Startup Grind DC February 25 2013

Rosetta Stone Founder Eugene Stoltzfus Shares Enduring Startup Insights With D.C. Tech Crowd

February 20th, 2013 by

Despite the busy hustle and buzz of D.C. Social Media WeekStartup Grind D.C.‘s monthly meetup (which they held yesterday evening) had a pretty decent turnout. For those unfamiliar with Startup Grind, they host a monthly event in which a brilliant thought leader from the tech community who has met success founding a company shares their thoughts and insights with a room of other founders, so imagine FUBU but for nerdy entrepreneurs. As for last night’s large crowds, much of the reason why people chose to attend this particular event over the myriad of other Social Media Week happenings was most likely due to who was speaking: none other than Rosetta Stone founder Eugene Stoltzfus.

 

I had the good fortune of being able to attend the event, and to say the least, it was probably one of the most poignant and enriching tech talks I’ve ever been to. Just from hearing him talk for an hour or so, it became quickly apparent that Eugene is both a shrewd and wise entrepreneur with an incredible eye for finding the right people and products to go after.

Since breaking down Eugene’s interview and discussion with the crowd could literally fill up pages in a book, I’ll try to do my best to highlight the best bits of information and insights he provided the room with.

Rosetta Stone Had No Initial VC-Backing or Investor Funding

Eugene founded Rosetta Stone with his brother, Allen Stoltzfus, and was one of five children. When Allen first came up with the concept for the software, it was rough and required quite a bit of additional work on Eugene’s part in terms of finding the right pictures to use and scripting the proper dialogue for the user interactions. Their mother, who was not only raising five children on her own but operated her own small business, was their only angel investor and she gave them $30k to launch Rosetta Stone. They supplemented that initial amount with a series of mortgages, bank loans, and all of the money in their savings account, refusing to take money from investors because they wanted to own every single inch of the product. At one point in 1992 they were down to their last $10k, but a massive sale in 1993 to the Richmond school district helped them over the hump and they started to scale quickly from there.

Their Proof of Concept Was Actually the Antagonism They Received From Other Linguists

At first, many language teachers and linguists shot down their product. When Spanish teachers would use it and try out the Spanish learning features, they would write it off as simply a series of flash cards for a student. But Eugene realized that the trick was to have them try a language or dialect that was completely different from their own.

So for a Spanish teacher, they avoided using any romance languages like French due to the cognates and even languages like German which may have the occasion similarities in diction, so they picked something like Russian. The Spanish teacher would try the Russian courses of the software, and it would blow their minds how quickly they picked up on words and phrases, making Rosetta Stone’s ultimate proof of concept the same people who detracted from it in the first place.

Growing Up in a Family With Intelligent, Competitive Brothers and Sisters is the Ultimate Startup Incubator

Many critics would say that working with family can ultimately be a bad thing for a business, but in Eugene’s case, it was really solidified the dynamics of their company as a whole. Since they were kids, bold ideas were always encouraged to be shared but you had to be able to defend them or else five intelligent siblings would find holes in your argument and tear it apart. Their shared experiences and relationships as siblings is what made their ability to innovate and create come easy to them. Eugene and his brother already had the type of relationship that most entrepreneurs spend years building with their co-founders. Eugene described how creating Rosetta Stone changed himself and his siblings, noting:

What Rosetta Stone did for us was build us as people.  What we learned is that you have to work well with others. The people on your team have to be willing to take a white board and put up an idea and somebody else put up another idea and have a big conversation…and then have everybody forget your idea. You need to be able to allow the conversation to lead yourself, and the group. You have to put your ideas out there, but it has to advance the conversation. Nobody should be attached to their ideas.

Company Culture is Everything

Eugene noted that company culture is absolutely critical. The way they operated both in the office and at home was as a forum of ideas that were freely exchanged. He described it as a ‘mertiocracy’ growing up. If you had an idea that you couldn’t defend, people would hammer you, but if it was solid, everybody would acquiesce and agree with it. Eugene took out a piece of paper and started firing off all of the values that Rosetta Stone tries to foster in the office (albeit I didn’t get all of them), and many of the values were things every startup should embrace:

  • Take responsibility, serve helpfully
  • Be passionate, think big
  • Build the future, don’t forget the past
  • Speak up, speak out
  • Play together, play hard
  • Create evangelists, change the world

Conclusion: Eugene is the Man

Overall, what can I say about Eugene other than that his story is pretty much the definitive “D.C. Tech Legend” success story. He disrupted a market with an incredibly innovative product, and the impact from his work has reached global levels. The only thing more surprising than his meteoric rise to success was how humble, polite, and open Eugene was to sharing his experiences with Rosetta Stone with the entrepreneur community. The sparse amount of time I spent hearing him talk and candidly discuss how he rose to success gave me something I rarely receive when I attend the typical gamutt of D.C. Tech talks: hope for this community.