InfoWeapons.com Chief Technology Office and Founder Lawrence Hughes shared his lessons learned in working and building start-ups. This is the first webinar organized under the DigitalFilipino Start-Up 100 Project that aims to mentor, encourage, give advice to aspiring technopreneurs. More information about the project can be found at http://www.e-commercephilippines.com

1. My
experiences
in
starting
four
private
sector
ventures
Lawrence
E.
Hughes

2. Who
am
I?
 Name:
Lawrence
E.
Hughes,
60
years
old,
born
in
U.S.,
currently
living
in
Asia.
 Undergraduate
degree
was
in
Pure
Math,
with
minor
in
Physics
(I
ignored
the
5
pound
weights
and
went
straight
for
the
BIG
barbells
–
working
up
to
300
pounders).
My
job
as
student
assistant
at
my
university
computing
center
was
far
more
valuable
to
me
later
than
all
my
formal
classes
combined.
 Member
of
Mensa
based
on
Graduate
Record
Exam
score
(high
enough
to
get
into
almost
any
graduate
program,
but
saw
them
as
a
waste
of
time).
 Worked
for
numerous
IT
companies,
learning
everything
I
could
from
each.
 Traveled
extensively
to
understand
other
cultures,
both
professionally
and
for
pleasure
(35+
countries
so
far).
Lived
in
HK
1993-­‐95,
PI
2002-­‐11
(for
most
part).
 Founded
and
ran
4
ventures
(so
far).
Score:
two
painful
learning
experiences,
one
major
success,
working
on
second
success
now
–
I’ll
let
you
know!
 Married,
Filipina
wife,
3
kids
(all
bright,
one
already
clearly
has
the
entrepreneur
bug,
and
the
second
is
coming
along).
 Saw
inevitable
coming
economic
and
political
problems
in
U.S.,
created
20+
year
escape
plan,
triggered
in
November
2008.
See
www.mises.org.

3. Accomplishments
 Three
books
(so
far):
 System
Programming
Under
CP/M-­‐80;
Reston
Publishing;
1976
 Internet
E-­‐mail:
Protocols,
Standards
and
Implementation;
Artech
House,
1998
 The
Second
Internet:
Reinventing
Computer
Networks
with
IPv6;
Creative
Commons
license
(free,
self
published,
see
www.secondinternet.org);
2010

4. Accomplishments
 Many
magazine
articles,
white
papers,
requirement
specifications,
starting
with
Dr.
Dobbs
Journal
in
1976.
 Speaker
at
major
conferences
in
Beijing,
Seoul,
Kuala
Lumpur,
Singapore,
Taipei,
Sydney,
Washington
D.C.,
Berlin,
many
other
places.
 Many
major
software
projects,
including
an
8085
macro
assembler
and
linker,
communication
software,
graphics
software
library,
secure
e-­‐mail
server,
some
of
the
key
parts
of
SolidDNS,
etc.
Now
working
on
next
generation
dual-­‐stack
network
management
system.
 Created
and
taught
certification
courses
in
crypto
and
PKI
for
VeriSign
 Founded
Open
Source
and
Security
Lab,
DOST
Region
7
(Cebu)
 IPv6
Forum
gold
certified
engineer
and
trainer,
created
700
slide
IPv6
course
 Created
and
run
one
of
the
seven
IPv6
Ready
testing
centers
in
the
world
 Created
site
used
by
people
all
over
the
world
to
test
IPv6
(v6address.com)
 AsiaCEO’s
award
for
Top
Technical
Innovation
Team
in
the
Philippines,
2010
(for
InfoWeapons)

5. Learning
Experience
1:
Mycro;
Labs,
Inc.
(1982-­‐1987)
 Primary
product
was
MITE
(Intelligent
Terminal
Emulator),
initially
for
CP/
M-­‐80,
later
for
CP/M-­‐86,
MSDOS
and
even
Macintosh.
Sold
about
250K
copies
worldwide.
Bundled
on
numerous
modems
and
Kaypro
computers.
 Based
in
Tallahassee
(capital
of
Florida)
–
high
percentage
of
population
worked
for
public
sector
(worthless
in
private
sector).
No
infrastructure
to
support
private
sector
companies
(banks,
PR
firms,
lawyers,
etc).
 Zero
funding
–
from
beginning
depended
on
sales
to
cover
expenses.
 No
protection
of
Intellectual
Property
(legal
or
technical)
–
went
from
0
to
140
competitors
over
five
years,
margins
evaporated.
One
company
stole
design
outright,
and
had
better
marketing
and
location.
Many
retail
computer
stores
and
clubs
gave
away
hundreds
of
copies
of
our
software
for
free,
never
paid
for
product
they
had
ordered,
etc.
 Entry
of
IBM
/
MSDOS
into
microcomputer
market
was
highly
disruptive
–
many
established
companies
didn’t
survive
transition.
We
did.
Barely.
 Ended
with
about
$90,000
in
debt,
from
loans
I
had
to
personally
guarantee.
 Lessons:
Concentrate
on
my
strong
suit
(technology).
Partner
with
people
who
are
equally
strong
in
management,
finance,
etc.
Anticipate
“sea
changes”.
Locate
where
there
is
support
infrastructure
and
employees
for
private
sector.

6. Mementos
of
Mycro;
Labs
(not
much
le;)

7. Learning
Experience
2:
Mika
L.P.
(1987-­‐1988)
 Based
in
Atlanta.
This
time
I
was
CTO
and
concentrated
on
technology.
 An
opportunity
arose
to
create
and
sell
a
secure
version
of
MITE
to
U.S.
Internal
Revenue
Service
(with
hardware
DES
encryption).
My
share
of
profit
from
first
sale
alone
would
have
been
$2.3M.
Secured
$800K
funding
from
private
investors,
most
of
which
was
squandered
by
the
incompetent
CEO
the
investors
saddled
us
with.
I
created
the
product
(Whisper)
for
IRS
with
about
10%
of
funds.
The
product
was
accepted
by
the
IRS,
but
Congress
never
authorized
funding
for
project,
so
the
deal
fell
through.
 We
tried
selling
to
the
general
market
with
$25K
ad
in
PC
magazine.
We
got
3000
responses,
almost
all
from
Europe
.
The
N.S.A.
refused
to
allow
sales
outside
of
U.S.
(“security
too
strong”),
which
killed
our
only
market.
 Had
been
paying
off
debt
from
first
venture
the
whole
time,
but
wound
up
having
to
“eat”
a
personal
bankruptcy,
which
affected
my
credit
for
10
years.
 Lessons:
Never
depend
on
sales
to
one
customer
(especially
government).
Don’t
develop
secure
software
in
U.S.
(subject
to
crypto
export
regulations).
Don’t
let
investors
force
a
bad
team
member
on
you
–
walk
away
from
funding
first.

8. Mementos
of
Mika,
L.P.
(almost
nothing
le;)

9. Interim:
Worked
for
several
companies,
built
capital
 Worked
5
years
for
Intergraph,
3
years
at
HQ
in
Huntsville
A,
then
2
years
with
Intergraph
Asia/Pacific
based
in
Hong
Kong.
Mastered
UNIX
OS
and
software
development
(as
well
as
graphics
programming
and
networking).
 Worked
for
West
Coast
startup
(Software.com)
for
1
year
working
on
e-­‐mail
servers.
Founder
merged
with
a
company
based
in
Boston
and
all
stock
options
became
instantly
worthless.
Almost
entire
west
coast
team
left
immediately.
 Worked
for
Inacom
(system
integrator)
for
2
years.
Mastered
Windows
NT
large
scale
deployment
and
network
design.
Started
learning
firewalls.
 Moved
to
SecureIT
(firewall
vendor,
white
hat
hackers)
as
a
software
developer,
which
was
bought
by
VeriSign
4
months
later.
VeriSign
needed
someone
to
create
PKI
training.
I
was
only
one
there
with
crypto
background,
so
I
did
it.
 Spent
two
years
at
VeriSign
(peak
of
IT
bubble).
Made
about
$3M
in
Incentive
Stock
Options
(ISOs),
half
of
which
was
taken
in
taxes
by
government
(all
short
term
capital
gains).
Learned
crypto
and
PKI
from
the
top
people
in
the
field.
 Lessons:
identify
critical
technology
(security/crypto)
and
get
job
at
the
leading
company
–
learn
from
the
top
people
in
the
field.
Be
willing
and
able
to
re-­‐invent
yourself
as
needed.
ISOs
are
great,
but
earn
most
of
your
money
in
Long
Term
Capital
Gains
(much
lower
tax
rates).

10. Interim:
Various
Companies

11. First
Major
Success:
CipherTrust
 Jay
Chaudhry
(my
former
boss
at
SecureIT,
then
a
VP
at
VeriSign)
had
sold
SecureIT
to
VeriSign
for
$81M
in
stock.
He
later
made
over
$500M
from
his
VeriSign
stock
and
was
now
starting
numerous
ventures.
I
approached
him
with
an
idea
for
securing
email
and
he
agreed
to
do
a
startup
with
me.
 Jay
was
CEO
and
senior
investor
–
he
managed
business
aspects,
marketing,
sales,
etc.
He
was
brilliant
at
this
and
was
already
a
serial
entrepreneur.
I
learned
a
great
deal
from
watching
him.
 I
was
CTO
and
junior
investor.
I
was
in
charge
of
the
technology
(a
secure
e-­‐mail
gateway
called
IronMail).
It
later
grew
Anti-­‐Virus
and
Anti-­‐Spam
filters.
 CipherTrust
was
launched
in
2000,
with
$3M
between
Jay
and
myself
(plus
minor
amounts
from
other
startup
team
members).
We
got
a
VC
placement
of
$42M
in
2004,
and
sold
for
$273M
in
2006
–
91X
the
original
investment.
 We
used
aggressive
universal
ISOs
and
created
some
20
new
millionaires
on
exit.
 Lessons:
Partner
with
the
best
people
you
can
find.
Identify
a
key
problem
in
a
major
area
(e.g.
e-­‐mail
security)
and
solve
it
better
than
anyone
else.
Hold
onto
your
investments
if
they
look
good.
Don’t
sell
stock
just
because
you
leave.
Delay
taking
outside
investment
as
long
as
possible
so
the
VCs
don’t
wind
up
with
everything.
Defer
gratification.
Give
good
ISOs
to
your
people.
Everyone
flys
coach.

12. CipherTrust
–
Makers
of
IronMail
™

13. Second
Success-­‐in-­‐the-­‐Making:
InfoWeapons
 I
wanted
to
create
additional
products,
but
nobody
else
at
CipherTrust
was
interested.
So
I
kept
my
CipherTrust
stock
and
moved
to
PI
in
2002.
My
researches
uncovered
a
major
unaddressed
market
opportunity:
IPv6
(next
generation
Internet).
In
2004
we
officially
launched
InfoWeapons
(to
create
IPv6
network
infrastucture
products
–
see
www.infoweapons.com).
 Once
again,
I
partnered
with
a
very
experienced
management
type
(Luis
Gopez,
now
President
and
CEO)
and
concentrated
on
the
technology.
Luis
had
been
in
charge
of
the
S.E.
Asia
VeriSign
affiliate
in
Manila
with
PLDT.
He
has
played
the
same
role
here
that
Jay
Chaudhry
did
at
CipherTrust,
but
this
time
I
was
the
only
investor.
Luis
knows
telcos
very
well.
I
did
quite
well
personally
from
the
CipherTrust
sale,
and
am
still
funding
InfoWeapons
with
some
of
my
proceeds
from
that.
Taxes
on
that
were
almost
all
long
term
gains
(at
15%).
 We
are
now
closing
major
deals
with
large
telcos
in
Asia
and
the
Middle
East
and
are
considered
a
world
class
leader
in
IPv6.
We
have
lunched
a
joint
venture
in
Malaysia
(“DualStak
Networks,
Sdn.
Bhd.”,
www.dualstak.com).
I
advise
the
Indian
and
Malaysian
government
on
their
IPv6
rollout.
We
are
training
engineers
at
SingTel.

14. InfoWeapons:
Pioneer
in
IPv6

15. InfoWeapons
–
SUll
On-­‐Going
 InfoWeapons
has
been
my
biggest
risk
to
date.
IPv6
is
the
biggest
thing
to
ever
hit
IT.
It
affects
every
network
and
is
the
only
hope
for
continuing
the
Internet
beyond
about
2013.
It
involves
ripping
up
one
layer
of
the
worldwide
Internet
(currently
using
30
year
old
technology
called
IPv4)
and
replacing
it
with
a
vastly
more
powerful
and
scalable
technology
that
will
take
us
well
into
the
21st
century.
For
details,
see
my
free
book
“The
Second
Internet”
(search
google).
 CipherTrust
took
about
3
years
to
begin
covering
expenses.
InfoWeapons
is
much
more
speculative
(just
now,
7
years
in,
are
we
starting
to
cover
expenses).
I’ve
had
to
put
in
much
more
money
than
I
did
at
CipherTrust.
No
VC
has
been
willing
to
invest
(they
don’t
understand
the
timing
or
the
dynamics).
Many
organizations
have
delayed
deploying
IPv6
until
the
last
possible
minute.
That
minute
happened
on
April
15,
2011
for
half
the
world
(when
APNIC
ceased
normal
allocation
of
IPv4
addresses).
Since
then
things
are
really
taking
off.
 Our
most
likely
exit
will
be
an
acquisition
by
one
of
the
major
players.
The
big
guys
don’t
innovate
anymore
–
it’s
too
risky.
They
let
startups
fight
it
out,
then
they
buy
the
winner.
We
intend
to
be
that
winner.
Already
our
market
cap
is
about
3X
my
investment,
and
my
goal
now
is
to
multiply
that
by
10X
more.

16. QuesUons
About
Entrepreneurship

17. What
characterizes
an
entrepreneur?
 Self-­‐starter:
you
have
learned
to
learn
on
your
own,
and
require
no
“spoon
feeding”.
Maybe
completed
a
4
year
degree,
but
not
more.
Many
of
the
most
successful
entrepreneurs
were
college
dropouts.
Academic
degrees
don’t
impress
you.
Further
college
only
slows
down
your
continual
learning
process.
 Independent:
you
depend
on
no
one
(especially
the
government,
your
primary
obstacle
to
success)
–
likely
others
depend
on
you.
 Risk
taker:
you
are
willing
to
take
outrageous
(but
calculated)
risks
in
return
for
outrageous
potential
rewards.
If
you
fall
off,
you
get
back
on
that
horse.
 Born
leader:
many
are
willing
to
follow
you
without
question,
because
of
your
track
record,
character,
integrity,
insight,
vision,
etc.
 Skeptic:
you
question
all
assumptions,
especially
“common
knowledge”.
 Value
integrity:
you
understand
that
your
word
is
a
primary
asset,
is
easily
damaged
by
unethical
behavior,
and
is
very
difficult
to
repair
once
damaged.
Employees,
partners
and
customers
know
they
can
rely
on
what
you
say.
People
will
remember
one
failure
of
integrity,
and
forget
hundreds
of
successes.
 You
see
most
“problems”
as
currently
unexploited
business
opportunities.

18. What
courses
should
I
take
in
college?
 College
is
a
good
place
to
hone
your
skills
in
learning.
It
almost
doesn’t
matter
what
you
learn,
so
long
as
it
is
really,
really
hard
(like
Math
&
Physics).
You
won’t
use
most
of
it
later.
Guaranteed.
In
a
gym,
the
goal
is
not
to
raise
the
barbell
a
few
feet
–
its
to
gain
the
strength
from
having
done
so
over
and
over
again.
College
is
to
build
your
mind.
Don’t
waste
that
time
and
money
(or
even
worse,
damage
your
brain)
with
too
much
partying
(you
can
do
that
later).
 You
might
be
able
to
learn
a
few
technical
skills,
but
most
of
what
they
are
teaching
is
already
obsolete
or
totally
wrong.
By
the
time
you
graduate,
it
will
be
ancient
history.
Do
learn
to
write
well
and
to
read
critically.
Take
courses
in
creative
and
technical
writing,
if
available.
Learn
to
communicate.
Really
well.
 College
is
also
a
good
place
to
find
similar
minded,
bright,
capable
people,
drop
out
together,
and
go
start
a
company.
Many
founders
met
in
college.
 Most
business
courses
prepare
you
for
middle
management
in
giant
corporations.
That’s
not
where
the
fun
(or
the
real
money)
is.
 Otherwise,
forget
academia.
Academics
don’t
have
a
clue
when
it
comes
to
startups.
If
they
did,
they
wouldn’t
be
making
a
professor’s
wages.
 Once
you
leave
college
(or
dropout),
your
real
education
can
finally
begin.

19. How
can
I
prepare
to
be
an
entrepreneur?
 Read
lots
of
books
(many
will
be
of
little
value
–
you
have
to
kiss
a
lot
of
frogs
to
find
a
prince).
I
am
providing
a
list
of
the
few
of
the
“princes”
I’ve
found.
Read
relevant
trade
magazines.
Read
books
on
corporate
finance
and
how
Venture
Capitalists
(more
correctly
called
Vulture
Capitalists)
think.
 Attend
trade
shows
and
conferences
in
your
area
of
expertise.
 Master
your
chosen
technology.
Become
a
world
class
expert
and
leader
in
it.
Especially
if
you
are
going
to
play
the
rock
star
role.
Get
published.
Often.
 Get
a
job
in
a
(if
possible
the)
leading
company
in
your
field,
and
observe
everything.
Learn
how
the
company
works.
Read
quarterly
reports.
Understand
the
technology
and
the
market.
Learn
from
the
best
people
you
can
locate.
Make
yourself
totally
irreplaceable.
They
should
be
ready
to
fire
the
CEO
before
they
fire
you.
Do
not
take
anything
sensitive
with
you
when
you
leave
(customer
lists,
documents,
insider
information,
etc).
Be
especially
careful
to
avoid
any
hint
of
stealing
IP.
Don’t
burn
bridges,
ever.
Don’t
dump
on
people
that
work
for
you.
You
may
wind
up
working
for
them
someday.
 Work
for
a
real
startup.
It
may
be
risky,
but
your
risk
is
tiny
compared
to
that
of
the
company
founders.
Watch
how
things
work.
Ask
questions.
Be
a
good
little
sponge
and
absorb
everything.
You
will
later
have
to
do
this
stuff
yourself.

20. What
should
I
watch
out
for?
 You
should
have
enough
savings
to
cover
your
costs
(and
anyone
dependent
on
you,
like
a
wife,
kids,
cats,
parents,
worthless
brothers-­‐in-­‐law,
etc).
The
more
dependents
you
have,
the
worse
the
pressure
will
be
on
you,
and
the
less
risk
you
will
be
able
to
take.
It
may
be
a
long,
lonely
time
before
you
can
pay
yourself
a
salary,
and
you
may
have
to
pay
salaries
of
others
for
quite
some
time
before
your
startup
can
cover
its
own
costs.
It’s
like
a
kid
but
more
expensive.
 Keep
expenses
to
an
absolute
minimum
everywhere
possible.
You
don’t
need
a
fancy
office
(maybe
no
office
at
all
in
some
cases
–
work
out
of
your
home).
You
don’t
need
classy
office
furniture.
Get
a
Microsoft
Partner
package
–
for
a
couple
of
hundred
dollars,
you
get
about
$20,000
worth
of
great
software:
multiple
copies
of
Windows
7
and
Office,
Windows
Server,
Exchange
Server,
etc.
Use
Open
Source
software
where
possible
(FreeBSD
or
Linux).
Avoid
Apple
unless
that
is
your
target
market
(and
if
so,
good
luck).
They
are
overpriced,
underpowered
and
highly
proprietary.
They
look
cool,
though
(if
that’s
your
criteria,
you’re
probably
not
entrepreneur
material).
Drive
a
used
car.
 Hire
only
A
players.
Anyone
below
A
doesn’t
belong
in
a
startup.
 Outsource
legal
and
accounting
services.
Don’t
try
to
do
your
own.

21. The
Magic
of
Private
Stock
• Make
your
business
a
Corporation
and
issue
stock.
This
is
how
you
keep
track
of
ownership
shares.
Get
a
lawyer
or
business
expert
help
you
manage
it
and
parcel
it
out
to
employees,
investors,
etc.
• Private
stock
is
like
being
able
to
print
your
own
money.
Some
professionals
will
accept
stock
(at
least
in
partial
payment)
for
services,
if
your
venture
looks
really
promising.
You
can
make
up
the
difference
in
the
salaries
you
can
pay,
and
what
an
established
company
can
pay
with
stock.
• Universal
Incentive
Stock
Options
(ISOs)
are
the
secret
that
makes
Silicon
Valley
so
productive.
Learn
about
them.
With
ISOs
there
is
no
“rank
and
file”
versus
management
(or
owners).
You
are
all
owners,
and
stand
to
sink
or
swim
together.
Would
you
rather
have
100%
of
a
10”
pizza,
or
90%
of
a
100”
pizza?
Letting
your
employees
earn
up
to
10%
of
your
company
will
result
in
amazing
productivity
and
loyalty,
as
well
as
keeping
your
costs
down.
Your
employees
are
no
longer
just
working
to
make
you
rich,
but
to
make
themselves
rich.
This
is
really
high
grade
rocket
fuel.
Learn
to
use
it
wisely.
I’ve
seen
it
from
both
sides
now
–
earning
them
at
VeriSign,
and
giving
them
at
CipherTrust
and
InfoWeapons.
Both
sides
are
great.
Talk
about
a
win-­‐win.
Capitalism
at
its
best!

22. A
few
good
resources
 “High
Tech
Startup
–
Revised
and
Updated
”;
John
Nesheim
 Priceless
–
contains
actual
VC
tables
from
Sequoia
Capital
for
about
30
firms,
also
contains
detailed
steps
you
should
go
through
before
opening
the
doors
 “The
Power
of
Unfair
Advantage”,
John
Nesheim
 Venture
capitalists
would
love
a
match
between
a
300
lb.
wrestler
and
a
10
year
old
kid.
They
would
cheer
for
the
wrestler.
Totally
unfair
advantage
is
what
they
look
for.
 “Term
Sheets
and
Valuations”;
Aspatore
Press
 Written
by
and
for
VCs
–
how
to
really
negotiate
a
term
sheet
with
a
VC
 “Venture
Capital
Best
Practices”;
Aspatore
Press
 How
VC
really
works
(from
personal
experience,
this
is
the
real
thing)
 “Deal
Terms”;
Aspatore
Press
 Get
this
when
you
are
seriously
ready
to
talk
to
VCs
 “Crossing
the
Chasm”
and
“Inside
the
Tornado”,
Geoffrey
A.
Moore
 The
guru
of
high
tech
marketing,
very
popular
in
Silicon
Valley
 “Angel
Capital
–
How
to
Raise
Early-­‐Stage
Private
Equity
Financing”,
Gerald
A.
Benjamin
and
Joel
B.
Margulis
 How
you
get
from
startup
to
where
the
VC’s
might
actually
talk
to
you

23. AddiUonal
Resources
 Join
the
one
social
networking
service
I
find
useful:
LinkedIn.
Start
building
your
contacts.
 Get
a
Kindle
e-­‐book
reader.
Or
at
least
get
a
Kindle
account
if
you
can’t
afford
a
reader.
You
can
read
Kindle
books
on
your
computer(s),
Android
or
Apple
tablets,
etc.
Most
books
you
can
download
in
4
to
6
readers
with
one
license.
If
you
are
not
in
the
U.S.,
this
save
LOTS
of
shipping
and
time
delay
getting
books.
Plus
Kindle
books
are
always
cheaper
than
print
books
(and
never
out
of
stock).
If
you
get
a
reader
you
can
carry
your
library
around
with
you
(on
planes,
in
restaurants,
etc).
If
cost
is
an
overriding
concern,
the
small
unit
will
work
fine.
If
you
can
afford
it
($389
or
so),
get
the
Kindle
DX
(the
Papa
Bear
of
Kindles).
Be
sure
to
get
the
units
with
International
3G
in
addition
to
WiFi.
Most
of
the
books
listed
are
available
in
Kindle
form.
My
very
favorite
toy.
 Get
the
best
notebook
computer
you
can
afford.
Forget
tablets
for
serious
work.
They
are
good
for
playing
angry
birds.
The
Kindle
is
better
for
reading
books.
You
can
get
amazing
notebooks
today
for
very
reasonable
prices
from
Asus
and
other
Taiwanese
companies
(e.g.
Acer).
Get
LOTS
of
disk
and
RAM.
If
weight
is
a
really
major
concern,
consider
a
netbook,
but
most
are
way
underpowered.

24. Visit
http://www.e-­‐commercephilippines.com
for
more
information.