Inventor of Pete's Wicked Ale: Getting an MBA without any real-world experience was a waste of time
This is the fourth interview in my "Does an entrepreneur need an MBA" series.
Peter Slosberg is the creator of Pete’s Wicked Ale and Pete’s Brewing Company, the maker of the popular microbrew beer. The business first started when Pete, who didn’t drink while in college, began making his own wine back in 1979 as a hobby. After realizing that making wine was a long and arduous process, he tried his hand at making beer. Pete’s Brewing Company was started in 1986, went public in 1995, and was sold to Gambrinus for $70 million in 1998. Pete also started Cocoa Pete’s Chocolate Adventures in 2002, and eventually sold it to Pan Pacific Foods for an undisclosed amount in 2006. Pete is currently exploring new options. Pete went to Columbia Business School soon after receiving a degree in engineering in 1972 from Columbia.
Here are excerpts from an interview about entrepreneurship and his MBA.
Do you need an MBA to be an entrepreneur?
Pete: I don’t think so. Getting an MBA without any real world experience was a waste of time. It actually was more like a "union card" to get a corporate job. I wouldn’t advise getting an MBA immediately upon graduating from undergraduate school. I’m not sure if going to get an MBA after a decade of working in the real world would have helped me as an entrepreneur. A lot of the decisions made as an entrepreneur come from gut feel and tests of reasonableness. MBA programs need to bring more of actual experiences to the school rather than the theoretical… The more real world you can make the experience at school, the better. (On background, Pete went to business school immediately after graduating college in 1972, because he couldn’t get a job in Aerospace with his degree in Space Mechanics.
Why did you become an entrepreneur?
Pete: I didn't want to, as I liked my corporate job at ROLM. My partner, who worked at IVP (Silicon Valley late-stage VC firm), kept insisting we do something. ROLM gave 12-week sabbaticals for employees every seventh year. So, I took that time to humor my friend and think about this idea. I finally said let's talk, but only about the goals of the company, not the product. And, we came up with three goals and that convinced me to pursue a start-up. Those three goals were 1) Create a product or service that is worldclass/top-shelf/gold-medal winning and not some commodity 2) Get in on the ground floor of a new industry or new segment of an industry with high-growth potential, and not a crowded field 3) Treat the product or service with reverence, but everything else with irreverence.
Which do you rely on when starting a business or operating your business: Gut or analysis?
Pete: A bit of both. We addressed many key/strategic issues up front, but only did a cursory plan. We decided on about 10 strategic issues before we were too far in that set the course for the company, e.g.: 1) Be partners 2) Be a national company, not regional nor local 3) Be willing to entertain a liquidity event, if we were so lucky, not keep the company forever 4) Get to the top three in segment as quickly as possible 5) Do not build brick and mortar, but be a contract manufacturer 6) Use the funds saved to invest in a direct sales force 7) Become smaller owners of a bigger company rather than bigger owners or a smaller company 8) Time is money, so hire outsiders who know the business, rather than come up the learning curve ourselves 9) Hire the best people who are energetic and want to learn and contribute and get out of their way and give them equity 10) Focus on sales tools for all customers: employees, sales people, wholesaler principals, wholesaler sales force, retailers and consumers
Give us an example of following your gut, rather than analysis:
Pete: We knew nothing about the beer business. But we knew the government required a three-tiered system – manufacturing, distribution and retailing – for the beverage alcohol industry. We didn’t know about the distribution portion of this three-tiered system, but our instinct told us that the ones paying the bills to the big distributors were the big players, not us. So, we had to ask ourselves how do you get appropriate mindshare of distributors when they’re not making much money from you. The first core decision was to have our own salesforce rather than to depend on the wholesaler. Our view was that if you treat wholesaler as a delivery mechanism – it’ll work out for you. If you treat it as a sales and delivery mechanism, it won’t. We put our money into sales and marketing. We became a contract brewer, giving formulas to breweries that had excess-capacity, so they’d brew the beer for us at affordable rates.
You took your company public, and never took a dime from VC’s. How did you go about raising funds for your company?
Pete: We knew we couldn’t get VC funding, so we self-funded to get started. We did a back-of-the-envelope calculation of what would it take to get a product on the shelf. We penciled in that it would be $15,000 to put the first batch out – build a label, product, and get some feedback. We tested our concept because we didn’t know if putting a dog on the label or using “Wicked” as the name would be effective marketing. Then we continually raised money in small chunks over a period of five years. We raised $1.5 million over a period of five years in five rounds. The practical side of this was that it was a way we could show progress. The impractical side of it is that you’re always in the fundraising mode.
If you can get $2 million right away, take the money and run.
Were you able to keep more of the company with this process, and how much of the company did you own when you sold to Gambrinus?
Pete: We made a conscious decision to be a small owner of a big company. Byt the time we sold, my ownership stake was not huge.
What’s the most difficult thing as an entrepreneur?
Pete: The highs and lows are wider than in corporate life and can happen several times a day. You have to have the stomach for it. There were no “major” failures or catastrophes that gave me low lows. It was nothing specific. It just happens all the time across any aspect of the business. On the legal side, Anheuser Busch came after us three times. It took a lot of stress and money to get through these. But I’ll say this: I haven’t worked since 1986. Building Pete’s Brewing didn’t feel like work. Working at a corporate world is work.
What makes a great entrepreneur?
Pete: There isn’t one answer at all. Our belief was that you can’t do it all yourself. Hire the best people you can, share the wealth and make everyone feel a part of it. The whole can be larger than the sum of the parts.
Was there a tipping point to your business?
Pete: Never believe there is a tipping point. Always go on as if disaster can strike. Because it will.
See past interviews in this MBA Series:
Lucinda Stawel
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