Q&A: Serial Entrepreneur Chuck Templeton on OpenTable's IPO, Chicago's Entrepreneurial Ecosystem, Being Green

June 30, 2009

CHICAGO - “ The Illinois Venture Capital Association continues its occasional conversations with local serial entrepreneurs as it discusses with OpenTable founder Chuck Templeton why it was time to IPO, the results of the IPO thus far and the wide-reaching effects the company has had on customers, employees and investors.

IVCA: The legendary OpenTable just went public. Aside from capital, what was the basis for the decision to proceed with that action?
Chuck Templeton: The company just felt it was time. Even with the market in the condition it was in, they were not raising much inside capital and the dilution would not be significant.

When the economy turns around, it will be able to take advantage of the confidence that goes back into the market. By the time the economy recovers later in 2009, the OpenTable investors that have been supporting the company for a long time will have a chance to realize some of the value that was created.

IVCA: How did your venture partners calculate the final numbers for the IPO?
CT: It was a function of the road show. The CEO and CFO presented the company to several investors at the price range of $12 to $14 and there was tremendous interest. This was a function of not wanting to sell many shares or a need to raise much capital. The company had more than $20 million in the bank prior to the IPO.

When the price was raised to $16 to $18 a share, that  didn't deter many investors. The price was finally priced at $20 a share and we saw what happened. It opened at $24.50, got as high as $35.50 and closed at $31. It's still holding strong at more than 35 percent above its offering price. It was market driven.

IVCA: You were part of the opening-bell ceremonies the day OpenTable went public. What were your feelings when you saw the company you started in the bright lights of the big time?
CT: It's pretty cool for sure. There were a lot of naysayers in the early days. Not many investors liked it because of the two-sided network problem and the feet-on-the-street sales team that had to sell restaurant by restaurant.

It took a lot of capital to grow the business and by no means was it a 10-times return for the investors. It was a solid return, though, especially given the vintage funds. It was and is great to see it be a survivor of the dot-com bust. It's also great to see the third major group of stakeholders finally get what they were in it for and that is the investors.

It has created a fair amount of jobs both directly and indirectly. It has provided both restaurants and consumers with a much more efficient and effective way to enjoy a meal at most of the world's finest restaurants. Now it was time for the investors to benefit. All in all, it's pretty cool.

IVCA: You were a California-based entrepreneur when you began OpenTable You're now based in Chicago. What do you find different about the business atmospheres in contrasting the two regions both in capital funding and in entrepreneurial spirit?
CT: There certainly are differences and both have their pluses and minuses. Here are a few observations I have in general regarding entrepreneurial spirit.
In the Bay Area, it's not the end of the world if you try something and fail. It's not that it's good to fail at something, but Silicon Valley will give you another chance and even have this sentiment: - œYou know what it's like to fail. I don't think you want to experience that again, so I'm going to give you another chance.-  If you fail here, I feel like you're branded as a failure.

Second, in the Bay Area, there are entrepreneurs who people aspire to be (i.e. Paige, Brin, Zuckerberg, Ellison, Jobs, Stoppelman, Simmons, etc.). There are lots of personalities that people aspire to be. There are fewer entrepreneurs who are known and want to be in front of crowds.

With regards to capital raising, there is just a lot more venture dollars in the Bay Area. As the venture funds there tend to be larger and there are more of them, finding them and getting in front of them is an easier endeavor. I don't mean that getting money from them is any easier if you have a bad idea. There is just more available.

IVCA: How do you rate the technological talent in the Midwest?
CT: I feel like the Midwest has all of the ingredients to have a world-class entrepreneurial spirit and to some degree it does. We have great universities here (both for tech and business). We have lots of capital (or certainly enough for good ideas), great talent and a hub for transportation (both people and commerce).

To some degree, though, there is a mindset issue here. As an example, when hiring tech talent here in the Midwest, seldom (in my experience) do they care about equity as part of their compensation.

They want some stock if it's an early stage company, but many don't ask about the strike price, how many outstanding shares there are or their vesting schedule. The tech talent here is every bit as technically talented. It just has a different risk profile relative to its Bay Area counterparts.

IVCA: What was the essential element in you that GrubHub.com was looking for when they brought you on as part of the team? What successes were you able to achieve with that element?
CT: The founders of GrubHub.com are more similar to a Silicon Valley entrepreneur rather than Midwest entrepreneurs. They were up to their necks in credit card debt. They were living very frugally with supportive spouses and going to all the tech networking events while relentlessly following their vision.

What I was brought in to help them with (as an advisor and board member) was based on my experiences with growing a business that was focused on independent restaurant operators. I was attacking an extremely fragmented market in a city-by-city rollout strategy with a two-sided network.

It was a transaction-based and pay-for-results value proposition. In addition, the team needed to raise capital, build a team and build the business in accordance to a budget. The Series A investors (including IVCA members Origin Ventures) were an important part of that process. Regarding the successes, that is yet to be seen.

I feel like the GrubHub.com team has built a methodical, deliberate and focused business. They're growing both sides of the network in harmony and building a team to execute and put themselves in a leadership position in the industry. I think my experience has contributed to their  successes to date.

IVCA: Restaurants have been particularly hit hard by the economic downturn. Since both OpenTable and GrubHub.com share the relationship with the restaurant business, what adjustments have been made within that sphere?
CT: The thing that most outside people don't realize is that both OpenTable and GrubHub.com are the best in their categories for bringing in pay-for-results business. Since both are lead-generation marketing tools for restaurants, we are a must-have business for a restaurant in tough times.

While each restaurant may not be doing as well as it once was, both companies are adding restaurants at a pace that is faster than they ever have. When we pull out of this downturn and the restaurant business starts to pick back up, both companies are in a great position to continue to outpace the competition.

IVCA: How does your experience as an U.S. Army Ranger inform your business acumen? Do you recommend military service to get a fuller life experience?
CT: To be clear, I was in the military during peacetime, which is a very different military than today. The men and women who serve today should be commended, taken care of and respected.

They provide the opportunity that we take for granted in relative peace. I say this having nothing to do with my service. I wish we gave the men and women of the military the respect they are due. That said, the military is not for everyone. It was a great experience for me.

I was a knucklehead in high school. The three years I spent in the military gave me a chance to mature before starting college. It really gave me a chance to accomplish the five reasons I joined.

It gave me time to grow up a few more years. It gave me a chance to try to give back to my country for all it had given me. It gave me a way to pay for college with the U.S. Army GI Bill and the U.S. Army College Fund. It gave me a chance see parts of the world I would have never had a chance to see. Finally, it gave me a way to get out of the house without having to depend on my parents.

IVCA: Your record (in words and action) on the environment and business effects therein is impressive. Please tell us about GreenBusinessProject.com, its origins and how all businesses can go greener with a few simple procedures.
CT: I have always had a - œgreen tint-  to myself. Growing up, my dad recycled just about everything and my grandma was the product of a recession. It was both about being green and just being resourceful. The GreenBusinessProject.com is frankly an experiment at this point.

I believe we are on a bad trajectory with regard to climate change, energy supplies, virgin resources, topsoil erosion, fishery depletion, deforestation and species extinction (just to name a few). I don't believe that technology is the answer to solving most of these issues. I believe it's human nature that we have to change.

We are stuck believing that we need to get that latest pair of sunglasses or new pair of shoes and we will feel better. We think we need to have the biggest house or a driveway lined with Range Rovers to be important and tell everyone we are successful. We have built consumption into our lives as a way to make us feel good about ourselves.

That is a flawed model. GreenBusinessProject.com is a very early work-in-progress attempt to teach businesses how to fish. Fish for them and they eat for a day, but teach them how to fish and they eat for a lifetime. We are living linearly in a non-linear word.

Remember there is no waste in nature. The output of one process is the input for another. What the GreenBusinessProject.com is hoping to do is to get people to think in non-linear ways about becoming sustainable. While a lot of work needs to happen to get it there, it's something with which I will keep tinkering.

IVCA: What is your proudest business achievement? What is your focus toward the future?
CT: My focus toward the future (aside from my wife and two little girls) is a two-fold focus. First, I want to help early stage companies grow their businesses. I like the early stage of company when there are lots of problems to solve, it's not too bureaucratic and it's idealistic in its vision.

The second I believe will be my non-family achievement. I want to answer and proliferate that answer to everyone who will listen to one question: - œWhat would it take to make Chicago sustainable by 2025 with a high standard of living?- 

I don't believe we have 100, 50 or even 30 years to right this spaceship we are on called Earth. I believe we are a very critical point in the existence of our species. I want this effort to be unencumbered by city politics and current popular cultural norms.

It's going to take a dedicated, deliberate and methodical effort to change the frame of reference of each person in Chicago one by one, block by block, neighborhood by neighborhood and business by business. When I look my little girls in their eyes and think about their future, I know I am up for the challenge.

Won't you join me? Check out TransitionChicago.org.