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Learning from Failure: How a Dane in Boston Got It Right the Second Time Around

Posted by Devin Cole  September 9, 2011 10:08 AM

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Palle Pedersen.JPG

Palle Pedersen is a Danish serial IT entrepreneur who has lived in Boston for 20 years, where he has been part of starting on average one company per year. He has a good sense of what can go right and wrong, and he has seen some of Boston's strengths up close.

Palle has been involved in failures as well as sucesses, which is of course very instructive. Failures have many causes but here is one spectacular cause.

In 2000, Palle was involved with the setting up of a company called Wallaware (walla is a Hindi word for hand, as in kitchen walla) that was to deliver interactive solutions around what we now call text messages.

Now it may be hard for us to remember what it was like before cell phone apps, but in those days it seemed futuristic. Wallaware did not offer an app, but software sitting inside the network, routing a message to the right address. They managed to get pretty big customers, such as Cellular One, Norwegian Telenor, and a large Russian telecom company.

But the mobile space was moving rapidly, and Wallaware needed to run fast. Just as they needed more investment to grow the company, the 9/11 attacks took place. Sadly, they lost their main investor at the World Trade Center.

Black Duck Software, by contrast, is a success story. Black Duck started as meetings at the Starbucks in Washington Square in Brookline in 2003. At the time, Open Source software was becoming generally known as a way to accelerate software development, and CEOs were slowly realizing that the use of Open Source and other third part code too required management. Black Duck offered a platform to map and manage software IP. One part of that is having spiders crawl the web to map software out there, which one can then compare with one's own. Another is to use that to pinpoint areas of security and legal concern.

Black Duck raised $40m in venture capital and now, according to their website, has ā€¯approximately 80 percent market share, a fast-growing customer base including some of the largest companies in the world and approximately 40 percent annualized sales growth for the past three yearsā€¯.

It might be interesting to ponder what role Boston played in this. If Black Duck had been set up in, say, Cedar Rapids, Iowa, then they might have missed out on close contact with both corporate customers and the Open Source community. They also needed to recruit expertise for working with large databases, and salespeople with access to large customers such as Bank of America. And they needed to partner up with competent IP lawyers.

Only two geographical places on the planet provide all these resources: Silicon
Valley and Boston. And in the end, the initial investors were found in Boston: General Catalyst, Fidelity Ventures, and Red Hat (the latter have their development headquarters in Westford, MA).

In addition, when one has a software question, it is very helpful to have face to face access to the relevant software communities, such as jQuery, Java, .NET, Drupal, Ruby on Rails, iOS, Android, mySQL, or PostGresQL. Boston has a community for all of these, and in many cases, the originators of the software lives here.

Similarly, inbound marketing, which most startup companies need, has its original and largest community here in Boston. It is because of such resources, that startup companies have a harder time in Cedar Rapids, or indeed pretty much anywhere, than in Boston.

Proximity has been key for Black Duck.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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