Elliot Turner: Startup junkie advice for both entrepreneurs and enterprises

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Elliot Turner, Director of Alchemy, IBM Watson, IBM

Not every startup CEO can say they were able to grow their business to a point where they were acquired. Even fewer can say they did it twice. But that is exactly the case for AlchemyAPI Founder and CEO Elliot Turner.Turner launched his first startup, MimeStar, a software development company focused on network intrusion detection, while a sophomore in high school. Inc. acquired it by the time he was twenty-one. He quickly saw the shift in the market to the need to democratize artificial intelligence (A.I.), and decided to venture out on his own to start AlchemyAPI. Within 10 years of starting his second company he was once again acquired, but this time by IBM Watson. He is now the Director of Alchemy for IBM Watson.

We met up with Turner at the AlchemyAPI offices in Denver, Colo., about his experience growing a startup, the pros/cons of being acquired and his advice for entrepreneurs. Read snippets of the interview or listen to the complete podcast, below.

What does AlchemyAPI do? (00:25 -1:45)

AlchemyAPI is focused on a singular problem and that’s enabling the world’s business to transform their data assets into action. Data is the lifeblood of businesses today, and it is involved in all the decisions that companies make. Problem is, the world is swimming in data that is being created at an ever-increasing rate and many of those assets are not readily understandable to machines. I’m speaking of the human communications, e-mails and chats, things that people understand quite readily but machines historically have done a very poor job at.

We’ve been developing advanced algorithms that allow machines to make sense of this data, and translate that data into intent and action, to allow a business to make better decisions and to make those decisions more quickly.

Did you start AlchemyAPI with the hope that you would be acquired at some point? (5:08 – 5:51)

People found businesses for different reasons. Some folks want a lifestyle business that they can keep under their control and provide fruitful income for many years.

“Startups” to me means two things: they mean high growth and a liquidity event. A liquidity event can come in a variety of forms. It can be an acquisition, it could mean going public, but at the end of the day you want to grow and you want to have some sort of thing that happens at the end that makes it worthwhile to the investors, to the team and everyone involved.

How has the transition been from being the final decision maker to working in a large organization like IBM?
(8:54 – 10:46)

You want to talk about culture shock? We were around 20 people when we got acquired. One of the first things I was told was “Say hello to your 400,000 new best friends.” When we got acquired and we had our all-hands meeting, I expressed to the team that IBM is bigger than the Navy, it’s bigger than the Air Force, it’s bigger than multiple branches of the military. We literally have an army behind us and that brings both excitement and fear to a lot of folks.

One of the things that I wanted to make sure everyone on our team understood is Alchemy was bought for a reason. It wasn’t just about our position in the marketplace or our technology; it was about the DNA of our team, and the velocity at which we can create useful artifacts for the world to leverage. IBM doesn’t want to change that, they want us to continue pushing that startup ethos inside the broader Watson business unit, which in a way I think of as a billion-dollar startup.

And there is always a flip side to every coin, but access to the scale, a huge talent pool, hundreds of world-class researchers and being invited to a seat at the table to deals we could never have expected to get access to alone. This is the amazing counterbalance to, yes, some increased processes.

What questions would you tell a startup CEO to ask before they consider selling their company? (10:47 – 12:05)

One of the interesting things about mergers and acquisitions, in general, is most acquisitions don’t actually go that great. It really depends on who your acquirer is and what you expect once you get acquired. For us, of course we want to repay our investors. But there is a broader mission at play here: the idea of taking A.I. technology, democratizing it and enabling the entire world to benefit from it, not just the world’s three largest companies in their ivory towers.

What one mistake you have made has taught you the biggest lesson? (12:06 – 13:40)

It’s hard as a CEO to point to a single mistake, because ultimately as a founder and CEO everything that goes wrong in a startup is your fault. The buck stops at the top, so I’d say the biggest mistake that I made in the past, and I’ve seen a lot of other founders make, is to not build out your bench quickly enough. If you want a company to scale, you have to really get ahead of that problem and build out your talent pool, and really cultivate them so they can become the next great set of leaders.

One of the things I learned from someone in the industry years ago is the rule of three. Every time a company gets three times larger, every time your customer base expands by 3x, everything breaks. All your processes breaks, payroll breaks, HR breaks, everything breaks. So if you aren’t thinking ahead, if you’re not cultivating the next set of leaders, making sure they not only have the capability but also the autonomy to do their jobs and to trust in their decisions, then you will hit a wall and it will impede your ability to continue climbing up that mountain.

What are you hoping to accomplish in Denver with Watson (which is based in New York)? (16:59 – 17:56)

We think there is a big opportunity in Denver to become a center of excellence surrounding and applying deep learning and A.I. technology to these big data problems that face businesses today.

There’s a lot of unique aspects to the Denver community that makes acquiring and retaining great talent that much easier: 300-plus days of sun a year, amazing work- life balance, one of the best park systems in the country, great schools, all these things matter. This stuff comes together to present a really big opportunity to IBM and Watson. Leveraging the great aspect of what Colorado has to offer to really build out something that is going to be amazing for the area and for the business.

What advice would you give to someone starting his or her own company? (18:00 – 18:56)

Make sure you are ready to jump down the shoot; startups are not for the faint of heart. A lot of folks ask me, “how do you become an entrepreneur” and I often joke that hundreds of years ago before startups existed we would probably call it a mental condition or affliction.

Most of the successful entrepreneurs I know don’t start companies solely for a financial outcome. They start companies so that they can change the world, so that they can create something from nothing, so that they can lead a team through the wilderness.

These are things that you get passionate about, because the reality is the path to success for any startup is not going to be a stream of one success after another. There’s going to be ups and downs, good times and bad. And for you to get through those bad times, and to really take that marathon run, you have to have those things that you are passionate about anchoring you and grounding you. It’s one of the most exciting roller coaster rides I can imagine and, quite honestly, becomes something that you can become borderline addicted to. I encourage folks to explore entrepreneurial endeavors, and I think this is how we create great change in the world around us.

So you can become a startup junkie? (19:26 – end)

You can, and it’s great to see companies like IBM pulling a lot of the great things about startups into organizations like Watson. Making them more tightly integrated, making them more agile, because big companies need to learn from startups and startups need to learn from big companies. There’s a virtuous cycle we can all benefit from.

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