Interview with Douglas Hanna '13

Interview by Howie Rhee '04 on February 8, 2011

Many Duke students think about starting companies after working for a few years, or even when they graduate.  Douglas Hanna is a sophomore at Duke running a multi-million dollar company.  We asked him for his perspective on running a company while working on his degree, and his advice for his fellow students.

First off, you are a sophomore at Duke running a multi-million dollar company, A Small Orange (which you bought as a freshman).  Tell us what your life is like. How do you balance everything?

It’s a balancing act for sure. I obviously want my business to be successful, but I also want to have a semblance of a college experience and spend time with my friends and just kick back and relax. 

The main thing I do to balance everything is keep track of my time and make sure I’m using it as efficiently as possible. I keep a really tight schedule and make sure that most of my calls and meetings are scheduled well in advance and are conducted at times when I can focus and give them my full attention. Another part of striking that balance is making sure that I’m spending any extra time I have to do something for work – whether it’s respond to an email or take a phone call. 

What kind of business is it?  Tell us about the basics of a web hosting business for those who aren't familiar.

A Small Orange provides high-end shared, reseller, VPS, and dedicated web hosting. 

At the most basic level, a web host allows you to put your content on the Internet so it’s accessible to everyone all the time and from anywhere. We don’t get involved in designing or building web sites – we just provide the place to put those websites as
you’re working on them and once you finish them. 

The bulk of what we do is answer questions from customers about our services and ensure we’re doing what we can to keep the servers (basically large computers) up and running at all times.

Tell us the story of how you got into the position you are in.  I understand you have been working in this type of business several years.

I first started working in the web hosting industry when I was 13. I was doing technical support for free for a company that was eventually acquired by a somewhat larger company. They started paying me after the acquisition and all of the sudden I was being paid to work in the web hosting industry. My boss didn’t really care I was 14 since I got the work done and I was making more than my friends were making while they were working at the grocery store and I was able to work from my house, so it was a good deal for me too. I stayed there for a year or so before I moved on to another job at a bigger company, where my role was more marketing focused. 

About three years later, I moved to the company that my current business partner founded. It had been named #21 or something on the Inc. 500 list the same week I was considering whether or not to take job. Seeing that the company grew more than 5000% in a three-year period definitely helped reassure me that the decision I was making was the right one and that the company I was about to join was going places. 

The first few months at my new job were challenging to say the least. I was the first person to have ever been hired as a manager and I was an 18 year old trying to make changes at a company run by people who were older than me and had worked their way up over three to four years. The company was 10 times bigger than my last company and was different in almost every way you could imagine. I learned a lot about the web hosting industry and working at a mid-sized company in general. I also learned a lot working with the company’s founder on everything from problem customers to business development deals.

Fast forward a year or so and I was involved with helping the company’s founder and CEO with some mergers and acquisition (M&A) deals at the time. Through that, I ended up finding and eventually acquiring A Small Orange. My partner and I had an agreement that worked out really well for both of us and the result was me leaving my old job at the company to become the CEO of A Small Orange.  

How has the transition been going from someone that works for a hosting company to someone that runs one?  

It has been one of the most formative experiences of my life. Going from Customer Service Manager at a company that had 350 employees at the time to the CEO of a company that had 14 employees at the time is an unbelievable transition. 

The biggest change initially was getting used to the fact that I was now responsible for making big decisions about a variety of things without having to ask anyone. In my old job, I would make decisions about whether or not to credit customers for potentially hundreds or thousands of dollars without being expected to ask anyone, but that doesn’t compare to being the final decision maker about how a company is run or who works at it or even what the company does on its most fundamental level. That was an adjustment I am still getting used to.

The next change was in the scope of things I found myself dealing with. Before I started running A Small Orange, I had never dealt with anything related to the administrative functions of HR. I had hired and fired and managed people before, but I had never worried about withholding their state taxes or figuring out what insurance plans to offer or even getting them paid on time. That was all stuff I had to learn about and honestly didn’t do perfectly initially. I had also never really dealt with product positioning or anything like that, but those things are easier to pick up and more fun to learn about than state taxation in Georgia.

What I enjoy most about running a company, as opposed to working at one is being the person who can decide the direction of the company and then be the best person to implement that. When you’re a manager, you think about the micro a lot more than the macro. That’s expected because of the functional organization of most companies – I was responsible for the function of customer service at my last job, so that’s naturally what I focused on. At A Small Orange, though, I’m ultimately responsible for everything, so I’m always trying to learn about new things and thinking about what is next and what should be next. 

There are a lot of students who think they need to create something very disruptive, like the next Google or Facebook to have a successful business.  Yet you have a successful business in a fairly mature space. What advice would you give to students who worry about needing to be very disruptive to succeed?

Quite frankly, if you own a business in a space that’s mature and your company is profitable, you can laugh all the way to the bank. 

Disruptive business models are definitely cool. Web hosting, which is a service-heavy business with a recurring subscription revenue model, is not that cool. I know that my business isn’t as sexy as the latest buzzword company/product/feature that either has an unknown business model or plans to makes money from Google Adsense. That doesn’t bother me, though, because I know a huge majority of the companies that are setting out to do whatever in a way much better than however Google or Facebook does it are not going to be successful. 

Put simply, the mature/less interesting business may not produce a lot of billionaires (and they very well may, but that isn’t the case in the web hosting industry), but it can produce plenty of multi-millionaires and I don’t see why anyone should dismiss that as not worth pursuing. 

How do you view the combination of a liberal arts education with running a business? Are the two at odds with one another, or do they combine to create something different, and perhaps better?

I’ve never experienced the other, so my one sided perspective is probably not be as valuable as someone who might have had a liberal arts education at the undergraduate level and then gone to business school or something like that. 

In terms of utility, it’d be a better use of my time at this point to learn how to use QuickBooks and Excel to do some financial models than it would be to learn about the interactions of the legislative and executive branches in our government. I don’t have any doubt that learning about finance or marketing or business operations would be more useful to me in the short term.  

However, I’m not sure what the effect would be in the long term. I enjoy learning about the interactions of the legislative and executive branches in our government because I’m interested in it and while I don’t think that class will help me much with A Small Orange, I don’t regret taking it. I think having some of the variety that you get through a liberal arts education exposes you to different ways of thinking and things you wouldn’t otherwise learn. And even though I think it’d probably be more useful to learn about business finance and marketing and operations, I think offering a liberal arts education instead of a business-focused one makes Duke a better place and probably ends up helping students more than it ends up hurting them. In my cases, I’ve been forced to learn how to use QuickBooks and Excel to do financial models, so it’s something I’ve learned regardless. I don’t know if I would go out of my way to learn the things that a liberal arts education might teach me.

In terms of doing both at the same time, you definitely miss out on one if you do both. I’m not getting all that I can out of my Duke academic experience because I’m running a business at the same time. That doesn’t mean I’m not getting anything out of my Duke academic experience, but I would definitely do more with my academics if I wasn’t focused on A Small Orange, but it’s a trade off that you need to make. 

You have to hire (and fire) people.  Do you have advice for Duke students that are trying to best prepare for their careers? What do you look for in an employee?

We have a unique hiring process, the first step of which is a unique application process. The number of people who don’t read our application instructions and don’t follow those instructions is absolutely baffling. We get about 200 applications for a given job opening and we can instantly discard 25-35% of them for not following the application instructions. For example, our application process says not to send a resume. We got an application from someone who was otherwise very qualified for the job, but he said he was including a resume “just in case.” He didn’t get an interview. It sounds harsh, but in our business, the ability to follow detailed instructions is really important. If companies have a specific application process, chances are it is reflective of something that’s important to them.  

The next thing is to stand out. Applicants who have clearly done their homework and who clearly articulate why they think they’d be a fit at our company stand out. Applications with interesting formatting or that clearly took it a step further stand out. If I were looking for a job right now, I’d spend all day trying to apply for 5 jobs that were a good fit for me rather than spend all day mass-applying for 50 jobs. I don’t think there is a hiring manager out there who isn’t happy to see a really thoughtful cover letter that was actually customized for their opening and for their company. It really helps an applicant stand out as serious and competent. 

Another important thing is culture fit. A lot of companies lie about the importance of culture fit and say that culture fit is so important when in actuality it takes a complete backseat to skill set. That’s clearly their prerogative, but my guess is those companies are not the best places to work. Make sure you are going to be a culture fit at the company you are applying to. Some companies are more touchy feely while other companies are really quantitative. There isn’t a right or a wrong way, but there is definitely a way that’s right for you and your personality. A good company will try to figure that out and communicate it during the hiring process, but some of that burden falls on the potential employee as well. Being genuine throughout the entire hiring process is important and will help get you a good job that’s a good fit for both you as the employee and the employer. 

A lot of students worry about talking about their idea to others, out of fear that someone will steal it. What advice do you have for them?

First of all, those who steal ideas tend to develop a reputation for doing so. Reputable venture capitalists, angel investors, or whoever will not steal your idea because they wouldn’t be in business for long if they did that. They also won’t sign non-disclosure or non-compete agreements because of that and because they see so many deals. Another large group of people doesn’t care enough to bother trying to steal your idea, even if you give them enough information to steal it. They have jobs and other stuff going on, so they’re not going to copy your idea and try to start a business around it. And a large group of people (hopefully the largest group) cannot execute your idea as well as you can anyways.

The last one is probably the most important. A lot of people say an idea is worth as much as the napkin it’s written out and I tend to agree with that. Business is about execution and if you’re sharing all of your secrets in the elevator pitch because that’s all there is, your business is going to be copied and recopied if it ends up being anywhere near successful. Some ideas are simple, but take a lot of execution to make them work. eBay’s idea is simple – it’s an online auction marketplace, but that’s so hard to copy because of the scale that’s required to make it successful. Same thing with Facebook. 

So, basically, your idea should have more required to make it work than what you’d tell the average person (a secret sauce) and if you’re concerned about others stealing your idea, you shouldn’t worry about sharing it with those who make a living hearing ideas like yours.  

What are some mistakes you've seen other student entrepreneurs make?

I think most student entrepreneurs have delusions of grandeur that get in the way of them seeing why their business idea will not work. I tend to be pretty cynical and I probably would have told Mark Zuckerberg that his idea for some social network to connect students would not have worked and I obviously would have been wrong, but I don’t think I would have been the only person with that opinion and I don’t think his story is typical. An outside perspective is important and being open to what outsiders (hopefully people whom you respect) say is even more important. 

In general, and there are of course many exceptions, a lot of business ideas coming from student entrepreneurs have not been thought out. There are usually a lot more variables involved with seeing an early stage business succeed than what most student entrepreneurs think. More experienced business people can help flush out an idea, but it falls on the entrepreneur to be open to that feedback and to take it seriously. One person might be wrong, but if you’re hearing a variation of some theme over and over again, it’s probably time to look at things again. 

If a student wants to pitch you on their new business, what will you be looking for?  In your opinion, what separates those who will succeed from those who fail?

I always look for feasibility. I’ve heard some interesting business ideas, but a lot of times they are totally impractical for a student team to implement while they’re still in school. Sometimes they are just tough to implement in general, even if the team was experienced and had all the time in the world. 

I think feasibility of the idea is an important factor in how successful a company will be. I think the other is team dedication and capability. If the team is behind it 100% and they’re capable of completing whatever is in front of them, that’s obviously a good thing. Duke students are always going to have a certain level of intelligence that’s way above that of the average person, but not all of them have the skills they might need (i. e. programming or sales or whatever) to make a business successful while they’re still in school. 

Related to dedication, I hear a lot of students say that a lack of time is what’s keeping them back. A plethora of time does not make a bad idea good, but no idea will succeed if the founders aren’t prepared to put in the time. Most students have more time than they think they do and if they prioritized, they could probably get something off the ground. It might not be successful, but it could be. At the very least, it’ll be a great learning experience. And regardless of what happens, Duke is a pretty good plan B. 

Check out Douglas Hanna's company at A Small Orange

Read more profiles of Duke alumni entrepreneurs