Business Report

The Mentor Advantage

Technology startups are booming. But is a shortage of mentors holding some back from success?

When John Hering, CEO and cofounder of Lookout Mobile Security, was featured in BusinessWeek as one of the best young tech entrepreneurs, he told the magazine that the “toughest decision” he ever made as an executive was moving his startup from L.A. to San Francisco.

What didn’t get reported was that a 73-year-old named Philip Paul had advised Hering to make the move, in order to be closer to investors. Paul, a gray-haired financier who appears nowhere in Lookout’s roster of executives or founders, nevertheless holds one of the most important titles in Hering’s life: that of mentor.

As technology entrepreneurs seemingly get younger and younger, it’s easy to forget that the difference between a bright technology idea and business success often comes down to the advice and connections of older advisors.

“We see a lot of young people who are very intelligent, mastering technical skills very early, but that is different than building a big or sustainable business,” says Nick Seguin, manager of entrepreneurship at the Ewing Marion Kauffman Foundation, which studies and supports entrepreneurial activity in the United States. Seguin says companies often “begin to take off” only when a mentor gets involved.

Hering, now 28, is certainly a success story. His company, cofounded with two college friends, makes software that several million people use to protect cell phones from malware; it is valued at around $1 billion. But he says that in the company’s early days he didn’t know anything about business and relied heavily on Paul for encouragement, as well as to help him shape a business plan and find investors. “We learn from each other, and it’s one of the deepest relationships I have,” says Hering. “I am tremendously fortunate to have met with Phil.”

Other generation-spanning relationships in the tech world have recently drawn attention: for example, the bond between 27-year-old Facebook CEO Mark Zuckerberg and 66-year-old Washington Post CEO Donald Graham bridges not only decades but also old and new media. But some observers believe that in the current technology-startup boom, there aren’t enough qualified mentors to go around. Exacerbating the demand for business advice is the recent surge in venture accelerators, which promise to quickly help startup companies develop—often by dangling the promise of advice from experienced entrepreneurs. According to some estimates, there are now over 60 venture accelerators in the United States—more than triple the number in 2009.

At any incubator, “the real asset is the mentor,” says Kauffman’s Seguin. But some advertised mentors have so many affiliations—in addition to their own careers—that it’s questionable how much they are really helping. Others may not really be up to the job. “In the technology sector, we believe there are not enough mentors right now,” Seguin says. “It’s an easy title to throw around.”

The scarcity gets more acute the farther a company is from Silicon Valley. For startups in the rest of the country, it can be hard to find the advice needed for success. “We just have to spend a lot of time on airplanes,” says Ben Milne, 25, founder of Dwolla, a fast-growing online payment-processing portal that is based in Des Moines, Iowa.

A dropout from University of Iowa, Milne started his first company at 18 and says he quickly learned the value of connecting to more experienced entrepreneurs. “We kept running around in circles, failing to think big,” he says. “It was a problem I was determined not to repeat.” He now maintains a stable of older advisors both in California and locally.

Any startup would be lucky to find a mentor as well connected as Paul, who is chairman of the San Francisco investment company Top Tier Capital Partners. Forty years ago, as the manager of the fortune of a wealthy family, Paul supplied initial capital to several now-legendary venture capital outfits, including Kleiner Perkins Caufield & Byers and New Enterprise Associates.

He and Hering met after Paul hired Hering’s mother to redecorate his home. At the time, Hering and two dorm mates at the University of Southern California had developed a digital sniper gun that could eavesdrop on a cell phone from a mile away. The toy caused a media sensation, but when they showed it to Paul, he knew right away that it wasn’t a business. “We soon shifted our discussion toward mobile security … a huge, wide-open market,” says Paul.

Hering proved to be an expert listener—perhaps the most gratifying trait a mentee can possess. “What attracted me … was a combination of John’s vision, energy, and, as contrived as it may sound, the fact that he was not in it for the money,” says Paul. “And what kept me engaged is his genuine eagerness to learn.”

After investing some of his own capital into Lookout, Paul set up meetings with investors in Silicon Valley and coached Hering on how to negotiate. Hering played his own role to perfection—he’d start meetings by hacking into the VCs’ cell phones, a demonstration that security was a growing problem for mobile devices.

The company eventually got the attention of big-name funds such as Khosla Ventures and Andreessen Horowitz. They, along with other investors, have put $75 million into Lookout, which has contracts with mobile carriers such as Verizon, Sprint, and T-Mobile. About one million users download a free version of the Lookout app every month.

All that means Hering now has even more mentors. Lookout’s corporate board is packed with important business figures. “Having grown up reading about people like Marc Andreessen and now to have them guiding me is incredibly lucky and humbling,” he says. “I don’t think I can ever outgrow my mentors.”

Antonio Regalado contributed reporting to this item.

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