Jeff Grass' Excellent Adventure.
For most Americans the explosive dotcom spectacle came and went like a loud party down the street. Its blaring giddiness annoyed us mostly because we weren't invited.
But Jeff Grass ('92) was invited. The adrenaline-fueled business planning, venture capital chasing, 16-hour workdays - he lived it all. Grass spent every waking moment for two and a half years launching and building PayMyBills.com (http://www.paymybills.com/). But just as the party was peaking, he left. Burnt out by the work, he sold the company he'd created - a company for which his affection was nearly fatherly. PayMyBills.com was merged with PayTrust.com (http://www.paytrust.com/) and became an industry leader. Grass then set off traveling the world but not as a pampered pilgrim in search of mysticism or true meaning. Instead he was a young man with time and cash and a head clear enough to comprehend his good fortune that time and cash rarely show up together. Grass, who received the Ronald E. Carrier Distinguished Alumni Achievement Award during a gala grand opening ceremony of the Leeolou Alumni Center on October 25, 2002, is shown at the right.
It was many miles and sleepless nights ago when Grass and his business school friend John Tedesco hatched the business idea for PayMyBills.com. They were attending Wharton and it was when top b-schools were boiling with Internet optimism in the late 90's. Business plans were flying out of classrooms and landing directly on the desks of venture capitalists. Grass says, "At the end of our entrepreneurship class we could have either put the plan on the shelf and agreed that it was a nice academic exercise, or we could try to make something of it." This was late '98 and venture capital was more accessible then. So they decided to make a go of it. "We spent a lot of time improving on the idea and conducting market research." Grass and his partner integrated the idea into their market research classes and conducted surveys and focus groups to determine appropriate price points, key features, barriers to adoption, etc. "We viewed business school as an opportunity to fail. It's two years when you can try something different and if you screw it up it's not like it's really going to matter. So, why not?"
Grass and his co-founder then entered their business plan into two competitions, one at Wharton and the other at Sloan (MIT). Their plan was a finalist at Wharton and semifinalist at Sloan. "During that process we developed a lot of contacts and relationships with people, one of which was with Howard Morgan who is vice chairman of Idealab (http://www.idealab.com/). He was a former professor at Penn (Wharton) in the 70's and a few of our Advisory Board members introduced us to Howard." All during the business plan competition Grass and his partner continued to build a prototype and kept the development ball rolling. So when Howard Morgan invited the team to present their idea to the legendary Bill Gross and the rest of Idealab's executive committee in Pasadena, they had more than just an idea to show. "After a full day of one-after-another-meetings we got a commitment for a seed capital investment of $250,000. They wanted us to quit school and start right away." With only a month-and-a-half left Grass and his roommate decided to graduate first. But they practically ran from the podium after graduating to get on the first flight to Pasadena.
Settling in Pasadena took Grass little time since he didn't pack much. "After finding a place to live, it finally started sinking in and we suddenly realized, holy sh*t, we're really doing this." The day after arriving at Idealab they met with Gross and sketched out two plans. One was conservative and included several stages of testing before launch. "The other was a guns-a-blazing approach; we build it, we start beta-testing it while we build it and we learn with live customers rather than beta customers." That was April '99 and the "first to market" strategy was prevalent among Internet start-ups then. "That's Idealab's model, come up with an idea and just go with it. Let your customers tell you how to make it better. Ready, fire, aim." They walked out of their first meeting with Gross realizing that they would launch immediately. "We also knew we needed help fast." Grass called good friend and fellow JMU alumnus, Tim Gillons ('92), and talked him into leaving his systems analyst job at MCI in Northern Virginia and coming to Pasadena. Grass says, "We were lucky. I caught him at work at 1 in the morning working on some terrible SAP integration project and he told us me hated his job." He quit immediately and was in Pasadena a week later. Gillons and Grass enjoy the view outside Showker Hall in the picture to the left.
Employing Gross' hurry-up offense, the team worked like mad to get PayMyBills launched. Idealab is an incubator and provides IT, accounting and human resource people to help companies develop as fast as possible. Leveraging this support, the PayMyBills guys quickly built a team of 25 and were able to launch the business in exactly 60 days. They launched nationally with a radio-advertising blitz in seven major markets and were ahead of expectations immediately. "We received a ton of mediacoverage. Along with the advertising we appeared all over the press - everywhere like CNN, Time magazine and the New York Times. This not only attracted our first few thousand customers, but it also announced our arrival on the scene to potential partners." The partners would come later. What was immediately exciting was how the customers were reacting to the service. "It wasn't easy to explain the service and it was difficult to get people to try the service. But once they tried it they loved it."
PayMyBills.com was "sticky" as the web jargon of the day went. Once customers starting using the service they kept coming back. Achieving stickiness was the key to attracting potential partners because customers who showed up over and over were the kind that other services wanted, too.
The next six months were incredibly intense. They raised another $4.5 million in a series B round of financing allowing them to build out the team. They refined their service and appeal to customers. "We had been advertising and promoting that PayMyBills.com could free you from your bills. Our tag line was Live Life, We'll Pay the Bills! But after more research we discovered that people didn't want to be free from their bills. They wanted power and greater control over their bills. So we changed the message." The group also worked on creating partnerships with internet service providers like Earthlink and Juno and with online financial institutions like E*TRADE, which ultimately helped them to raise an additional $30 million in a series C round of financing. That was in March 2000 when the NASDAQ was around 5000.
Then POP went the irrational exuberance.
By the summer of 2000 the company had grown to over 200 employees but was not fully to scale and not yet profitable. So it was apparent that they'd need more financing. With the venture capital market rapidly tightening, they decided to merge with a competitor. Grass says, "It didn't make sense that we continue to compete with PayTrust.com for customers and capital. So we decided it was in the shareholders' best interest to merge. And on August 22, 2000, my thirtieth birthday, we announced to our employees that we had agreed to a merge with our archrival." The merger was complete in August and by the end of the year, Grass and Gillons and the rest of PayMyBills.com's senior management had exited after helping transition through the merger. PayMyBills.com was valued at $67 million when it was sold.
Then Grass and Gillons and another PayMyBills partner jetted off into the wild blue yonder (their globetrotting exploits are on full display at http://www.travelingidiots.com/. After completing a yearlong walkabout, Grass came back to JMU to teach managerial finance and business plan writing. As an adjunct faculty member, he became one of four teachers who team up to teach COB 300, Integrated Functional Systems. "I was honored to be invited to teach here for a semester. I am also very thankful for my four years as a student here at JMU and this is my way of giving back," Grass says. But by the end of spring semester 2002, he was on his way again. Two days after exams his good friend Tim Gillons, who had just returned from 16 months of international travel, came to the 'burg and the two got into Grass' convertible and set off across the States, slowly heading for the left coast. Grass says of the relaxed trip west, "We're going to take our time and see a lot of friends." He eventually arrived there and now calls Los Angeles his home. He decided to get a job and is with McKinsey & Company consulting with clients of every kind. You can contact Jeff Grass at firstname.lastname@example.org.