Mistakes startups make in business plansㅣBob Tinker & Tae Hea Nahm EP 01 | EO

Airespace's founders on why urgency beats pain

Two enterprise founders recount the company they built together. Airespace bet on WiFi in the enterprise, survived a pivot that halved its team, and sold to Cisco for about $500m. The lessons they draw are that early customers need pain with urgency, and that product-market fit is not the end of the work.

Takeaways

• Solve pain with urgency, not just pain. Vertical Networks built the first IP PBX in 1998 but struggled, because only large companies buy phone systems and only when they open new offices. There was pain but no urgency, and urgency explains why a customer buys now rather than in six months.
• The first ten customers are the hardest. Tinker compares it to a surgeon's first patient, who does not want to be operated on by a beginner. Airespace solved it with a teaching customer, a buyer whose problem resembled others', taking the company from one customer to three, five, then ten.
• Product-market fit is not enough. Tinker calls go-to-market fit the missing link after product-market fit. Heroic selling by founders does not scale, so the company needs a simple repeatable process that ordinary hires can run, not founders or copies of founders.
• Channel partners carried Airespace to large enterprises. Airespace could not reach big buyers alone, so it recruited channel partners to sell for it. It ran the ABC strategy, anybody but Cisco, uniting Cisco's rivals against the leader, and reached $80m in revenue by 2005.
• The Cisco sale is still argued about. Nahm calls the sale controversial and says hindsight suggests it was wrong. Aruba and Ruckus, then larger, became multibillion-dollar companies. But the price suited investors and Cisco's sales channel, and Cisco sold almost a billion dollars of Airespace gear two or three years later.
• Airespace taught Nahm a damaging lesson. Running Airespace convinced him he could fix companies, so at Storm Ventures he backed founders he thought he could coach. Those investments went poorly. Storm Ventures has invested in over 200 B2B software companies, 12 of which became unicorns.

How Airespace survived its pivot

1. Tim Danforth, a technologist from Cisco then at Storm Ventures, proposed one box supporting both cellular and WiFi, arguing WiFi would win because open spectrum is free.
2. Nahm hired four engineers for cellular and four for WiFi. Customers wanted WiFi only, so the company dropped cellular.
3. The pivot forced layoffs of half the team in 2002, including someone Nahm had moved to Silicon Valley from abroad. The alternative was shutting down entirely.
4. To keep his partners funding the company, Nahm became CEO and accepted he would be fired if it failed. Samsung executives who wanted WiFi in laptops and devices gave him confidence.