No Longer the Loudest Guy in the Room Q. You've started several companies. Where did you get the entrepreneurial DNA? A. My stepfather was a successful entrepreneur who built a sizable business and then sold it for a lot of money. And my father became a senior partner at PricewaterhouseCoopers. So I had an Ivy League-educated father with an accounting background who is very detail-oriented, and I had a stepfather who barely finished high school who built this massive direct-marketing company. All of that converged in me in a very fortunate way, in that I'm very analytical, but I also know how to sell. Q. Other mentors? A. John Sculley [former Apple chief executive] and I have worked together for at least 15 years. One of the things he taught me was style. I used to be much more brash. I remember the first time we went on a West Coast swing. I had just started a company called InPhonic/Wirefly. John was our first investor and took on the role of my mentor. We went to the West Coast and had 10 or 15 client meetings. I remember we came out of the first meeting and John said, "David, there's a West Coast style and there's an East Coast style. We need to work on your West Coast style. Q. Explain that for me. A. Soften it up. Take it down a number of notches, and just listen instead of always talking. Up to that point, I had always been a person who could muscle my way through anything. He taught me how, from a leadership perspective, to step back and take in the landscape. And it's something he does exceptionally well. He will sit in a room for an hour before he says one thing, but when he says that thing, he is so right. Q. As you've expanded your companies, have you noticed there are certain break points or key milestones? A. To me the first break point is when you hit $1 million a year in sales. It's very different below that. The next jump is $10 million, then $25 million, then $100 million. At that point either the wheels come off or you get some business process expertise in your company. Very few entrepreneurs think about financial controls. Very few entrepreneurs think about balance sheet. They're really all about the P.& L. You have to remake your business constantly. And you've got to be willing to fail. Most people are not, so they'll change direction but keep doing what they were doing simultaneously. If I see a division that's not working, I will shut it down or sell it. Revenues end up going down? Because if you don't get rid of that dead limb, management still wants to prove that they can make it work, even though you're focusing on the new direction. Q. You also invest in a lot of fledgling businesses. What are you looking for when you're sizing up entrepreneurs? A. I ask a lot of basic questions. Even though I might already know the answer, I want to see if they know. Like what were your revenues last month - not last quarter, but last month? Q. And some people don't know? A. It's shocking. They might round to the nearest $10,000, and these are small businesses. I want to know to the dollar. I'll ask how big their market opportunity is and what is the market. I always like to hear how they came up with the idea for the business. What data points did they bring together that made this an interesting opportunity for them? Q. Tell me more about the qualities you're looking for. A. I don't run institutional money. It's primarily me and three partners. The most important thing for me when I look at a new business to buy, control or invest in is, do I like the person sitting in front of me. I'm an extremely dyslexic person, and when you're not good at one thing I think you more finely tune other skills. I'm a very intuitive person and I try to understand different personality traits so that I can watch for patterns in other people. You can learn a lot about people and understand them if you're more open and inquisitive. You've got to ask a lot of questions. Q. How is your leadership style different today from when you were younger? A. I listen a lot more. I will also often let people make mistakes even though I know they're about to make a mistake. When I was younger, I always had to be right and I always had to be the loudest guy in the room. I will now literally sit in our weekly management meeting and let my chief operating officer run it. I could never have done that 10 years ago. Q. What's your approach to creating a culture of innovation? A. It's allowing people to fail. But you don't let them fail too big. For example, we have a great guy who works with us. He loves the fashion business, and he wanted to start a fashion Web site. He gave a presentation to management, and many people in the room came to my office after and said it was a horrible idea. I said, "He's one of the best guys we have in the company. Who cares? He'll do it in his spare time. It won't cost us much money, and when it doesn't work he'll abandon it. That's exactly what happened, but he felt empowered that he was able to go out and build that. Innovation to me doesn't have to be about creating the light bulb or the telegraph. Innovation can be very important small changes to something that's already working. That's the stuff that's overlooked, and it can take things to the next level. Q. What's your best career advice to someone who wants to be an entrepreneur? A. I'd give the same advice my stepfather gave me - which I didn't take. Go work for somebody who you can really learn from in the field you want to be in. Q. Any expressions you use a lot at work? A. I say, "It's a love story" a lot. It's a great thing when I see somebody who loves what they do. I also say, "Time is the enemy of all deals." The longer you wait to get a transaction done, the less likely it is to get done. People get deal fatigue and they start looking for the next shiny thing, and then they're focused on that. This interview has been edited and condensed.