Succeeding as an entrepreneur is not just the result of a random good idea, as the film “The Social Network” might have you believe. A great idea helps, but careful preparation is what made serial entrepreneur Jeff Hoffman, who cofounded Priceline.com, the success he is today.
His first foray into business, as a supplier of contract programmers, was not the result of any fascination with the possibilities of entrepreneurship. “I did it because I couldn’t afford Yale,” he says.
Still, he had been accepted at Yale and had every intention of going. Hoffman won a bid to supply software developers (for accounting software) to a business in New Haven, Connecticut. “I got the phone call, and it was great,” he says, “except that I had never written a line of code in my life, and I had no idea how to deliver.”
But Hoffman was resourceful and put up fliers at Yale and at Litchfield High School to hire the programmers he needed. Over his four years in college he learned how to mark up his services and pay his employees, and how to manage, budget, and schedule. His business continued during his entire tenure at Yale, and he managed to pay his bill and graduate on time.
Hoffman will speak about his career on Monday, May 2, at 7 p.m., at the Florham campus, of Fairleigh Dickinson University. The event is free, but registration is required. Call 973-443-8842.
#b#Get some field experience early on#/b#. The business Hoffman ran in college gave him a sense of the realities of the software business. First he learned about the power of technology. “Even though software was relatively new and the Internet did not exist back then as a public vehicle,” he says, “I had the sense that if I could deliver services via technology, a technology-driven service company would be the place to be.”
Hoffman also noted the gap between technology and businesspeople and realized it had to be bridged. “I knew programmers who thought marketing was a crime and thought anyone in sales should be put in jail,” he says. And of course the business guys didn’t understand what software did or how it worked.
Hoffman concluded that he might be able to help bridge those gaps by having a foot in both worlds. He earned his bachelor’s degree in both computer science and business.
#b#Learn about management#/b#. Hoffman learned from his college business that the most difficult challenge in the technology world is not the technology itself, but project management. Figuring that he would probably get the best training in a large organization, he signed on to work with NASA on the space shuttle — a “massive project management task.” He recalls a printout of a giant chart of two early shuttle launches. “It had hundreds of moving parts,” he says. “Contractors, pieces of the shuttle system — and somebody has to manage the subcontractors, tasks, and parts.”
When NASA sublet his work on launch software to Harris Electronics Corporation he moved to that firm. About three years later, he got drafted to work on intelligent weapons at Texas Instruments, where he gained more skills in project management and attended every class he could. He was also asked to join the marketing team and go out and sell the product. “I got a great education, because I saw the whole life cycle — design, build, test, sell, and service,” he says.
#b#Come up with an idea#/b#. After a time at Texas Instruments Hoffman decided to leave corporate America. “The big structure of corporations was suffocating me,” he says. He figured he would do contract work to pay his bills, but otherwise had no idea what he would do next. Then one day, while listening to a song on the radio, he had an epiphany. He remembers saying to himself:
“They’ve sold 2 million copies, and you know what — that’s not fair,” he says. “They were in the studio one time and sang a song that was four minutes long. I got it that that was the way to make real money.”
His next task was to find a software application that he could write once and sell over and over — like Visicalc, which was the first software application to have mass sales.
Some of the first contract software Hoffman developed was in the travel industry. Back in the 1980s getting information about flights and fares required a customer to either go through a travel agent or make calls to every airline and then compare prices. Hoffman learned that between midnight and 2 a.m. airlines would check seat sales for upcoming flights. If many empty seats remained, say, at a price of $400 as the flight date grew near, the yield management system might release 10 seats at $250. It was also true then that reservations could be canceled at no cost to the consumer.
Presumably, if customers called every night at 2 a.m. to check prices, they might be able to book cheaper fares and then cancel their original reservations. Hoffman hatched this idea: “What if I had a room full of PCs, for only my customers, that woke up at 2 a.m. and spent the day trying to find you a cheaper seat and releasing the old one? An army of PCs doesn’t mind working at 2 a.m.”
He created Competitive Technologies and its customers were large corporations with huge travel costs. One of his first customers was Exxon, which bought approximately $40 million worth of airline tickets yearly. Hoffman’s proposition to Exxon was simple: “I won’t charge you for this product, but I will take a percentage of every dollar I save you.” He sold this proposition to hundreds of companies and saved them millions of dollars.
Although corporations loved his company, travel agents were not happy with him because he was reducing their commissions and hurting their businesses. So American Express bought his company and renamed it American Express Technologies.
#b#Make adjustments based on marketing conditions#/b#. Hoffman’s next company, Virtual Shopping, was based on the idea that maybe one day people would buy stuff on computers rather than driving to the mall. His idea was to create software that would enable big mainframes to communicate with consumers via the new Internet protocols. “Retailers were interested,” says Hoffman, “but consumers were not yet ready to enter their credit card numbers or buy sweaters they could not try on.”
So Hoffman switched the company’s focus a little and chose an industry for which consumers would not need to enter credit card numbers — banking. As a result he began selling to banks all over the world. Eventually the company was acquired by the Wallenberg Group.
#b#Do something you always wanted to do#/b#. Hoffman took a break from Internet entrepreneurship and did something that he describes as a complete aberration: he spent five years in the entertainment business. “I’ve always been fascinated by the creative process,” he says. “My little dream was that I wanted to make a film and see what the whole process was all about.” He co-produced (and played one of the victims in) the independent movie “Cabin Fever.” He also did some musical tours and concerts.
Hoffman grew up in Arizona. His father was a corporate executive who taught him about what it might take to scale a little company into a bigger one. But it was his mother who was his entrepreneurial model. “She always had some kind of company that she created and ran successfully,” he says. One that she started from scratch was a company to manage, keep an eye on, and report revenues to absentee landlords who owned apartment complexes and condos in Arizona — many of them Canadian.
After Hoffman finished his creative fling, he did a couple of years as CEO of Enable Holdings, which specialized in the liquidation of excess inventory from major brand name manufacturers and retailers. Then he was ready to go back where he really belonged — helping to launch new companies. “I sorted everybody into three buckets: inventors, builders, and operators,” he says. Inventors have an endless stream of great ideas; builders turn the idea into a 150-person company; and operators manage the company for the next 20 years.
Realizing that he was a builder, he created the venture accelerator Color Jar with a partner, Dave Gardner. With a team of eight people, they help entrepreneurs with great ideas launch them into businesses. “I love that building process,” says Hoffman. “This is a great idea; let’s try to launch a company.”