September 2009
Cable Guy
Wharton Alumnus Julian Brodsky Helped Build Cable Leader Comcast into a Giant with a Keen Entrepreneurial Eye
A big factor in whether a business succeeds or fails is the management team. Put the wrong personalities together and it can be a disaster. But when the right personalities come together, sometimes they can reach heights they never imagined.
This was the case for Wharton alumnus Julian Brodsky, who launched Comcast with fellow Wharton alumnus Ralph Roberts and Dan Aaron in 1963. At a party in honor of Aaron's retirement, Aaron described the founders as three guys trying to drive a car. Brodsky recalls Aaron saying "'There was Julian trying to go a million miles an hour, and there was I, frantically pumping the brakes to keep this maniac under control, and then there was Ralph, firm and calm, with his hands on the wheel.'" Brodsky, who earned his Wharton undergraduate degree in 1956 adds, "It was the magic of our three diverse personalities and our drive that made it all happen."
Comcast is now the largest provider of cable service in the U.S. With annual revenue of $32 billion, the company focuses on broadband cable, commerce, and content, delivering its services and products to tens of millions of customers.
However, it took a fortuitous series of events to bring the trio of Aaron, Brodsky and Roberts together. It began in the late 1950s when Brodsky, working in an accounting firm, was assigned to help Pioneer Belt and Suspender Company complete a sale to Hickok Manufacturing Company. During the transaction, Brodsky had ample opportunity to get to know Pioneer's CEO, Ralph Roberts. "While Ralph was looking for something to do next, I'd go out once a quarter and knock out a financial statement for what was left of the company, go over the numbers, and talk about what he would do when he grew up," laughs Brodsky.
Legend has it that a few years later, Roberts ran into Aaron and Pete Musser (founder and former chairman and CEO of Safeguard Scientifics, Inc.) on a Center City Philadelphia street where Aaron and Musser took the opportunity to pitch Roberts a business plan. The pitch was for Roberts to buy a cable system in Tupelo, Miss. from Musser, and Aaron was there to broker the deal. Brodsky explains, "Ralph was intrigued, but he hated doing anything without an expert in his camp. So he agreed to buy the cable system if Dan [Aaron] came along to help him create a company with this system as the base. Dan, who knew Ralph slightly by reputation, pretty much said yes on the spot."
Hearing about the venture, Brodsky recalls, "I went to Ralph and announced rather presumptively that I had just resigned from the accounting firm because he wasn't going to do this without me." And so "the boys" launched Comcast in November of 1963 with a 1,200 subscriber cable system and two unbuilt franchises in Mississippi with $150,000 from Roberts, a similar amount from friends and family, as well as financing from Philadelphia National Bank.
From day one, their goal was simple: growth. Brodsky, now director and vice chairman of Comcast, says that their vision extended only to the next deal, whatever that happened to be. "We just knew that if we could continue to make good acquisitions and find opportunities to build cable systems, then things would sort themselves out for the long haul," he says.
As the business achieved its goal of growth, Comcast kept its entrepreneurial spirit alive by developing new products and investing in start-ups. In the 1990s, as the Internet's commercial potential was emerging, Brodsky made several investments in Internet companies on behalf of Comcast, creating a radar of sorts for the company to detect new technologies and potential products. Brodsky also helped launch the Internet Capital Group, a combination incubator, VC fund, and operating company that specialized in business-to-business applications on the Internet. Comcast invested in the group and Brodsky joined its board.
Wanting to learn even more about the Internet and gain intelligence about competition, Brodsky led the creation of an in-house VC fund called Comcast Interactive Capital. In the first six years of the group, Brodsky estimates that he reviewed close to 5,000 potential deals that ultimately resulted in 70 investments. "It was a long process with first readers, second readers, and then meetings. My successor used to ask me how I could spend weeks looking at a $2 million investment, and I said that it was not only important but very enjoyable," says Brodsky.
"We'd get into nooks and crannies that there is no way in the world Comcast would normally have found. Some of the businesses we invested in were pretty wild on paper and sometimes didn't even seem to be in the best interest of Comcast, but they were interesting and Comcast got to learn all about it. I think we provided a lot of intangible benefits to Comcast as well as made Comcast a lot of money," he says.
Brodsky adds that despite the inherent suspicions often associated with corporate VCs, Comcast didn't face too many challenges attracting entrepreneurs. "Comcast had no agenda with the decisions, and all decisions were made by the fund itself first and foremost to maximize the investment. Sometimes it took some red meat and red wine to get the deal done, but we had a great track record and as time went by, entrepreneurs could talk to other entrepreneurs who had worked with us."
Considering how many pitches Brodsky has heard over the years, it's not surprising that he became quite an expert at evaluating business proposals. The most important factors, he says, are the size of the market for the business and the ability of the management team to execute the plan. "So many of the large VC firms have people who come from search firms because the human resources function of a VC is so important. One of the hardest things to do is convince - in a positive way - the entrepreneur that he or she is not cut out to be the CEO of their company."
As for common mistakes entrepreneurs make when presenting to VCs, Brodsky says the biggest ones are getting bogged down in minutia, namedropping, and running out of time before making all of the key points. "If you are an entrepreneur, practice your pitch, get it under half an hour, know exactly what message you want to give, discuss the revenue model, and how you will get it done," he says.
As much fun as he's had over the years as a VC, Brodsky says he'll always have a special fondness for cable. "At the beginning, middle, and end, nothing is more fun than building a cable system in a town that had never had a cable system before. This is a cable company and we are all cable guys," he says.
As for selling Comcast, "We got our kicks out of building something, not necessarily disposing of it and trying to do it again," says Brodsky. "Maybe it was because we were older and from another era when the hope was to build a great American company. We were all proud of what Comcast has become and proud of the new generation of management that has taken it to even greater heights than what the founders would have done."
Posted September 2009