Robert Herjavec

The Substance in the Economy

Editors’ Note

Robert Herjavec arrived in America from Croatia with his family when he was eight years old. After attending university, worked for a time in movies and television before convincing a fledgling computer services company to hire him at no salary. While he absorbed all he could about the computer industry, his only income was earned by waiting on tables in an upscale restaurant. Spurred by the development of computer networking, he launched one of the first companies dedicated to providing corporations with Internet security systems, and built the firm to a leadership position in its field before selling the company to AT&T for a reported $100 million. From there, he moved to other ventures, including the sale of a Silicon Valley-based technology company to Nokia for $225 million. He later returned to the technology business, establishing The Herjavec Group. Herjavec supports several charities dedicated to funding cancer research.

Company Brief

The Herjavec Group (www.herjavecgroup.com) is one of Canada’s leading and fastest growing technology firms, specializing in network security products and services. The group achieved $50 million in sales within five years and recently acquired a New York-based competitor.

Did the speed and depth of the economic crisis surprise you, and do you believe that we are on road to recovery?

It didn’t surprise me that it got so bad. What surprised me was the speed at which it got there. I’ve learned over time that the only person whose opinion really matters in your business is typically the guy who is writing you a check. So we started getting close to our customers and we noticed there was a lack of capital spending in their plans. When we looked at all the data, I was petrified. So I was pleasantly surprised that there wasn’t a complete meltdown. We got to the edge of the precipice and looked over, but we didn’t fall in.

I don’t think we’re at the recovery point. We’ve stabilized, we’ve moved up a little bit, but the other shoe has yet to fall, and the other shoe for me is foreclosures on commercial transactions. Do I think that’s going to make it worse than last year? No. But I do think the recovery is going to very long and protracted.

Do you believe entrepreneurs must lead us out of this downturn, and are they receiving adequate incentives to do so?

The biggest fear I have right now is that the stimulus is like the façade of a movie set: it looks great from the outside, but when you open the door, there is no substance. The substance in the economy is the entrepreneur. Why couldn’t we have come out with a system where a guy who starts a business and makes $1 million doesn’t have to pay tax on it if he reinvests it? If we had done that, then we would have a house – not a façade.

What made you feel it was the right timing to start the business, and looking back, has it been what you expected?

I’d love to tell you we had some prescient vision of technology, but I was retired for three years and, in the course of one week, three life-altering things happened: I turned 40, my kids went to school so I had nobody to play with, and my wife stopped working. So I realized I couldn’t be retired at 40, which is why I went back. We made every mistake in the book and here we are five and a half years later at $50 million from just $400,000 in sales in the first year. So it didn’t start the way I thought it would, but it has turned out to be successful. We’re fortunate in that our industry wasn’t affected, and partly because we saw it coming, we were leveraging the downturn while my competitors were making investments. So we grew 38 percent in 2009 over the previous year, and our plan for 2010 is to grow by 42 percent.

Is entrepreneurship something you can teach or do you believe that you have to be born with an entrepreneurial gene?

My personal belief is that people are born with certain skills that make them more open and that make it easier for them to do certain things, but great entrepreneurs are definitely made, just like great salespeople are definitely made.

When you look to hire, is it critical for you to see some of those characteristics in potential employees?

When you’re small, you can have a bunch of cowboys who can help you run around – no process, no procedures. But as you get larger, you need more adults in the playpen. Otherwise, it becomes a free-for-all and it’s very difficult to create consistency. Talent cannot be replicated on a consistent basis but process can.

What enticed you to want to join the Shark Tank television show?

I do the show in Canada and have for four years, so when the opportunity came to do it with Mark Burnett, Disney, and ABC, I immediately wanted to do it, regardless of the required time. The show in Canada is wonderful, but the Disney/ABC/Sony thing is like playing in the major leagues. I wanted to see if I could have the same effect on the audience as I have on the audience in Canada.

When the opportunities for you to invest are presented on the show, what do you look for first?

It changes from person to person. The first thing I look for is somebody to engage me quickly. Because if you can’t, how are you going to do it with others? Then everything flows from there. My big thing is, I don’t know if it’s a good or a bad idea, but if you have sales, it means somebody is paying you because they think it’s a good idea. So I’m looking for a track record and for pointers that tell me there is proof this is tangible.

You’re very focused on giving back. Was that instilled in you early on?

I came to North America when I was eight years old on a boat with my mom and dad and one suitcase. We lived in a village where all the floors were dirt. I don’t know how you could come from that background and not have empathy for people. I’m not a product just of myself; I’m a product of those who were kind enough to guide me along the way. And that’s a service you owe to others – sometimes it’s in the form of money, sometimes it’s your time, but you have to be a guide for others.