"Serial entrepreneur" Frank Huerta built success in Internet security, then turned to biomedical engineering.
Intel Corp. co-founder Andy Grove claimed "only the paranoid survive" in the aggressively competitive tech industry. But serial entrepreneur Frank Huerta has his own advice for successful business building: Have a lot of humility, accept and understand the risks you run, and still maintain high ethical standards and integrity.
It must be working for him. In just a few years, Mr. Huerta has launched and grown a successful Internet security company (Recourse Technologies), sold it to industry giant Symantec for $135 million, and founded another start-up in a space he hadn't been familiar with – biomedical engineering.
Mr. Huerta's foray into business creation came in the late 1990s while he was working as director of business development for Exodus Communications, a Web-hosting provider. At the time, the whole Internet space was going nuts and security became a concern. Security breaches became more of a problem for Mr. Huerta when hackers busted into the Exodus system, slowing the company down for days. Exodus engineering and Internet wunderkind Mike Lyle, then age 19, designed an electronic trap for the hacker, which worked.
That's when a light bulb went on over Mr. Huerta's head. "We thought, people were going to need more security beyond firewalls as the Internet grew," he says. Mr. Huerta and Mr. Lyle decided they could build a better mousetrap, so to speak, and formed their own company – Recourse Technologies Inc. – which designed a high-speed intrusion detection device and another product to "trap" hackers.
The pair may have had a good solution for the market, but it wasn't an easy sell at first. Since the Internet space was so hot, competition for talent was fierce.
No Deals on Napkins
"Some people were raising $40 million off an idea on a napkin and they were buying people BMWs," says Mr. Huerta, who holds a physics degree from Harvard and an MBA from Stanford. "We weren't doing that. We raised some money but we spent it competitively. We made sure we were giving people fair salaries, but we weren't going to buy toys for people. We wanted people who believed in what we were doing."
It was this smart growth and keen business focus that hooked venture capitalist David Chao, who also happened to be a fellow Stanford alum. After reading Recourse's business plan, Mr. Chao's firm – Doll Capital Management (DCM) in Menlo Park, California – wanted to be the first to invest in Recourse. (The firm's subsequent investment totaled $12 million).
The year was 1999, and the Internet security market wasn't experiencing the kind of exuberance that animated the typical dot-com. After Mr. Chao made the initial investment in Recourse, a lot of people in the industry, including the media, questioned his decision. But he was still convinced that Mr. Huerta was on to something.
Not About Being Safe
"It was clear that as the Internet grew there were going to be a lot of hackers, and there was no way at the time to detect high-speed intrusions," Mr. Chao says. "These guys were going to make one of the fastest real-time intrusion detection systems. It was exactly what the world needed."
Another plus for Mr. Huerta was that he surrounded himself with the right team and a clear vision, says Mr. Chao, DCM's co-founder and managing general partner. "If you invest in things that are safe and in what everybody else is doing, you may make a little bit of money but it's not going to be an extraordinary outcome," Mr. Chao observes. "It's like those who invested in Yahoo! In the beginning, people have no clue what it's going to turn out to be. For Recourse, Frank's vision was right on. It's about trying to see what others don't see."
