Alex van Someren is one of those rare people, without whom our modern world would probably be a little bit different. From writing the first book about programming ARM architecture, the computer processor which now sits at the core of almost every mobile phone on the planet. To providing the technology that made Secure Socket Layer (SSL) more commercially viable, and helped enable the ecommerce internet revolution of the late 1990s.
Yet his story is fascinating because it is a definitive study in luck: Not just pure chance. But the type of luck that comes from a combination of unusual personal interests, social circumstance, and the active pursuit of something different.
It's a reality that few "successful" entrepreneurial people acknowledge, because it's an uncomfortable reality: It doesn't fit neatly into a 5-point plan for instant fame and fortune [also see box below]. And it leaves a nagging doubt that the outcome could easily have been unsuccessful. And while I suspect that Alex isn't comfortable with pure chance, he provides ample examples of how other elements of luck can be biased. How the odds can be improved. The dice loaded more favourably.
Those examples make Alex van Someren worth understanding. This article is based on a talk he gave to the Edinburgh Informatics Forum. In this article:
Although Alex's most valuable experiences don't fit into a neat 5-point checklist of "how to build an entrepreneurial business", he gave one anyway:
- Problem - to solve
- Team - to demonstrate you can find help, and to prove you're not crazy
- Market - which may not be where you started
- Money - not always formal capital, it could be sales revenue
- Advisers - you'll hate them, but lawyers and accountants are needed
Born of an entrepreneurial father, Alex and his younger brother, Nicko, were raised in Cambridge, England. Cambridge is important, because both brothers were interested in electronics, and in the late 1970s (and arguably still today) Cambridge was at the heart of Britain's "computing" industry. Aged 14, Alex discovered that Acorn Computers (as it was later known) was based in Cambridge, and he wrote to them asking for a job. They told him to visit during the school holidays, and on first day of those holidays, Alex was on their doorstep. A presumably bemused Hermann Hauser sent Alex home with an Atom. An Acorn Atom, one of the first genuinely personal computers.
This was "getting what you want by being prepared to take it," as much as "right place, right time".
Alex and his brother ("the smart one") spent the rest of the day translating a Star Trek game onto the Atom, and duly returned to Acorn the following day, tape [audio magnetic] cassette in hand. (My first computer experience was very similar - aged 7, writing what would now be called a roleplay game onto my father's kit-built Sinclair ZX81.) Acorn's staff were impressed - not least, because they had a new game to play - and Alex and his brother continued to "work" for Acorn for the next 3-4 years, variously hacking and testing Acorn computers. They were too young to be formerly employed, so were paid in free computer components and products.
Aged 17, Alex was offered a job with Acorn. Since he now "had a job", he lost interest in formal education, and never attended university. His job in customer service and bug-fixing exposed him to the "people side" of computers. But, by his own admission he was more-or-less unemployable, and after 2 years moved to London to become an independent computer consultant.
This was a period when computers were rapidly evolving from the expensive corporate mainframes, to widely available cheap personal devices. Businesses knew they wanted to use computers, but didn't know how. Or sometimes why. So, Alex both earned an income, and learnt how to develop useful products. He cited the replacement of a manually-operated paper teleprompter (auto-cue used in television) with a computer-based device: Although it was relatively simple to programme words to move up a screen, live television required very high standards of reliability, which meant emphasis on testing and quality.
Alex used his knowledge of Acorn Computers to develop various related products: A card that "made Acorns go faster" became so popular he merged backwards into his father's business to sell it - "dad already had a credit card machine." He wrote the earliest book on the ARM processor - the Acorn-based computer architecture now found in many (possibly most) personal electronic devices, including mobile phones. Worked on an Acorn emulator to run Microsoft software (Microsoft was becoming dominant, an dominance that would eventually lead to Acorn Computing's bankruptcy). And implemented a cheap form of networking for Acorns, called Ethernet.
Meanwhile, Alex's brother, Nicko, had continued on into further education. While at Cambridge he had become aware of this thing called the internet. They ported the first popular browser, Mosaic to the Acorn, adding email and FTP (file transfer) features. This created the business called ANT ("Alex's Networking Team - although everyone else calls it something different"), which continues by providing software for services such as interactive screens in hotel rooms.
Oracle approached Acorn to make a home internet device. And consequently raised the question, would Alex van Someren license his browser technology to Oracle? There was only one catch: No payment. Oracle expected prestige to be enough (Oracle was that big in the early 1990s). Alex's gut reaction was no - why give the technology away? But his wife changed his mind - you do know who Oracle are, don't you?
As events transpired, the Oracle project was a commercial failure. But it had led Alex and his brother to start working with the encryption of data sent across the internet. Encrypted communications protocols allow confidential information (like credit card details) to be sent across the internet without risk of the data being intercepted and stolen while in transit. Netscape had already implemented SSL (Secure Socket Layer), but it was technically very slow for the host server (the machines running the website). Slow meant expensive: Many more physical server machines were needed to operate a SSL-based website, than a normal website. A big problem looking for a clever solution.
Box: Team Work
"The press" can create the impression that the leader of a company is the most important person, but isn't the case. Alex tends to be "the front man", happily dealing with the more bureaucratic elements of running the business. His brother, Nicko, is described as more capable with the technology itself. This idea of keeping the full skill-set distributed between different people, in different combinations, continues into the wider company. "Team work" doesn't mean that everyone tries to do the same thing.
By chance Nicko had meet a venture capitalist, who had made a vague offer of money, should the pair have any good ideas. Alex read a "business plan in 24 hours" book and sweated blood over the perfect "pitching slide-deck", before the brothers flew to Canada to meet Terry Matthews, the Welsh technology billionaire. 3 slides in, Matthews interrupted to ask how much money they wanted, before suggesting they "take a million now, and see how you go". The brothers upgraded to First Class for the flight home.
It transpired that Terry Matthews didn't just want a third of the business in return for his investment, but a further third was to be owned by an associate company. Which meant that the van Somerens had already lost control of their company in the first round of investment. The process was not exactly "by the book". But, in spite of Alex's misgivings (see Oracle, above), the brothers were still in control of their business from day-to-day - and didn't do so badly in the end.
While they understood the problem, they didn't yet have a solution. Or rather they did, they just didn't know it: Back in Cambridge, staff and ideas were "crowd-sourced" from local pubs (bars inhabited by students and tech' types). The solution itself was described as "a load of ARM chips" - reusing locally produced and understood technology. The solution was about 30 times quicker at de-encrypting secure communications. Ergo, requiring 30 times fewer expensive web servers. A commercially viable solution.
Box: Role of Universities
Alex's story explains a lot about the role of universities in entrepreneurial innovation: That university towns create a suitable background environment and ecosystem, rather than specifically training the people required to lead any commercialisation. Someone that has spent most of their life in education/research may be able to formulate a solution, but the problem may only be understood by someone with more commercial, "real world" experience. The skill-sets are different, and you need both. It is easy for decision-makers to be fooled into the belief that innovation simply "comes from universities".
In 1996 electronic "ecommerce" was almost exclusively occurring in the United States. So although the company remained based in Britain, its sales operations moved to the United States. To Boston, where Alex's mother was already living (another small background/geographic advantage).
Alex was too late to hire a stand at the main (RSA) data security conference, so took a suite in the same hotel, and tried to "button-hole" (accost) people in the lobby, as they entered the conference. Alex mixed up 2 similar looking people, and ended up talking to someone he wasn't planning to talk to. Except that the person he was talking to transpired to be from Fidelity Investments, which operated a large stock-trading websites. It transpired they were conducting 5000 stock trades per second, where each SSL trade took a third of a second to compute. This traffic required $150 million [I think I got that figure correct, even if it seem outrageously high by current standards] of Sun servers. Needless to say, they were very interested in reducing the number of machines by a factor of 30.
Unfortunately Netscape (then the developer of the dominant web browser) hadn't returned Alex's calls, so the new technology couldn't be used. Fidelity Investments didn't just secure the first $1 million of sales for the new van Someren business, nCipher. They convinced Netscape to change their browser, to accommodate Alex's product. And the rest, as they say, is history.
Alex also cited $5 million of sales to Microsoft, for Hotmail. Sales which were made by someone who just happened to be working late in the office. Alex's argument, that while chance is involved, actions had been taken by individuals that allowed that chance to occur: They wouldn't have succeeded by simply staying in bed.
Box: Intellectual Property
Patents make investors happy, because they are somewhat quantifiable assets in an otherwise intangible business. But sometimes it is better not to protect intellectual property with a patent, because then competitors will never know how something works. The result is that the least important things are often patented, while the most important ideas simply remain closely-guarded trade secrets. Electronic security is an exception, because nobody will trust a "black box". Instead the business aims to use standards, preferably standards they have invented and championed themselves. Those standards then become the basis for the creation of further intellectual property.
The company was offered (IPO) to the London stock market at the height of the "dot com" boom of the late 1990s: A Â£350 million valuation (over $600 million) on a business with $4 million of (venture) capital backing, $15 million of annual revenue, and still losing money. The company was obliqued (by the market) to sell a proportion (20%) of the stock, gifting it a huge amount of cash. Alex used the interest on cash to make 4 acquisitions, before eventually returning the cash to the shareholders.
Alex van Someren's best acquisition was of a company that had failed, after burning through $50 million of venture capital funding: They waited for the business to fail, then manage to secure 2 containers worth of server machines, and a lot of Intellectual Property rights for a mere $120,000. His worst acquisition was of a business with "optimistic" revenue predictions, that was originally intended to be purchased alongside another complementary business (which Microsoft purchased during the negotiations). The result was $10 million wasted on something that wasn't making money, was to create law suits, and didn't have a clear strategic reason for being.
After a decade leading nCipher, Alex had become bored, and someone else took over the day-to-day running of the company. Attempts to sell the business to a competitor fell foul of competition regulation: The plan to merge companies with 60% and 25% market share together upset the UK's Competition Commission. nCipher was eventually sold to the French Thales group.
Box: Capital and Mentoring
Alex's products tend to be "software in a box", where the physical hardware is a significant part of the product. Hardware tends to require (venture) capital backing, because of the high startup costs. Software enterprise now dominates: Software is much easier to "bootstrap" (fund yourself and/or from revenue). The ideal situation (for the entrepreneur) is not to have to sell a portion of their companies in exchange for capital: The traditional funding role of venture capital is diminished (something I've discussed in the context of Cloud computing). Mentoring is one area where venture capital organisations can still assist, however the importance of mentoring remains questionable: Alex acknowledged that he was never consciously mentored, and much of his life has involved "screwing up as [he] went along" - merely, on balance, getting more right than wrong. Of course, he's also giving talks like this, so clearly thinks there is benefit to sharing past experiences.
Several years ago Marc Andreessen - the founder of Netscape and, as such, almost a parallel life to the van Somerens - wrote about James Austin's 4 kinds of luck. It's a theory I've also discussed in the past: Active curiosity, unusual background, and distinct hobbies, are just as relevant to "luck" as pure chance.
Alex van Someren's story fits the pattern remarkably well:
- Actively doing something: From "getting what you want by being prepared to take it," to buttonholing people in hotel lobbies.
- Unusual social and geographic background: Family (parents, brother and wife), location (Cambridge), and time (immediately pre-internet revolution) are all clearly important. Few individuals will have had all these backgrounds.
- Distinct hobbies: If computing is still a bit "geeky" today, it certainly was when assembling a home computer involved a soldering iron.
- Chance: One wonders what would have happened if Fidelity Investments had not learnt about nCipher...
However, there is one further element, which is intriguing: Doing the opposite. Taking what conventional wisdom would deem to be the wrong decision. From giving technology to Oracle for free, to selling 2/3 of the company in the first round of funding.
This might be a logical extension of simply doing something a bit unusual: Unusual methods become just as valid to "luck" as an unusual background or interest. Alternatively, the underlying market might be so prosperous, that one could make a huge number of mistakes and still succeed. Both states are perhaps true, since the aim is generally to pre-empt the crowd - occupy a different position today, that everyone else will adopt tomorrow. An unusual approach may be required to be able to occupy a different position today, while tomorrow's appreciative market allows unusual approaches to be funded. However, such a chaotic process is still bounded: For example, giving technology to Oracle was ultimately successful because it lead to further work on secure internet communications.
Similiar writings: Business, Edinburgh, Innovation, Security, Society.