Alan: Welcome back I’m visiting here today with Wally Hawley. Wally Hawley has created a number of companies throughout the years in Silicon Valley about midlife he took a change in direction and we’ll get into that in just a few minutes. Wally welcome to today’s show.
Wally: Thank you for having me.
Alan: Wally can you give us your background.
Wally: Well I am 75 years old as of last week and in the early part of my career education was Stanford undergraduate at Harvard business school. I married my wife when I got out of Harvard business school and this year we will be married 50 years. I went with McKinsey and Company after Harvard and was in San Francisco and then spent four years in the Netherlands helping them with their European operations where my two daughters were born and then I came back to San Francisco and became the president of one of my Dutch clients here in the United States and is part of that effort we formed a venture firm for them. Then in 1972 I decided that venture capital was going to be more significant than it had and it would really grow. I was right but I certainly didn't understand how significant It was going to be. So in ‘79 we formed our own firm, InterWest, which is still going, it's on its 10th fund- although I am not involved, I am doing Angel investing which I think will get into a little bit later. I live in Atherton. I’m involved in nine Board of Directors and I'm a happy camper
Alan: Well you've done quite in your life… Wally I want to change directions, in looking at all these companies that you created over the years and you’ve seen both good and bad ones, what do you value most in the company, thinking this is really going to take off and be a winner.
Wally: Well if you limited me to one word it would be people. There are three things I tend to look at when I'm looking for a company. The first is scale because it needs to get size or it won’t make any difference, the second is to make sure there's a sizable market that will permit that scale because you have a great product with no market. But the next one is where I think people tend to fall down, they pay lip service to management but I'm looking for A+ people, and the reason I can be on nine boards is that I have an A+ guy leading every one of those nine and if you pick the right leader for over 50% on the way it may mean you have to make changes adjustments whatever but it's the good leader that sees the need for that gets it done so I'd say a word it's people.
Alan: When it comes to building a team in a company how do you identify that talent?
Wally: That's a tough one. You're not sure you always have that when you go in and if you knew it, you might not have backed some of them but basically you begin to see whether the person has an interest in working with other people including the Board of Directors. If they are willing to build a significant Board of Directors with serious people it means are willing to listen to other people and to think about a team at the director level if that's the case is a good chance it will be thinking about a team at the company level as well. But if they're already in operation, because many of those are already started that we could involved in- I can learn more by walking around the company and watching how the people react to the leader and to me and others than I can by reading any business plan.
Alan: How does a leader make the hard decisions?
Wally: Well there are very different styles of some people are pretty self-sufficient. For me I tend to think that more often not than not it means being collegial of getting more people's input. I'm fond of saying you know if I want to get an answer I'm probably not going to get a very good one if I just look in the mirror.
Alan: Well you know throughout the years you’ve had lots of good experience in both good and bad. InterWest was 1979 and you worked up to what year?
Wally: Early 90’s
Alan: Early 90’s. I’m visiting here today with Wally Hawley, he’s a Silicon Valley entrepreneur and has seen the Valley grow up over the years areas and InterWest was one of his… he’s a founding partner there in the company and has done a lot of great companies throughout the years. Wally we’re going to take a quick break here and when we come back I’d like to get into how we look at leadership and companies and scaling, will you stick around with us?
Wally: Sure absolutely.
Alan: We’ll be right back after these messages.
Alan: Welcome back I’m visiting today with Wally Hawley, a Silicon Valley entrepreneur and out Wally I want to move into the topic of leadership. We talked about to the importance of leadership within companies. What do you look for in a leader?
Wally: Well first and foremost integrity is critical. They have to have someone who's going to walk the talk and has a good set of ethics its primary. Beyond that there a lot of personality styles, some of them tend to be autocratic, I tend to prefer people who really want to work in team kind of environments and that they're bringing along strong people because ultimately if you’re going to build a sizable company it’s not going to be a one-man job. And it not going to be about just one man even though the name may be well known, its going to be the people that he or she bring him to the company to help build, that's critical.
Alan: How do companies scale?
Wally: Well there you can learn from that by learning how they don't scale as well. They scale normally by setting up a pilot of something, it may be a product if it's a retail company it may be a store and the key here is to determine before you put too much money into it that the pilot works there are examples of how you don't do it by people who assume it's got to be successful put a ton of money and buildings all over the place and then find out that you never really had a business model. You got to start by doing something small, and prove it.
Alan: What are the pros and cons of bootstrapping a business?
Wally: The pro of bootstrapping obviously is the person who starts it retains more of the ownership position so that's an argument for that, however in many cases you want to have a situation where money is not the limiting factor because if it does it may start making decisions that don't fit where you need to go and if you are trying to build something big, I generally find that you want to have the management not worried about where the next dollars coming from worrying about the product the market people and something other than the money. So that would argue for not bootstrapping it but getting yourself well-capitalized so you can focus on other parts of the business.
Alan: For companies that you’re involved with on the board, are you proactive with respect to the building accountability into, their measuring the progress of performance?
Wally: I think that varies by company, sometimes the managements have a good model for doing it I view my role as a director as helping on a continuum so that when people say well there's only three or four board meetings a year, that doesn’t matter to me because the board meetings often times are just a follow-up of what you’ve been working on know throughout the period between board meetings. I’ll give an example, I'm involved in a couple of educational companies down in Texas. I'm probably on the telephone with them three or four times a week, it may be for only 15 minutes or whatever but it's continually talking about what we need and supportive. So if its supportive your hoping that managements going to deal a lot with the accountability question.
Alan: You’re also involved in a lot of angel financing here in Silicon Valley and what specifically is Angel money?
Wally: That is money that comes from people who have been successful financially either as venture capitalists or as entrepreneurs, and the advantage of angel money, and there are many, first and foremost you're getting people who have experience in building companies. You’re not always going to get that when you get a venture capital firm which may have people that are fairly junior and not that experienced. The second thing you're getting is patients in the capital. This is their money so they can take their time in terms of building as opposed to having other people's money and then you have the pressure to produce and get an outcome for them. It may put artificial constraints on the company. So you get experience and you get patients.
Alan: I'm visiting here today with Wally Hawley. He’s a Silicon Valley entrepreneur who's been involved in starting a lot of companies here in the valley; he serves on a number of boards. Wally we need to take a quick break and we'll be right back after these messages.
Alan: Welcome back I’m here to today with Wally Hawley, he’s a Silicon Valley entrepreneur and prior to the break we were talking about your career and starting companies and what you value most in a company I want to turn the page though to a different segment of your life one that I'm excited to get into. So you spent 30 years of your career in Silicon Valley doing this venture capital you know working with the venture capital community and now you're walking a different path in life, it's something that Bob Buford called Halftime. Can you tell us a bit about that.
Wally: Yes that book had a huge influence on shifting my career and direction. And Bob's book deals with people who, he puts it in quotes “successful” turned success into significance, but the successful he's defining initially as financial success and then you moved to significance and I read that book on a vacation and thought, but wait a minute that should be me. Do I want to just keep building quote success financially or do I want to become significant. Now that was in tandem to my becoming a Christian which also change my attitude from moving from it's about me to it's about others and that was the big shift. So once you start to make that shift you say okay how I want to live next part or half of my life. And what that means is dealing with others giving to others helping to others and I began to move into the nonprofit arena which includes a lot of education, it includes the Christian activities and I became involved in a number of organizations that are dealing with helping other people much, of it focused on youth.
Alan: What does it mean to be a Christian?
Wally: Well needs a lot of things to different people but to me it means becoming a follower of Jesus that's what it means and that's what I'm trying to do on a course that get you over the things of what you do, like covenant groups and like other things. I'm in a covenant group where we are studying spiritual formation trying to learn more about what Jesus taught and we study a lot of the great to authors about this and discuss it try and see how that impacts our lives and I think it just means really helping other people if you're involved in a church is getting outside the church getting outside the walls and helping in the community.
Alan: Why do you feel it’s important to give back to society?
Wally: Well let’s start with the fact that society gave a lot to me. How would I be at that point without society having the foundation the freedoms of all of the elements that allowed me to be financially successful. So to me it’s just certain natural to give it back. Secondly I don't think when you reach the end of your days that what you want to do is look back and say what was my financial net worth? I define it I want to know what my net worth is, my net worth is not my financial net worth. My net worth is what I've done for others.
Alan: That’s a good point, what impact in the social entrepreneur have on others?
Wally: Large, I think that's one of the encouraging things that I find about our society. That it’s the nonprofit and social entrepreneur that’s becoming significant more prevalent and I think that, that is one of the keys to our society. I know Peter Drucker said that “our success here in this country to be largely dependent on the third arm not the government not the financial sector but the social sector.” And were seeing this in the schools way down in the junior high and high school with her doing various projects in the community, and it’s moved up to the colleges and the business schools where there studying nonprofit entities and social things and it's one of the encouraging things for me about where we're headed.
Alan: So what types of projects are you involved in now?
Wally: Well one of them is called Young Life, it's a major Christian youth organization we reach about 1,200,000 kids every week in clubs and we and we're now in 70 countries around the world and were just exposing the kids to the gospel. It’s nondenominational but we want them to learn about the gospel and about themselves. So that's one where I worked actively and became chairman of the board at one point. I'm on two boards at Stanford University, Institute for Economic Policy Research which is a nonprofit organization dealing with economic problems. I'm on the Stanford Alumni board were working with the University on things that were doing along with their graduates and alumni I'm also involved in something called the Dallas Willard Center and this was an outgrowth of my covenant group where we were studying Dallas Willard's teaching is one of the major Christian writers of our time and so we are going to put a library up down on the Westmont campus with all of his writings and activities and we’re going to build courses and curriculums and we’re going to make it available to all other universities not just Westmont. So here's a situation where you start something like getting involved in a covenant group and it just gradually morphs and moves on the broader things. Another one I'm working on is something I with Reggie McNeal called Missional Renaissance the whole idea there is getting outside your church and not being a club not being in the walls and being responsive to what the communities need and this is a lot of fun you're just watching impacts of other people and adjust it's a joy giver.
Alan: Did you find it to be a big adjustment moving from the business world where it’s all about me in accumulating wealth to more of a Christian attitude and empowering others?
Wally: Well you say moving I still have things in the for-profit world, so I haven't totally stepped out of it but it’s not something that driving what I'm going to be. Ultimately with help of people like Bob Buford and some other Christian colleagues, no I don't think it was hard because the key decision was deciding that I just didn't want to be full-time in the financial side, once you open your heart your mind that God provides the opportunities.
Alan: That is so true. Education markets, where you see that going?
Wally: This is a great time to be working in that field. Ten years ago if you said do you want help in the educational field people would say well you can't make any money there you can't be successful it's hidebound and now we're seeing that education is something that needs to be disrupted.
Alan: Wally I need to hold this thought right there. I got take a quick break and we’ll be right back at these messages and I wanted to pull in what you mean by disrupted and that will continue after the break. We’ll be right back after the messages.
Alan: Welcome back, we’re here today with Wally Hawley. Wally is a Silicon Valley entrepreneur that when he reached the midpoint of his career he turned over new leaf and started giving back to the world through service, education and following a Christ-like life. Wally before the break were talking about the word disruptive education and I want to pick up on that. Where do you see the education markets going right now and your involvement in that industry.
Wally: Well disruptive is a term that comes from Clayton Christiansen at Harvard business school and he studied industries that needed to be disruptive because they become hidebound. He started with the auto industry they went to the steel industry and recently Clayton has determined that the next place that needs to be disruptive is education and why? Because much of our education goes back to what we were doing not a decade ago but in some cases a century. AndI know of no industry that's going to go a without change for century and the last. So what you are now beginning to see is the education is being turned on its head in terms of the professors have to think differently they don't control things all the way, we’re looking at accountability of the school starting from K-12 and also colleges and so the whole thing now is going to have a different structure and were seeing this and all the programs that are being done in race for the top and all the things of the universities are sponsoring now to change so we have some companies that are doing distance-learning. Distance learning happens to be one of the segments that will cause disruption because now we have the opportunity to reach a lot more people than we could with the number of seats that we have on a college campus for instance. So we have two companies that are involved in doing this one is buying universities in the South and Central America only bought 11 universities in nine countries and we’re providing distance-learning so that a larger percent of the population can have a college degree and be functional in their society. We also have about 40 or 50 partnerships with state universities here where their funding is drying up and through online they can take on more students stay alive and more people can get degrees. So distance-learning is just one element but an important one of what is happening when I talk about disruption.
Alan: Where do you see the education markets in a three to five-year window?
Wally: When you say see it-
Alan: Is a person going to college or are we going to have more distance-learning involved…
Wally: Yeah in fact I could see that it may change the way you look at whether you need a college degree are not. We see businesses talking about they want their graduates to be functional and an useful but many of them taken many courses that may have broadened them as an individual but are irrelevant for the company. So some of these place distance-learning programs permit students to take a course that's useful for the businesses so some people are going to start to design their curriculums they may or may not get credit but they will get recognition by the University that they’ve done the course. I’ll give you one quick example. At Stanford there was an artificial intelligence unit professor who is teaching 60 students he decided to put his class online now he has 165,000 students taking his course and half of his 60 students have dropped out of the online of the regular course undertaken it online. So it is opened up to people they can now learn about that and this is happening at all the major colleges and I think we're just going to see a whole different outcome of what it means to have preparation for the outside world after I'm in a quality education not college.
Alan: I'm visiting here today with Wally Hawley is a Silicon Valley entrepreneur who halfway through his career turned over new leaf and started getting back not only to the community but to the rest of the world. His recent projects have been Young Life and education models. Wally appreciate you being on today’s show.
Wally: Thank you for having me.
Alan: Been a pleasure having here. We’ll be right back after these messages.
About Wally Hawley:
Wally Hawley is a co-founder of InterWest Partners (1979), one of the larger venture capital partnerships in the United States, formed to make equity investments in diversified U.S. growth companies. His prior experience includes seven years as President of SHV North America Holding Corp., a wholly owned subsidiary of a Netherlands corporation, and seven years with McKinsey and Co. His current affiliations include Chairman Emeritus of the Advisory Board to the Stanford Institute for Economic Policy Research; guest lecturer at the Stanford Graduate School of Business; former Chairman of the Board of Trustees of Young Life; Board Member of Stanford Alumni Association; Advisory Board Member of Rosewood Venture Capital; and Director of several educational companies including several online companies .