Entrepreneurs rise from dot-com ruins

BOULDER — There’s plenty of fallout — in the form of unemployed and underemployed techies — from the dot-com bust of a few years ago. But there’s also a new breed of entrepreneur springing from the ruins of burnt out shells of once flashy, overvalued Internet companies.

A number of Boulder Valley dot-com survivors have picked themselves up, dusted themselves off and climbed back on the startup horse. The Business Report talked with four to see how they are faring, and discovered they have learned similar lessons from their spin on the dot-com cyclone.

* It’s the customer, stupid.

* Don’t make the business your entire life.

* Dream big but dream realistically.

Dan Murray

Internet Marketing Strategist,

Ravenwood Marketing Inc.

Dan Murray and business partner Paul Fearing launched Ravenwood Marketing in May 2002. The company is an Internet marketing company with a twist — it’s performance based. Ravenwood gets paid only when it provides a customer or qualified lead to its clients.

“We help companies sell products and generate sales leads on the Net, and we get paid a commission on success,” Murray said.

Ravenwood cost almost nothing to start.

“The investment was more time than money,” he said. The company, which now has three employees, is subleasing office space in East Boulder from Free Speech TV, a nonprofit, independent satellite television station.

Low overhead and a compelling marketing model made Ravenwood “profitable immediately,” Murray said. And the company is growing. According to Murray, monthly revenues have more than doubled since January. The company has more than 100 clients in industries ranging from computer hardware and software to sports equipment. “If it’s being sold on the Net, we’re selling it,” Murray said.

Prior to launching Ravenwood, Murray worked at four dot-coms, starting in mid-1995 at iXL and ending at Email Publishing where Murray had his “big ride up and big ride down.” He did very well financially when First Virtual acquired the company in 1998, renaming it Message Media. But when the company tumbled from its one-time market cap of $1 billion to being bought by DoubleClick in 2000 for pennies on the dollar, Murray’s entire department was given the ax.

He hung out a shingle as a marketing consultant as he looked for full-time employment. After months of searching he finally got an interview but didn’t get the job. “That was the kick in the pants to say ‘you need to do something else,'” Murray said. Thus Ravenwood was born.

Murray believes there’s nothing like a down economy to jump-start a business. Talent is readily available and cheap, office space is very reasonable, and office furniture is almost free. The new entrepreneurs also are working smarter than they did during the dot-com glory days. “They are based on real business models, and no one is trying to become a billionaire,” Murray said. “We’re building reality-based companies.”

Jennifer W. Fawcett

Principal,

RouteSix Digital Marketing

Jennifer Fawcett and business partner Blake Kritzberg launched RouteSix in spring 2001. The two produce Web-based marketing material for small- and medium-sized businesses. The company is entirely virtual. Fawcett works out of her Boulder home, and Kritzberg is based in Coudersport, Penn. The two have never met in person; they created and built their business entirely online and over the phone.

With low overhead and home offices, RouteSix was “profitable from day one,” Fawcett said. It’s also growing, having doubled its revenues in one year.

Fawcett tends to look for interesting clients in different industries because it makes her job more fun. Her two dozen or so clients range from wireless LAN product startup Roving Planet to Burgundy Wine Holidays.

She also plugs a race that she organizes, the Double-Rugged Ride & Tie, a 20-kilometer trail bike and run team event that’s a fund-raiser for the Colorado Cancer Foundation.

Fawcett had her dot-com experience at Message Media. She came on board too late to ride the whirlwind, and all she has to show are worthless stock options.

After a stint at Rational (now part of IBM), Fawcett struck out on her own.

Kritzberg and Fawcett came up the name RouteSix because U.S. Route 6 runs from the East Coast to the West Coast through Pennsylvania and Denver. “It’s the only thing that connects us,” Fawcett said.

The two met when they were doing dot-com time at Message Media.

“We have a yin yang relationship. I’m the front person, and she’s in the background doing the design and coding. We have a beautiful partnership.”

Fawcett readily admits the business isn’t her life. She runs competitively and manages races.

“I’m not stuck in this fast crazy software world,” Fawcett said. “I feel like I’m giving a lot back to the community as well. I want to help other local companies be successful because they will tell all their friends, and I’ll be successful as well.”

Derek Scruggs

Owner,

Escalan LLC

Derek Scruggs launched Escalan in fall 2002. The company creates and carries out online marketing and customer relationship management strategies for mid-size business.

Scruggs bootstrapped Escalan on his own dime after considering raising venture capital.

“I decided I wanted to get off that mindset and focus on building a business for the long term,” he said. “I’m not trying to have the million-dollar idea but to work with customers to solve their problems.”

Instead of opening yet another Internet marketing company, Scruggs went the software development route to enhance his services. He developed a database platform for capturing customer data called Climb that collects and analyzes data from surveys, e-mail lists, product warranty registration cards and contest entries.

“One of my goals is to build an asset like the software that has value beyond the number of hours beyond what I put into building it,” he said.

Most of his customers are mid-size businesses that spend a monthly fee of $500 to $5,000 for his services, but Scruggs is developing a product for companies that only can afford a few hundred dollars a year. The new product is a standalone service scheduled to launch at the end of July. He described it as a self-service Web front-end “to gather your own data.”

Scruggs keeps expenses low by working at home, and revenues have started increasing. He’s very particular about his clients.

“I’ve tried to focus only on clients I can have an ongoing relationship with,” Scruggs said. “With online marketing, companies don’t really know what they want, and they certainly don’t know what works. You don’t know until you test it. I shy away from clients who want a 30-day miracle.”

Scruggs rode the dot-com wave into Boulder in 1998 when he sold his Chicago-based startup, Distributed Bids, to Message Media. Two years later he was out on his ear, but not before he had cashed in enough stock options to buy his house.

Scruggs said his goal is to build out the technology to have a solid base company. “I don’t think of it in terms of revenues,” he said. “I’m really driving at more self-service options so I can make money while I’m skiing”

Jeff Finkelstein

President,

Customer Paradigm Inc.

Jeff Finkelstein founded Customer Paradigm early in 2002. The company primarily offers services in e-mail marketing with a strong focus on privacy and security.

For Finkelstein, the customer is key.

“I founded Customer Paradigm on the principle that if you put the customer first, if you really think about what makes the customer’s life easier, people love you for solving their problem,” Finkelstein said.

For example, he said, people don’t want to buy drill bits, they want a hole in a wall. If you just sell drill bits you’re selling a commodity, but if you figure out why they need a hole — perhaps to pass a wire — and solve that problem, you are focusing on the customer, not on pushing a product. A wireless network for the home solves the issue without having to drill holes.

Most of Customer Paradigm’s clients use permission-based e-mail rather than Web-marketing because most of the customers they are trying to reach use older computers with dial-up connections that can make waiting to download pages seem interminable. Permission-based e-mail includes those items that consumers “opt in” to — newsletters and other electronic mailers from companies in which they are interested.

Finkelstein started his dot-com career at Privaseek, later called Persona, a company that designed tools to let individuals control the sharing of their personal information online. He joined as an intern in fall 1999 when the company closed on a $30 million round of funding, and left in January 2002, just before the company folded.

Customer Paradigm was funded entirely by Finkelstein.

“I saved a lot of money when I was being overpaid at a venture-backed company,” he said.

Although he didn’t need to put a lot of money into the company, he lived off his savings while getting Customer Paradigm off the ground. The company now has seven employees and is growing rapidly. In the first three months of 2003 revenue was double the entire year of 2002.

Finkelstein sees a vast difference between then and now. In the dot-com startup world, “the whole goal was to build them, go public and get rich,” he said. “The end customer who was supposed to use the product or service wasn’t given much attention.”

In today’s world, however, Finkelstein said, it’s “important to have something that would change the world and do other things.”

Contact Caron Schwartz Ellis at (303) 440-4950 or e-mail csellis@bcbr.com.

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