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Patrick Byrne
Chairman and CEO, Overstock.com

Visit Date: October 16, 2003

Center for Private Equity and Entrepreneurship (CPEE): Why did you want to start your own business?

Byrne: Several factors led to my decision to start Overstock.com. The first was my desire to be my own boss. The second reason had to do with my prior work experience. I was an investor before founding Overstock.com. As such, I focused on purchasing distressed assets and turning them around. My role as an active investor meant that I had been involved in running a number of companies in the past. My decision to start Overstock.com extended my investment philosophy into the retail space.

CPEE: What was the impetus for Overstock.com?

Byrne: As I mentioned, I always believed in finding great deals as an investor. Overstock.com let me transfer my investment philosophy to the retail space and fill an online niche that had not been addressed.

CPEE: What was the biggest challenge you faced in starting Overstock.com?

Byrne: My biggest challenge was raising capital. I would not describe myself as a salesman, and I was turned down by 55 VCs in the Fall of 1999. Ironically, Overstock.com has liquidated the inventories of nearly 20 Internet companies funded by VCs that turned down Overstock.com. In the end, I funded Overstock.com by liquidating most of my personal assets.

CPEE: What are the most important traits for being a successful entrepreneur?

Byrne: Being able to think for yourself and following your convictions are the most important personality traits for being a successful entrepreneur. Entrepreneurs often become surrounded with advisors (banks, VCs, consultants). These advisors may have different objectives than the entrepreneur does, and they may not fully understand the entrepreneur's vision. A successful entrepreneur must be able to filter out their advisors' wishes when necessary, and drive the company towards its goals.

CPEE: When you were starting up Overstock.com, what were your biggest concerns? What kept you up at night?

Byrne: What didn't keep me up at night? Overstock.com was built in a different way than most Internet startups. I focused on the firm's distribution system from day one. Building a brand or traffic was never an objective. By focusing on operations and sales execution, I believed my business would be sustainable; once sales got going Overstock.com would be able to retain clients given its ability to service them. To this day, I am not a believer in branding. [Please see the question regarding Overstock.com's recent TV commercial.]

CPEE: What part of running Overstock.com keeps you up at night now?

Byrne: I had to evolve as a manager as Overstock.com grew. I now think more strategically rather than operationally. I was in an operating bubble for several years while I built Overstock.com.

CPEE: Startups rely on hiring the right people. What do you look for in new employees when starting a firm?

Byrne: I look for a certain spark when I meet potential candidates. I consider my hiring practices more instinctive than process-oriented. The traits I believe to be most important are: honesty, integrity, no ego, dynamism, and raw intelligence. This is one of the most difficult parts of building a firm. It took me about two years to get the right people.

CPEE: Given your opinions on branding, why did you decide to start advertising on T.V.?

Byrne: My real goal for Overstock.com is to carve a spot out on the Internet. I want to be the discount online shopping experience. Overstock.com delayed its advertising as long as it could, but felt increasing pressure from potential entrants to the market. For example, Barry Diller and others may have plans to move into Overstock.com's space on the Internet. By beginning a branding campaign, I hope to preempt competition by building a brand while it is still a cost-effective exercise.

CPEE: Many Tuck students who plan to be or work with entrepreneurs have consulting or investment banking backgrounds. How can these backgrounds be leveraged in an entrepreneurial role?

Byrne: I spent one year working on Wall Street (based on Warren Buffet's advice). I left the experience with two conclusions. First, there is a lot to be learned from Wall Street; developing an understanding of how capital providers think is very important. Second, there is much that people with investment banking experience need to unlearn to be successful as an entrepreneur. Entrepreneurs must be leaders to realize their vision. Leaders must have a certain set of qualities, and Wall Street rewards behaviors that are the opposite of what you need to be a good leader.

CPEE: As a long-time investor and an entrepreneur, where do you see the most opportunity in the future for business-school students?

Byrne: I believe that biotechnology holds the greatest potential for future business opportunities, but I'm wary of the rate at which capital is flowing (or being earmarked for investment) towards the industry.

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