In about 1999 or 2000, I met a neat Canadian guy, former Citibanker, who was starting a company during the dotcom boom. At the time, the company was called VR Solutions, a software solution in the model of the exchanges that were popular at the time (Anybody remember Verticalnet?) It was for truckers and shippers with loads to ship. He knew that these weren't Internet savvy people, but he thought Dan could attract them with a cost-effective piece of technoogy.
He was in Arizona visiting his wife's folks, and someone recommended him to Stealthmode, so we had a meeting.I liked the idea, and I liked the man. A while later, we moved the company to Phoenix and re-incorporated it as Loadbook.He thought he had a better chance of succeeding in the states, because we were flying high with Web 1.0. The press release is still on PR web here.
Time passed. Dan (the founder) tried to grow the company.He acquired a small contract from a large client. He worked with several "sales" experts and "consultants."The bottom fell out of the Internet. 9.11 disrupted the entire American economy. Dan's wife, perhaps tired of struggling, divorced him. He still had the single client. Not enough to live on. No money to hire sales people.
Struggling on alone, Dan was approached in 2003 by one of the small public companies that are constantly trying to roll up other companies so they can get some momentum and make their stock truly liquid. It was called OrderPro Logistics, and you can find it on the Internet WayBack Machine's archives here. Demoralized and tired, Dan decided to sell. OrderPro would get the technology, Dan would get a CTO job, and Dan and his new wife would move to Tucson.
I was very happy for him. I went with him to Tucson to celebrate the closing of the deal. I received a small fee for participating.
My check bounced. Dan's check bounced. And within weeks, OrderPro's payroll checks started bouncing.
On the advice of an attorney, Dan began again. He took the technology and re-incorporated as 38 Minutes.
That's the target time for matching a truck to a shipment.
Disgusted, Dan bought 40 acres of cheap farmland in Missouri and he and his wife moved there to run the virtual business and raise animals.
Five years of broken promises from would-be helpers and investors later, the site has finally caught on. Even truckers are on the Internet now. One of the consultants actually sold a deal, and now Dan's off and running. If he plays it right, 38Minutes will be viral.
The servers are still up, his wife is still with him, he's got enough money to take his kids to a NASCAR race this year, and things are looking good. Dan has literally done all this himself, with the help of a single loyal developer, who by now is his partner in the company.
Every once in a while, people ask me what Stealthmode does. Simple: we incubate early stage companies. What does that mean? Well, it can mean many things, but in my own case (Ed's involvements are separate for the most part) I'm usually involved in one of three ways.
Here are the categories, and here are the current companies. I've been involved with some of them for six months, and with three of them for more than six years. Most of their founders are also personal friends by now. And I love and respect them all. Sure I hope for an exit. But I also hope to spend each day being of service and having fun.
Every relationship is different, and except for the ones in which I have shares or options, most of them are not a contract, they are a handshake. So never ask Stealthmode what its "standard agreement" is. There isn't one, any more than there's a standard startup.
The one thing they all have in common? None of them are located in Silicon Valley. And yet, I seem to have plenty to do. Most of them have a social purpose, and one is even a not-for-profit. I believe in them and in their dedicated founders, many of whom are bootstrapping their way to fame and fortune.
My friend Scott Coles apparently committed suicide yesterday, apparently seeing no way out
of the disastrous Arizona mortgage market, in which he was the largest
private lender. He had purchased the business from his father, and made
private loans funded by individual investors. Many of the investors
were friends of his, or friends of his father, or --as one of my
friends who also invested with him-- said "every Jew in Phoenix."
Scott proudly proclaimed that in the entire history of the business,
he had never lost a penny for investors. I'm guessing that was about to
change. I'm also guessing that the two developers who sued him for not
fully funding their loans (who could raise money for mortgages in this
environment?) affected him personally, too, because he was himself
fully invested financially and emotionally in the business. He always
thought he could find a solution if he just worked hard enough, but the
current credit crisis and mortgage meltdown defeated even his
brilliance and hard work.
So as the investors begged to have their capital released, and the
builders begged to have their loans funded, Scott didn't see a way out,
I'm guessing.
So he left a beautiful wife and three children, and sought peace by killing himself.
It's not my job to judge him, just to mourn him. Yet when something
like this happens, I always look for what we can learn from it.
Fortuitously, today I am at "Under the Radar," a technology conference, and the lesson manifested.
There was a way out -- a way I see every day here in Silicon Valley.
The way out is to accept failure and go on. Here in Silicon Valley,
this happens every day. No one is happy about it, of course, but when a "black swan"
comes along (one of those events no one can predict), you disconnect
your ego from the outside event, pick yourself up, and move on.
Everyone had to accept that after 9/11, when the Web 1.0 bubble burst,
and they will have to do it again when the Web 2.0 bubble bursts. Here
in the Bay Area, they're used to it. In their lives, they have a
portfolio of ventures, and some succeed while others fail.
The difference between here and the Phoenix real estate culture is
that Silicon Valley is a culture that accepts failure as the price we
pay for innovation, rather than pilng on the person with problems. In
the tech world, when someone fails he is presumed to have learned, and
investors are more, not less, willing to fund him/her next time.
Scott, sleep well. You have earned it, and you need the rest. I know how hard you tried.
Update: I'm turnng off comments for this post because of the uncivil tone. I'm grieving and I can't deal with it.
Not everybody becomes an entrepreneur to make money. In fact, most young entrepreneurs seem to be focused on saving the world, rather than on the bucks. Best case scenario is that both happen. But for Phil Lillienthal, there's no chance, because his newest ventures is a 501(c)3.
Phil was class president of my high school class. His family owned a camp, and of course he spent his summers there. As an adult, he became an attorney.Now he has come back to his roots and started another camp.
But this one's different. It is a camp for children in South Africa who have HIV/AIDS. Phil believes that the camp experience changes the lives of children, and he's out to change the lives of a country where one half of the 15-year-olds are expected to die of AIDS .Global
Camps Africa (GCA) provides 10-day residential camps for children
ages 10-16 years affected by HIV/AIDS in South Africa. The camp,
called Camp Sizanani (Zulu for 'to help each other') is located in
the mountains outside Johannesburg and is patterned after U.S. summer
camps but with two main differences: it weaves life skills education
throughout the camp sessions and provides ongoing support through
bi-weekly Kids Clubs gatherings after camp is over. More than 700
children attend the weekly gatherings held at several locations in
Soweto.
Up
to six camp sessions are held each year for 10-days each for 135
children ages 10-16. Neither the children nor their families pay
tuition. GCA relies on the generosity of its donors to run camps.
The
camp experience provides vulnerable children with the education and
skills that are essential for them to effectively manage themselves
and their lives, even in difficult circumstances, and provides them
with personal courage and a hope for a better future. The program
offers one-on-one mentoring, tutoring and counseling in a secure
environment with a foundation of trust, love and positive acceptance.
Schools,
orphanages and children’s groups that have sent children to
camp have seen the remarkable difference experiential education,
mentoring and peer support has on at-risk youth, and word of GCA’s
success is spreading rapidly. In 2007, Global Camps Africa
established two additional camp programs in partnership with two
local non profits: one for orphans living in one of the poorest
regions of South Africa, and one in KwaZulu Natal in partnership with
a job training organization in a province with the highest
unemployment rate and the highest HIV/AIDS infection rate in South
Africa.
Children
write about how their lives have changed. Parents, caregivers,
counselors, teachers and school administrators have responded
enthusiastically to the changes exhibited by the children. Teachers
have requested that camp counselors come to school to teach life
skills courses because of the dramatic behavioral changes they see in
those students who have attended camp.
So Phil has a unique promotion under way to raise money for his camps. An anonymous donor has offered to match any contribution up to $46,664. (46664 was Nelson Mandela's number when he was in prison on Robben Island, and the promotion honors Mandela's 90th birthday this year and his work for AIDS since. Mandela's own son died of AIDS in 2003.)
Fundraising for a social venture is very similar to what you have to do for a for-profit venture: you need a business plan, a marketing plan, a good team, and a passion for your goal. Phil has them all, plus the experience to make it happen. I am planning a trip to South Africa next year to visit the camps. In the mean time, if you are interested, you can email info@globalcampsafrica.org.
Actually, today I am in Silicon Valley. I'm at The Conversation Group's celebration of the tenth anniversary of "The Cluetrain Manifesto," and Doc Searls, one of the authors of the original manifesto is here to lead a conversation on where the manifesto stands now.
He's talking about what happens when buyer reach exceeds seller grasp, which is an unfinished question from the Manifesto. This was the Call of the Wild Customer: we are not seats or eyeballs or endusers or consuers. We are human beings, and our reach exceeds your grasp -- deal with it.
But it isn't quite true yet. Ten years later, we're still in the grasp of the vendors. No new social network is big enough to accomplish what we have to do on our own. And we can't do it individually: we have to do it with the power of the group.
And it's dependent on open source, which is a product of human nature. Its wild and free environment is the Net: Nobody owns it, everybody can use it, anybody can improve it.
There are now more than half a million open source code bases, all of which are building materials growing wild, outside of any corporate silo. The live web is branching off the static web. The branching occurs between space and time. That's why Google blog search differentiates between searching the web (static), and searching blogs (live).
On the live web, relationships between customers and vendors have to be two-way. Relationships can't occue unless both parties are equal. This means solutions have to come from customers rather than just vendors, and the two have to help each other.
Example: I should be able to express global preferences outside of anyone's silo. IF I am calling for tech support, THEN I don't want to want to hear a commercial message, AND I am willing to pay X to reach a human in <than 60 seconds.
I should be able to inquire and relate to whole markets on the fly
And I should be able to contol my own health care data.
The technology to manage my relationship with vendors is here.
I should bring my own Terms of Service to the relationship. I shouldn't have to accept the vendor's. The social contract should let me be trusted if I have money to spend, and I shouldn't have to give up so much information.
The customer is the new platform.
Markets are relationships.
The Intention Economy will grow around what we really WANT. Demand will drive supply. Personally.
I'm knee-deep in the planning of the Third Annual Arizona Entrepreneurship Conference, to be held Nov. 19th in Phoenix. The conference does three things: 1) Provide high quality content about starting and growing a "gazelle" business to entrepreneurs; 2) raise money for my foundation, the Opportunity for Entrepreneurship Foundation, which trains disadvantaged populations in entrepreneurship skills; and 3) show people from outside the Valley of the Sun that we're more than golf and retirement.
Every year, although I keep a framework adopted from the Kauffman Foundation's entrepreneurial education programs (Stealthmode provides them in metro Phoenix), I try to make the content totally new. This means I'm constantly going outside my Rolodex, which I used for the first conference, and trying to listen to the customer and give him/her what she asks for.
This year, we are having Chris Brogan on Social Media best practices for marketing, Bill Reichert of Garage Technology Ventures on early stage funding, Matt Mullenweg talking about youthful entrepreneurship (he started Wordpress as a mere child and a slew of local talent with success stories and pointers.
This is SUCH a big job, especially since I am a lousy manager and delegater, and seem to wind up doing everything myself except the logistics (of which I am incapable). But I truly believe that, even though social media goes a long way to connecting the world's dots, it's really fun to bring people together to share ideas and information once in a while.
For about six months, I've been happily participating in the Beauty Cred blog on Seattle-based RealSelf.com, a site on which readers and professionals talk about beauty treatments and cosmetics.
While we have great traffic to the site, we wish we could get more readers to participate. They come to read the reviews of others, perhaps to get an answer from an expert, or to find out what the aggregate of our readers thinks about certain procedures. Naturally, if the number of reviewers is higher, the percentage values become more accurate. "72% thought a treatment was worth it" is a more trustworthy assessment if a thousand people rated the procedure than if onlly 10 people did.
So we have launched a campaign with the cheerful little moniker of "WIWI," which stands for "Was It Worth It."
We did this because we want people to comment on their experience with common treatments like Invisalign, Lasik, Intense Pulsed Light skin treatments, so we can share the information with others who are thinking of having these treatments.
t's lunch in a
Scottsdale restaurant. The attendees are mainly retired scions of
industry, professionals, and business. I came because the group is
having a presentation by one of the largest real estate developers in
Arizona, and I've come to hear the story of a "typical" Arizona
entrepreneur.
Mark Sklar, one of the three original (and still intact) partners at DMB was originally from Wisconsin and studied history. He has the midwesterners' value system and sense of engagement.
He and his wife moved to Arizona to strike out on their own in 1971.
For seven years he was in the travel business before becoming partners
with Bennett Dorrance and Drew Brown to form DMB, a company known for
its excellence in real estate development and community engagement. As
he runs down the list of boards he is on, from arts advocacy to
Alzheimer's centers to camps for special needs children, he tells us
the company credo: profitability, legacy, partnership and fun.
DMB was formed in 1982 out of some land syndications. Drew Brown was
Mark's lawyer, and Bennett was Drew's client. They spent a long time
getting to know each other, trying to understand if an enterprise among
the three of them would make sense. Mark, Drew and Bennett are
entrepreneurs who started off by buying and selling land, using money
they raised from syndications.
In 1989, the Resolution Trust Company afforded them an opportunity
to buy a bunch of stuff from defunct savings and loans. No one else
would invest, because no one knew where the bottom of the market was.
Sound familiar? So they bought a lot of property, including the famous
blue building on Alma School Road in Mesa, Arizona. Of course they had
the means to do it. It's not a strategy for everyone.
About fifteen years ago, the company took a philosophical jump into
the planned community business. They view themselves as developers,
planners, and zoners and marketers of planning communities: large
communities (like Verrado and DC Ranch) with lots of different product,
and recreational communities for people who want vacation homes (Forest
Highlands).
DMB also has a significant amount of investment in California: in
Orange County at Madera Ranch. They also have a property in San
Francisco Bay that is currently under water; it was formerly a salt
mine owned by Cargill.
DMB prefers to do joint ventures with landowners rather than buy
property. They're a project-centric company that pushes authority down
into the field into each project's General Manager.
They have done quite a bit of succession planning, including
diversifying their capital base outside Bennett Dorrance's personal
capabilities. They now have two financial partners from the Bay Area, a
board of directors, and a real plan to allow the company to succeed
them without a sale or liquidation.
And now...about the market. Mark's guess is that it won't turn around before Q3 of '09 or have righted itself until 2010.
We have an oversupply of single family residential, which will
create a longer time to recover this time around. It was fueled by easy
money, and the idea that single family residential could be an
investment. Two and a half years ago, DMB was so concerned about this
that they hired a team to knock on every door in Verrado and see if
someone was living in the home. They found that about 25% of the homes
were investor-owned.
Arizona has a worse oversupply of single family housing than
California, because it has strong employment, a right to work state,
and it is easier to bring a product to market here than in California,
so that encourages inmigration.
167,000 homes were built in 2004-2006 in Arizona, where there is a
need for 35-40k a year based on inmigration. The oversupply will be
with us for a while. Here's why:
1)We have had a dislocation in the financial markets that has been
unprecedented. Sklar is seeing a lot of institutional lenders do really
stupid things; they are handcuffed because they don't know what their
portfolios are worth, and they are walking away from sound,
underwritten transactions. They just don't know when the regulators
will come in.
Bill Gross's newsletter for the past two years has been talking
about the shadow economy -- large scale transactions that have been
securitized and sold to people who didn't understand the underlying
value of the assets. The result of this continues to affect the real
estate markets.
2)Huge increase in commodities costs.
3)Recession
4)Interdependence with everything that happens in the national economy.
How does he feel? Negative for the short short term. The economy is
one problem for Arizona. Employee sanctions laws are another. The
inability of people to sell homes elsewhere slows the state's
inmigration. (2006 102,000, 2007, 67,000 people.) DMB has taken their
land of the market to discourage more building for right now. They have
no wish to contribute to the oversupply. They are also tightening
budgets, lengthening timelines, and have laid off twenty people. But
DMB is optimistic for the long term. With the business and political
leadership we have now, he thinks Arizona has a rosy future.
It's always a great moment when a company gets its first customer. When EmpowHer.com launched, advertisers lined up to advertise on the site -- in the future. We're talking big advertisers here, who buy on reach and frequency and CPM.
They have promised to advertise, when the traffic grows to the point where it will be worth their budgets. And that, of course, does not happen overnight. Which is why most companies with an advertising model knock themselves out to get eyeballs, or page views, or click throughs, or whatever the current unit of measurement of the moment is.
But in the meantime, EmpowHer, which is self-funded, is producing high quality, kick-butt content both by and for women who need trusted health advice. There are two words on the landing page: ASK and SHARE. The founder, my friend Michelle Robson (who has turned her health advocacy from a passion into a product), believes women need a safe space to ask their questions and share their stories. That's all.
But she has assembled very high quality video from medical experts who answer the questions women ask most often. And this video production capability turns out to be worth $35k a month!
That rocks. Yes, video production is not their core business. But revenue is revenue, and the market is asking for these services and willing to pay for them. Michelle will actually get paid to produce the content she wants to produce anyway!
Gotta hand it to her. She's a scrappy woman, in the best senses of the word. I'm very excited for her this morning.
Pankaj Sinha comes from a poor province in India that, coincidentally, I have visited (Bihar). But he left a long time ago and came to the US, where he has been, until recently, working at Intel.
Now he's the founder of a startup named Chemurja, which has already self-funded its first two prototypes of a fuel cell on a chip.
His company is in Phoenix, so he's not the recipient of venture capital. In fact, he had the opportunity to take venture capital and turned it down, because the terms were so onerous that he would have been demotivated.
So with a small amount of private investment, he has taken the cheapest space he can find (true startup digs) and is working toward the next prototype. He figures once he has the data, he will be able to partner with the right people to bring his technology to market.
His mission is to develop and supply fuel cell stacks that make possible convenient and affordable portable
electric power for all geographies. His product is fuel cell stacks small enough to fit in ultraportable devices like smart phones, at a price the market can afford.
To run a device with his product will cost less than a penny an hour for the person in the developing world. And since that's where he came from, he's not smoking anything about the concept of affordability.
This is a company for which I hold out great hope, because I see a real product addressing a real market need, being devloped by an engineer who knows both the product and market, and has the professional credibility and connections to make it happen.
Will it be easy? Of course not. He's at least an angel round away from his fabless manufacturing strategy. But if you look at his surroundings, he's sure not burning through what resources he has at a very rapid rate.
Scoble asked recently how you can smell a good startup. That's how.
