IN THE EYES OF AN ENTREPRENEUR, no matter how comfy a job may be, it’s still a job. It can be quite a shock to family, coworkers, and friends to hear someone throw caution to the wind and say, “I’m outta here!”
Bernhard Kappe, co-founder of Pathfinder, certainly wasn’t the first person to walk away from gainful employment and by no means is he the last, but looking at his background it’s a sharp deviation from his upbringing. Like so many before him, he left his parents slightly bewildered.
“You know, they had a hard time understanding why I was leaving a nice, comfortable job at Merrill Lynch in order to go do something completely different. They were like, ‘Why are you…? Okay…. Umm… You work in investment banking. I can explain this to people. That’s a real job.’
“I think I’ve come to enjoy it. I think one of the things that really struck me when I was working for Merrill Lynch in investment banking was, it can be a tough environment. People are working 80 hours a week. You never know whether you’re going to be in over the weekend because there’s a board meeting and you got to get stuff done. People are yelling at each other. It’s a rough work environment.
“That kind of scarred me. I was like, ‘Do I really want to work for someone else again?’ I kind of like to work for myself, and that’s part of what happened there. You’re always working with people and it’s not as if you could sort of say, ‘Do what I say!’ That’s not how you are an effective leader. You have to find really good people, come together around something and lead people in a direction, work together and be willing to work with folks.”
Bernhard felt that he could never find the freedom to pursue his ideas and passions inside a giant corporation. He knew his goals in life were too expansive to confine himself to being a corporate bricklayer.
“It’s a lot more fun [being an entrepreneur] than just being somewhere in some big corporation where it’s really hard to see the connection between what you are doing within that company and making the world a better place. I know that maybe sounds corny, but you’re effecting some change in the world. And that’s one of the things that being an entrepreneur—you can actually go out and build something that hopefully adds some value and you actually see that it’s very tangible.”
BORN IN NUREMBERG, GERMANY IN 1965 to two mathematicians, Bernhard and his younger brother Dietrich had an upbringing steeped heavily in education. In addition, he would move back and forth between Germany and the U.S. quite often in his early years, eventually spending every summer in Germany after 4th grade.
“My parents first came here in 1962 for a year and then they went back. I was born in Germany, but then when I was six month old, they packed me up and we were at The Ohio State University in Columbus, Ohio, for another year and then went back again. My brother was actually born at Ohio State and then they kind of moved back and forth when I was growing up. So I grew up part of the time in the States and part of the time in Germany.
“They hadn’t really intended on staying in the U.S., but in the end it was just much easier to find professorships for two people at one university here than in Germany. Because in Germany, there are these nepotism laws that you can’t have two people in the family at the university, and there are fewer universities than there are here, so it was just much more complicated.
“The last time I was in school in Germany was like 4th grade. After 4th grade, I was here in school, but then as soon as the school year let out, we would go back to Germany for the summer and then come back when the school year started. So that’s kind of how I grew up. We spoke German at home and English at school.”
Never having as much time as he needed to establish strong relationships back in Germany, Bernhard and his brother became closer and closer over the years. As with many children of families that move frequently, your siblings become the rock upon which you lay the foundation of your childhood memories.
“I think I ended being much closer to my brother than many other people. It would be just the two of us, myself and Dietrich, who’s 13 months younger than I am.
“During the summertime, it’s like, ‘Well, it’s just you and me.’ Yeah, we have some friends there but not as close as what we have here, so it ended up being a much closer relationship. In the end, he and I ended up starting a company together and have kept it together for 12 years as two brothers, through some good times and some hard times, but have managed to keep it together.”
Looking at the company Bernhard currently runs, it’s easy to assume he developed a strong passion for coding at a young age. However, it was much more common to find him buried in a book or blaring away on his saxophone.
“I was definitely a nerd, a geek. We did lots of music and I started taking college classes fairly early in high school. I was in the marching band. I play saxophone and clarinet.
“Sports wasn’t something that my parents wanted us to do. My brother and I would play basketball as long as we could. That’s what we love doing, but actually playing organized sports was discouraged by my parents. My brother, his senior year, he was finally allowed to do one sports thing. He was allowed to run track ,so he did that, but I was like, ‘How did you get to do that and I didn’t get to do it?’
“I didn’t do that much stuff with computers. I read science fiction. I did lots of reading. My brother was actually someone who got a TRS 80 [a very early personal computer] and all these things and was doing programming, showing me the games he was working on. I was sort of like, ‘Ah, yeah, yeah, okay.’ I didn’t actually get all that interested in software and things like that until much later.”
WHEN GETTING A PH.D. IS ASSUMED, you know you are in a family that values education.
“Well actually from the day I was born, I’m not sure it was ever really sort of stated but the understanding was that you would go to college and then you would go get a Ph.D., and then you would become an adult after you got your Ph.D. That’s what I saw in my parents’ life. It was sort of like they’re not really there yet but once they got a Ph.D., oh now they’re a real person. They’re an adult at that point. That was kind of the mental model.”
Needless to say, that push at a young age to value and excel in education is the exact primer you would expect from someone who ends up in the Ivy League. However, Bernhard would experience the same harsh reality faced by many Northwestern and University of Chicago graduates I’ve spoken with: great diplomas do not equal the hype that the admissions offices promise when you graduate.
“I went to University of Pennsylvania in Philadelphia and it was an environment where there were lots of opportunities, lots of other people that had intellectual curiosity and a lot of international students as well. So it was an environment I felt actually really comfortable in when I was there. I had a great time in college. Though, I’m not sure that it necessarily prepared me that well for the real world.
“At the end of four years, my parents had said, ‘Hey, we’ll pay for four years of school, but after that you’re on your own.’ And I had lots of courses, but I didn’t have enough for any one degree. And so I decided to do one more year, got an undergraduate business degree and a Masters in Math from Penn, all that 5th year to kind of finish all that stuff up.
“And then I thought, ‘I’m not ready to go on and get a Ph.D., so why don’t I go do a little traveling? Maybe do some work and then figure it out. Try something else out. Get a little bit outside of academia. I had friends from college who were in Hong Kong, so I went out there and I looked for a job. I’m not sure what I was thinking because what exactly did I have to offer those people other than ‘I have these degrees. I am from an Ivy League university. People must want to hire me!’
“I think some schools sort of foster that kind of an attitude that you’re the best and the brightest and everyone should be so happy to have you. It’s going to be a while before you have something to actually contribute to whatever place you’re going to.”
While in Hong Kong, Bernhard would also make a brief attempt at starting a company that would produce day planners. A friend had a manufacturing connection in China, but quickly the business fizzled out as the difficult realities of what they were going to attempt became more apparent.
Next was a move to New York City to work at Merril Lynch and then eventually another relocation to Seattle also brought about a new life discovery [author note: a rude awakening that I discovered for myself in college as well]. After quickly enrolling at the University of Washington, Bernhard wanted to see if architecture was as exciting as Ayn Rand made it out to be.
“I had friends out in Seattle and the University of Washington was a place where out-of-state students got relatively decent rates for tuition. So I went out there and I was taking classes in architecture and such for about a year or two. I realized that architecture wasn’t necessarily the right job for me.
“I had friends who were architects and I saw what they were doing. And it was like, ‘Oh, okay. It’s not the Fountainhead. That’s not really what architecture is like as a profession.’ You got to love it for what it is. I still have as a dream at some point of building my own house. I probably won’t like it, I’ll sell it, and build another one. That’s what I liked to do, but not as a profession.”
THE TRANSITION TO ENTREPENEURSHIP wasn’t crystal clear for Bernhard. Looking at his path, there isn’t one defining moment in which he had a great revelation and stopped dead in his tracks. It was more of a gradual shift occurring through a dozen small steps and minor epiphanies.
“I graduated in ’88. I traveled around the world the rest of ’88, part of ’89 and then ‘89 and ‘90, and into ‘91 I was in New York at Merrill Lynch. I worked in their Mergers and Acquisition group. I was an analyst, so a lot of the job is collecting data and building financial model with it. The work was very manual, a lot of copying into spreadsheets.
“There were some folks that came in and pitched my department on automating some of that process, and I ended up working with them on that process because it was like, ‘Well great, this will make my life easier rather than going out in the library, pulling all these annual reports, pulling this stuff in. I can now just sort of select and press a button and pre-populate comp models. I still have work to do but, wow, there’s some real power in this software.”
This would stick with him through the years as he worked various jobs in Seattle including a stint at Weyerhaeuser, Starbucks, and finally Microsoft. It would be at Microsoft while working on pivot table technology that he would wonder what it would be like to go out on his own and try to sell his own software.
Eventually Bernhard started working on his own version of this data management software and decided to try and see if he could sell it on his own. Given that this was his first real attempt at entrepreneurship, he was only familiar with the development end of the business and was lost when it came to concepts of pricing models, marketing, etc…
“There were two folks that went and started a company to build a similar product and there was me, on my own, I started a company, Cobre Software, to build a shared reporting product based on pivot table functionality. I was doing all the coding to build this thing, try to market it and sell it, so I was a kind of a one-man show trying to do all of this stuff together. I sold a number of copies, but I didn’t have my pricing strategy together. I sold stuff to Labatt’s Brewery and the University of San Francisco and all these places who wanted to do all of this reporting stuff.
“The problem was, I was selling a site license for three times the price of an individual license, so it was like $100 for an individual license and $300 for a site license. Lo and behold, I got a whole bunch of site licenses! I was underpricing the thing. I didn’t understand how to acquire customers and customer development you lay out in a start-up before you go and build that stuff… I do now. I managed to eek out a living at it for about a year and I learned a lot of things.”
THINGS START TO COME TOGETHER IN CHICAGO in 1998 as Bernhard decided that it was time to take his development work more seriously. It was time for a grander plan and something that had lasting power to it. Choosing the right partner is critical to any business’s success; it must be someone you trust. Why look any further than your own brother?
“My brother and I, we had collaborated on some projects and we said, ‘We like building things together. We should start a company.” We had like two projects that we were pursuing. One in Seattle and one in Chicago.”
They would end up landing the Chicago-based project for local powerhouse, Mesirow Financial, to bring their brokerage accounts online. Though they both started out as developers, over time it became apparent that Dietrech’s interest in development was much stronger than Bernhard’s, and the duties began to shift.
“We both initially started out as developers, but over time he’s gravitated more towards the technology role, the chief technologist role. I don’t code anymore. I just got more into running the business side of it. That’s kind of how it’s continued for a while.
“As the company has grown, you end up doing much more in terms of managing client relationships and things like that. I think we had a lot of business things we had to learn the hard way. Initially, we did not do marketing or sales. You end up with conversations like, ‘Things aren’t just going to walk in the door. Isn’t sales your job? Okay, well I guess we have to learn how to be better at sales.’ Then it becomes, ‘How do I hire a salesperson? How do I do sales? How do I do marketing? Those were all kinds of things we struggled with for quite some time.”
As the company grew, there was one thing that never wavered: Bernhard believes that Chicago is the perfect place for building his company and life with his growing family.
“I like the fact Chicago is, and I lived in a number of other places, both a world city with lots of ethnicity, but at the same time, it is a place that is kind of more friendly and down-to-earth, and people are more helpful than in some other places like New York.
It’s a good balance of those things, and I ended up feeling comfortable here—heavy winters not withstanding, that’s the one thing. If there were mountains and the winters weren’t so bad, then it would be paradise, but I’ll take that with the others things I get.”
Now, with more than 35 employees, Pathfinder is the well-oiled machine the two co-founders wanted it to become. Pinning down exactly what Pathfinder is can be a little tricky. Most of the revenue comes from client work, but for the first time the company is looking to create its own products to sell directly.
After incubating a couple of fast-growing startups, it’s no wonder Bernhard is trying to figure out what’s next.
“I want to be building more products. If I can mentor other people and help them along the way, I think that’s great. I love doing that, especially if I have smart entrepreneurs working out of our space.
“I see myself as a serial entrepreneur, serial investor. At some point, Pathfinder is going to evolve. There’s the consulting practice, and there’s the product side of things. And they’ll probably evolve in somewhat different ways. How long will that last? Will we sell it? I don’t know. Right now, I’m having too much fun doing it.”