The Cost of Money
JMU's "serial entrepreneurs" ponder the meaning of wealth and success
Does money cost more than it is ultimately worth, or is the payoff
of financial success much greater than the dollars? Money, in so many
ways, is what makes the world go around. It drives us in different ways.
For some it is simply a means to live, for others it is the reward of
sweet success.
For some JMU alumni entrepreneurs, money is a relative object. While
there are the haves and the have mores, having lots of money doesn't
necessarily make one the wealthiest in the bunch. Does "having
it all" equal true freedom? As with each of these entrepreneurs,
that depends on what drives you.
"If you're doing what you're enjoying in life, I consider that
success," says Bill Vance ('81), who founded Support Systems Developers
Inc., a company that provided call center services, with fellow College
of Business alumnus Frank Marvin ('84). "And our rule of business
was if we were taking in more money than we were spending, we were doing
well," Vance says.
The partners almost didn't make it after losing their first contract
in 1994. "We were going to shut down at the end of August. Cannon
called us at the end of July. We went from getting ready to pack up
the boxes to getting set up to go live in 45 days," Marvin says.
Their business strategy was simple: They didn't bring in outside investors
and didn't spend money if they didn't have it. "With the dot-com
economy, businesses were trying to scale too quickly, and their income
wasn't able to keep up with capital need," says Vance. "But
when you're lean and mean, you're able to get through tough times more
easily."
Because of its flexibility, the company was in good shape to cash in
on the final days of the bull market. Vance and Marvin nurtured SSDI
for several years while call centers were becoming the darlings of Wall
Street, then sold in 1997 right before that business segment foreshadowed
what was to come in the technology sector. "After everything shook
up, we ended up selling to Sitel, the largest calling center corporation
in the world at the time," says Marvin.
"Looking back, it was certainly traumatic when we were going through
it, but it was one of the most fun times I've had in business,"
says Vance, who now oversees business development for Sitel's technology
sales and support in Vienna. "Our focus was not only growing the
business, but also devoting time to our personal life."
Like Vance and Marvin, Dennis Tracz ('78) enjoys the adventures of
uncertainty. "Most people are nervous and ducking, but I see lots
of opportunities in chaos," says the former CEO of Leapfrog-XML
Inc., an e-services company. "Filling the void is what entrepreneurship
is about. Change generally shows the void and the opportunity. But just
because it's an opportunity doesn't mean you should pursue it. Big opportunities
are better than small ones, and I like working with smart people rather
than by myself," says the College of Business Advisory Council
member.
From his home office, Tracz balances his comfort for chaos with a slower
lifestyle in Nellysford, 50 miles from Harrisonburg at Wintergreen Resort.
For the past year he would hit the road about once a week to work out
of his team's Richmond office. Now Leap-frog is selling to one of its
investors, and Tracz plans to spend more time on one of his hobbies
- with an entrepreneurial twist: "We are setting up a fund to buy
and operate distressed golf courses."
Vance says he works between 60 and 70 hours a week, but some of that
- e-mail, proposals and other computer time - is from home in the evening
after wife, Patti Schlemm Vance ('81), and their three kids have already
gone to bed. But he spends the early part of the evening with his family.
"Just like you're committed to work, you have to be committed to
your family. When there's school plays and things like that, I'm there."
Marvin took a different route after their company's buyout. With financial
security fairly well taken care of, his wife gave him a little nudge.
"We got lucky selling a company, then instead of sitting back and
enjoying it - I had these two boys - and she said, 'What are you doing?
Haven't you done this enough?' First, I got mad. Then I went up-stairs
and looked in the mirror and said to myself, 'What am I doing?' And
I went downstairs and said, 'You're 100 percent right.' You think you're
kind of important - traveling all over the place business class, offices
in six cities, with clients like Microsoft, AOL. This has all been great,
but this is crazy."
So Marvin made the switch to a home-based consultancy, literally putting
family first. He is now the chief operating officer of Infusion, a technology
company that enables students to learn about higher education options
on the Web - then apply, get financial aid and even go to class - all
online. But don't look for him on the 15th floor of a palatial office
suite. He plans to stay home based. "I get up every morning, and
I take my oldest son to school, then I come home and I play with my
4 year old. He's in here while I'm doing conference calls, and I think
I'm more attractive to people because I can walk away."
But, you say, people like Marvin and Tracz have the luxury of taking
financial risks. Yet according to sociology professor Gregory Peter,
entrepreneurship is an equal opportunity choice. "They could afford
to do it financially, but people can support themselves doing a business
out of their homes. And it's a means to be with their families, fitting
economics into their values. People shouldn't have to sacrifice family,
community (or think they have to) to be an entrepreneur," he says.
He says entrepreneurs generally fall into two categories. "Capitalistic
entrepreneurship is the familiar, pro-growth style of entrepreneurship.
It's creating a large organization to make a big impact - and lots of
money of course. Even though researchers don't recognize it, lifestyle
entrepreneurship is a different path. It's another way to have it all
without being owned by it all," says Peter.
For two intense years, Jeff Grass ('92) was owned by it all. He and
his partner researched, launched, built, fine tuned and capitalized
(several times) Paymybills.com, which relieved customers of the time,
stress and torture of writing out a slew of checks to pay their bills.
For a fee, Paymybills' customers got their bills paid on time, whether
they were sitting at home on the patio or on the road making deals.
A business-school project that won initial financing from Bill Gross
and Idealab, Paymybills.com points to the intensity of capitalistic
entrepreneurship. "We were in a very competitive market space with
a similar competitor [Paytrust]," Grass says. "We were going
head to head for relationships with banks. We were so similar and well
positioned that it came down to the price thing. We both started cutting,
but then below cost, you can't survive."
Grass sold to Paytrust just as the dot-com wave crested. Then he nearly
collapsed. "You put so much time and effort in it. It's really
hard to let go," he explains. "I was a little burned out after
that experience. We worked all the time, nonstop," Grass says of
himself, his partner and Tim Gillons ('92), who joined Grass to help
build the company. "I had a very nondimensional life for that period.
I had to get away. We took significant time off to travel the world."
Grass was gone for seven months before coming back to the work world
and then to teach at JMU for a semester. Gillons is still gone.
Wayne Jackson ('85) is another successful entrepreneur who has tallied
up the cost of money and opted for change. The former head of Aether
Systems Capital Asset Management Division made millions when Aether
merged with Riverbed Technologies, which Jackson co-founded and served
as its chief executive officer. The offshoot of Noble-star eventually
licensed its technology to Palm Computing. As for so many of JMU's most
successful entrepreneurs, there was plenty in the deal to pay off his
house, credit card debt and probably even handle any concerns about
paying the education bill for any future Dukes. "The whole impact
of going from one financial place in life to another was really strange.
You go through all these weird emotional issues - feeling absurdly lucky
and disproportionately so when you wake up and find you have a big bank
account. You see it make a lot of people crazy, and what I decided is
that I liked my life before, and I like it now. I just don't worry about
money."
But Jackson definitely paid a high price. "I went four to five
months without ever seeing Nicholas when he was 1, because he was asleep
when I left and when I got home. There was so much at stake for people
in the technology industry, and the distance between financial gain
and loss is so enormous. Some people worked themselves to death quite
literally. I don't regret it, but I never want to do it again."
After years of seven-day workweeks - ranging from a high of 100 hours
to a low of 60 hours - he left Aether to start White Shoes Racing, an
interest that he has had for years, and to do more sailing. The company
secures race-car sponsorships and restores and sells vintage race cars.
"I had already decided to spend a lot more time with my family
and doing the things that I enjoy and for which I have worked so hard.
Sept. 11 certainly reinforced the feelings be-hind that decision and
my thoughts about changing my priorities away from being so business
obsessed."
Jackson, who readily acknowledges that his academic record was far
from stellar, says that he learned valuable lessons about himself while
at JMU. "People who learn how to relate well to others have a greater
chance at success than those who are simply well educated," he
says. "They have to learn how to take advice, create consensus
around different opinions and motivate people around difficult circumstances."
Jamal Al-Khatib, the Zane Showker Professor and Center for Entrepreneurship
director, is not at all surprised that some of JMU's most successful
entrepreneurs were not necessarily exemplary academic achievers. "School
is not the end, it's the means. They might not excel academically -
even though they are certainly capable of making the grades - but they
choose not to, because they have so much going on," says Al-Khatib.
Rich Masterson spent his days at JMU doing all he could to pay the
bills while getting the degree. "I was an exceptionally average
student, but honed a strong work ethic while at JMU," says Masterson
('78). "I also managed a bar, cleaned fish and sold Christmas trees.
I got into the habit of working all the time." He says JMU offered
him a good balance, a quality that Masterson has kept central throughout
his professional life. "I think balance occurs over a period of
time. However dysfunctional I may have been working 20 hours a day,
I was never in a sales meeting rather than a doctor's appointment with
one of my kids. Maintaining a certain set of values at work as well
as at home helps you to make the millions of decisions you have to make
in your life. It's become a world where everything is compromised, and
some things shouldn't be. To me, it's integrity, and I wouldn't sacrifice
it. Not everything can be for sale."
Masterson's time couldn't be bought when his father needed him - not
even for millions of dollars. He walked away from U.S. Interactive -
the company that put United Parcel Service, American Express and Ragu
spaghetti sauce on the Web - right before the company went public. "I
went to help my dad, and we were losing the war on cancer. At the time
I was going through it, it was not obvious that making the right choices
was going to benefit me." Seven months later, after the IPO was
consummated, Masterson was able to monetize his holdings - right before
the dot-com bubble burst. "I had the opportunity to make the most
money of anyone in the company."
JMU's academic experience did click with David Kay ('89). His classroom
success led him to Arthur Andersen, where he used his entrepreneurial
sense of opportunity to spot what Tracz calls "the void."
He worked on many transactions where several smaller automobile dealerships
would form partnerships to go public. The dealers wanted to sell their
land and the consolidators didn't want it - acres upon acres of prime
real estate.
Enter the opportunity. Kay put together a plan for a real-estate investment
trust with Pulte Home Corp.'s Tom Eckert, and Capital Automotive was
born. It buys the dealership's land, then leases it back. Kay, senior
vice president and chief financial officer of the company, is content
with the No. 2 spot. "A lot of young people want to start these
firms, and they want to be the CEO. There was no way I had the qualifications
I needed to do that," says Kay, who was 31 at the time. "I
knew I was good at telling our story. I'm good at raising money, but
I was not good at putting together a board of directors. When you have
employees (up to three of them JMU grads) and you have buyers, you have
to make sure everyone is thought about. Tom is very good at that. There's
nothing wrong with being No. 2, even if you have the idea. Be No. 1
later."
Kay has plenty of potential for growth. The company has $1.3 billion
invested in 274 automotive properties in 28 states. "People say,
'you must have been a great student.' I wasn't a good student my first
year. I found something I really liked."
Al-Khatib says that especially since the creation of the Center for
Entrepreneurship in 1985, the College of Business has steadily expanded
its opportunities for entrepreneurial-minded students.
"The Center for Entrepreneurship sponsors a Business Plan Competition,
where students submit their ideas to a panel of professional judges
who are local and national entrepreneurs," he says. "The students
compete for substantial cash and scholarship awards. The CFE also invites
successful entrepreneurs who graduated from JMU to speak to and share
with our business students interested in entrepreneurship their experiences
as well as best practices in the field," says Al-Khatib.
Two students who certainly would have entered the Business Plan Competition
if it had been offered in their day are 1991 graduates Larry Cotter
and Bill Carey. They passed 20 business plans back and forth from the
time they were at JMU to the time they founded Wall Street Sports, predecessor
of Sandbox.com, in July of 1997.
Like Kay, they have begun their entrepreneurial journey more recently
- and they are still weighing the ultimate cost of money. The partners
founded their dot-com to seize upon several leisure time activities
- sports, cards, casino and arcade games, and surfing. "Without
the Internet, the cost of playing would have been prohibitive. We were
making money with it - we were at break even in 1999 - but we knew we
still needed to get bigger because it wasn't going to attract the masses.
Then we thought fantasy sports would be a natural tie-in to what we
were doing." They acquired Sandbox Entertainment in 1999.
The business is not all fun and games. "Three years ago, we couldn't
have been sexier," says Cotter. "We hit a sweet spot in the
market, and things couldn't have been better. It was relatively easy
to raise." Now instability on Wall Street means nearby Madison
Avenue isn't placing as many ad buys - especially with dot-coms. "The
one good thing about the Internet bust is it's crystal clear what we
need to do: We need to be profitable, just like every other company
out there," says Carey.
Whether we count our money in thousands or millions - or even hundreds
- we all have an equal opportunity to choose our priorities and ultimately
to make decisions about how we spend our time and how that reflects
our values. "All entrepreneurship is lifestyle entrepreneurship,"
says Peter. "The difference is on how the entrepreneur deals with
the meaning of it. 'Is my lifestyle work and money and power or is my
lifestyle family and subsistence and community?' I would imagine that
most entrepreneurs feel these tensions."
Like many of us, the entrepreneurs have perhaps wrestled with these
tensions even more since Sept. 11. "Between the tech crash and
Sept. 11, everything my family, friends and I do has been reduced to
more of an appreciation of and move toward the simpler life - more simple
time with family and friends rather than big dinners, new toys for the
adults, huge trips," says Marvin.
Jackson and Tracz had contemplated a change months before Sept. 11.
When asked whether they would try to make the business work or cut their
losses and get out, Jackson says, "Show me the money. When you're
in your 20s, you don't know how rare this can be. It's an entrepreneurial
trait to always ignore the downside, but I would let go of the company."
And he did, only to take hold of another one last August.
Tracz took a similar path after Sept. 11 sealed his decision to sell
Leapfrog. "In my 20s, I would have answered that question differently,
but now I've got kids in college. So now I would definitely give up
the company."
Al-Khatib points out that regardless of the reason, entrepreneurs thrive
on change. "They will embrace risk and change before they would
ever settle for the security of a regular paycheck. They have tasted
the sweetness of success and are always alert and on the look for new
ways to guard and preserve their independence. The subconscious fear
of the unknown coupled with their talent for spotting and capitalizing
on opportunities are what drive them to explore new ventures and ideas
- and survive change," he says.
Whether working from the boardroom or the home office, the lifeblood
of the entrepreneur is all about seizing the day - regardless of the
weather. "It's chaos and change and that's where the opportunity
is," Tracz says. "But you have to act fast and be creative,
because the window won't be there long."
Story by Edie Jeffers ('87)
Photos by Robert Burgess, Diane Elliott ('00), Christopher Gardner and
Tyler Mallory
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