieces of one market.
Yeah, exactly. There are certain opportunities in a market that a small company just can’t acquire just because of its size. You need to have enough muscle and enough mass to be able to bid on some of the higher-end projects.
That roll-up was Condor Technology Solutions, and they’ve had some problems. The IPO was a big success. At its height the stock was about $18 a share. But by the time you left the company it was down in the single digits and now it’s a penny stock.
Condor was a roll-up and roll-ups were kind of out of favor shortly after Condor got out there. But Condor was making money. It was undervalued if you just purely looked at its cash flow. The mistake that was made at Condor, in my opinion, was that there were some big influences to continue and acquire companies rather than just try to integrate and operate the companies we had.
The company ran up about $45 million in debt and then had a couple of bad quarters and had trouble servicing that debt. It went downhill from there quickly.
I was committed to that company, and I’d have done anything for that company. I have great relationships with the people that are still there. I would have done things a lot differently if I had stayed.
In your years as an entrepreneur — you’ve founded or worked with several start-ups — have you ever used an incubator?
No, I have not.
Yet you work with one now. Are there pros and cons to incubators that caused you to make those decisions not to use one?
I feel that when I started my companies, the incubator wasn’t an option for me. This incubator didn’t exist. There weren’t any in the immediate area. Condor we started out of Falls Church and then we moved it to Annapolis after it went public. Rapid, I ran out of Columbia. It was sort of in an incubator. AT&T let us use their facilities just like an incubator would for almost a year, which was absolutely wonderful. Then they sat down and said, “Look, you need to graduate. The baby needs to leave the nest.” So, then I did. And, fortunately, we kept growing and growing.
There has been some criticism of incubators that they create “hothouse flowers,” companies that thrive in that supportive setting but can’t go it alone.
I think that’s a fair statement for any company. The incubator’s goal is to be there for the company in a number of ways. Usually when a company gets started you have an entrepreneur that has a tremendous amount of strength and talent in a given area. It might be a marketing and sales guy who has decided to go and attack a market. Or you might have a bunch of engineers who have a wonderful idea for a product.
In the incubation stage they don’t need to have a full functioning company. They don’t need a marketing department, research department, finance department, etc. When they need those services they need to have place to go to get access to them. That’s one of the things that the incubator provides.
When they’re ready to stand on their own two feet is when they’ve begun to get their contracts, their sales are ramping up and a lot of them at that point need to bring in an experienced management team. This is not different than any other company. This is true here, as it is anywhere. Some make that transition well and some don’t.
Do you think you can teach someone to be an entrepreneur?
Yes, absolutely. I think that there are certain traits that make it easier but I think there’re traits that are all learnable. It really comes down to drive, and organizational skills. A lot of people think entrepreneurs are risk-takers. They’re not, I think. I feel I am extremely conservative and yet I’ve started a number of companies. You just do your research, so you’ve got to be hard-working.
An entrepreneur is someone that’s willing to do what it takes. Whether that means sweeping the floors, writing the strategic plan or presenting financials to a bank.. An entrepreneur realizes they’ll do whatever whenever to get the concept to the next stage.
That, to me, is very learnable.
Are the undergraduates you teach unrealistic in their expectations of business success or has that changed since the market went south?
I would say that’s definitely where their mindset was two years ago. Now they need the pep talk that they can still be entrepreneurs. That this country is all about entrepreneurship, it’s all about identifying needs and creating a value proposition to fill those needs and creating an environment to make that happen. That’s how, when the tide comes in, all boats rise in this country. Teaching that is a lot of fun.
The undergraduates come in all types and flavors. Some of them are getting technical degrees or business degrees and have come from a family of entrepreneurs. Whether it’s Dad had a dry cleaners or a liquor store. Some people just take starting and running a business for granted, they know they’re going to do it. Some people, it’s very foreign to them. They come from an environment of parents who have always worked for the federal government and security has always been a key issue. Those are the mentalities that need to be broken.
If you ask me, every entrepreneur is naive in some particular area. Otherwise, they wouldn’t have done it in the first place. They didn’t really know everything that they were getting themselves into. Which is a good thing. That’s how you learn.
What is your advice to entrepreneurs right now? Is it just to keep your head down and try to stay afloat?
Absolutely, I think it’s an opportunity for them to really put on their creative hats and figure out everything they can do to buckle down and work through this lull in the marketplace. If a business can work through that, when they pop out at the other end, they are so much stronger.
My first company, Rapid, I started in May of 1991. We were in the middle of a recession then and it set the tone for the whole company. We squeezed every single nickel.
Finally, you climbed Africa’s highest peak, Mt. Kilimanjaro, in October. The parallels to starting a business are fairly obvious there.
It’s a lot of work. [It takes] a belief in yourself that you can do it because everybody’s going to tell you no. I can’t tell you how many of my friends and family members were looking for excuses for me to not go do it. When September 11th happened, everyone just assumed that I wasn’t going to go. No, I made a commitment to myself that I was going to do it. So, I went and I did it. And I trained enough to actually enjoy it.
An entrepreneur gets satisfaction from achieving a goal, and I certainly got a tremendous amount of satisfaction from achieving that goal. It’s not any different.
