2015-02-18 / Columns

‘Flexibility trumps everything,’ says tech entrepreneur ‘Rudy’ Karsan

COMPUSCHMOOZE
STEVE LUBETKIN

The path from Internet entrepreneur to Internet millionaire is not a straight one. Just ask Nooruddin “Rudy” Karsan. He just successfully sold his biggest Internet company, Kenexa, which makes human resources software, to IBM for $1.3-billion. Karsan’s personal share of that deal was reported by the Financial Times to be about $56-million.

“In my life, I have started about a dozen companies. In most cases, I have been a flaming failure, which has allowed me to be introspective enough to learn from the experience,” Karsan said. “In some cases, we hit the cover off the ball, like Kenexa.”

Karsan was the keynote speaker at this year’s Founder Factory conference, sponsored by Philly Startup Leaders, the networking group for tech entrepreneurs. (Disclosure: Our firm produces videos of the conference sessions. You can watch this year’s videos at http://wp.me/p10SEo-2GO.)

The percentage of startup tech companies that actually reach a million dollars in revenue is small, about six percent, Karsan pointed out.

He started Kenexa with a $5,000 cash advance from his credit card, he recalled.

“Fear is a constant companion,” Karsan said of the entrepreneurial startup life. And fear can cause you to make poor decisions, he explained.

When Kenexa was preparing to go public, the stock market was in a bit of turmoil, and investment bankers were pressuring Karsan to lower the price for the initial offering or keep the sales book open over the weekend, which could have made bankers and investors even more jittery about the company. The company had only about three weeks of operating cash left, he said.

“Being scared, I decided that I would do the deal,” Karsan said ruefully. “If I had been a little less scared, I would have kept the book open over the weekend, because right after we priced on Friday afternoon, the stock market shot back up again.”

Not having enough data to make the decision, he said, cost Karsan a quarter of his personal net worth. “I could never ever recover from that mistake,” he said.

Karsan also recalled that in 2011, he told an interviewer that Kenexa would always remain an independent company, but in 2012, competitors in the industry began to be acquired by larger technology firms. He said he realized then that human resources software would be dominated by large firms, and made plans to find a buyer for Kenexa.

He negotiated the sale of the firm to IBM in 2013, and stayed with the company through the merger integration. He left in late 2014, he said, because “in a larger company, you reach a point where it’s all about risk mitigation and not about growth. I find that environment very stifling.”

Early stage technology entrepreneurs need to learn two lessons, Karsan said.

One is the ability to be resilient and bounce back. “The disappointments far outweigh any of the victories,” he explained. “In the early stages, it’s always about managing disappointment.”

The second lesson is that flexibility trumps everything, Karsan said. “The ability to be able to pivot and re-pivot absolutely wins in the end.”

Having experienced cash flow problems at most of his companies, Karsan today is obsessed with the cash on hand at startup companies in which he now invests.

The one piece of paper he carries in his pocket every day is a list of the companies and how much their sales were the previous day.

“In any business I’m involved in, I know the previous day’s sales,” he said. “It’s an absolutely imperative piece of information.”

Do you have questions about technology startup companies? Write to me at steve@com puschmooze.com. .

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