Another dot-com business sells for millions. Some new Boy Wonder takes the money and runs. Sound familiar? That scenario had become quite common in recent years--until several months ago, when the NASDAQ started taking a dive and the dot-com shakedown began in earnest. Whether or not a return to those heady days of Web fortunes is in the making, young techno-nerds are still coding their way to early retirement and a home in some tropical paradise.
Case in Point Joe Gleason may fit this profile. He started Quality Computers in 1984 while still a Michigan high school senior. Within five years, he had built it into one of the largest distributors and publishers of educational software for schools. He sold the business to Scantron Corporation in 1995 for $7 million, distributing nearly half of that amount to employees who held equity. But we're not really talking techno-nerd or programming wunderkind here. Gleason doesn't know how to program--only how to sell it.
That may be oversimplifying it at bit. Unlike other dot-com ventures, there was no stock offering before a real company existed. Gleason had to learn sound business values and build a solid foundation before the company attracted serious buyers. In the meantime, Quality Computers designed and published over 200 software titles and, with distribution rights to other titles, combined sales grew into the millions of units. By the time of its sale, the company's marketing machine was reaching 200,000 educators regularly.
Gleason anticipated a downturn in the dot-com industry because "the company has to be run as a real business. The worst thing you can do is give a company major funding before it is ready. Kids with no experience, no solid business background, were getting major funding. Their companies were not forced to grow through conservative measures." But such was not the case for Quality Computers. Cash flow strictly regulated growth for the company, which put it on solid footing and made it a formidable competitor in its niche.
What Does the Future Hold? Gleason predicts the current shakeout will continue: "Investors are waiting to see which business models work." New businesses seeking to sell right away are being unrealistic, whether or not they have a flashy concept. "It won't happen [for these companies] until cash flow is positive," he says.
The same holds true for his latest venture, WebNow.com. This new company is targeted at small businesses, providing free, online Web site construction in five minutes using easy-to-follow prompts and templates. As the client becomes more Web-savvy and sophisticated, WebNow will provide fee-based services such as e-commerce, domain hosting, and so on. Seemingly a sure-fire concept, WebNow.com surged when it started up in 1998. It quickly built a clientele of 60,000 and projected growth of up to 500,000 within the first year or two of business. An offer was made to buy the code. But the young programmers responsible for authoring the code (while under contract with WebNow) demanded a 30 percent cut of the deal, and walked when Gleason refused to give it to them. The company suffered and, as a result, the system failed for 40 hours.
This failure definitely spooked the buyer, Gleason says. Before he was able to replace the programmers and put things back on track, the NASDAQ sagged. Yet he remains optimistic that the market will recover and he will recoup his investment with the next offer.
Meanwhile, he is far from the cold Michigan climate of his youth, operating out of offices at Maui Research and Technology Park. And when WebNow passes from his hands, he has already registered the domain for a new company that will simply distribute "things that are cool."
Alan Isbell is an award-winning journalist who has spent the past two decades writing and editing for nationally recognized newspapers, magazines, Web sites, and trade journals. Based in Hawaii, Isbell's accomplishments have been documented by Who's Who in America for over 10 years. He can be reached at writenow@maui.net.
