The assignment: track down the top finalists – dubbed the Great Eight – from last year’s Wharton Business Plan Competition. The goal: find out what actually happened to the cream of the crop of student start-up ideas. Did any become viable businesses? Did they make money? Lots of money? Did any drop off the face of the Internet?
We found the Great Eight scattered all over the country, eager to share tales of venture capital highs and lows, intellectual property snags, site launch glitches, cash flow problems, employee frustrations, and in several notable cases, success beyond their wildest dreams.
But before we get to those stories, some background on the Business Plan Competition: the three-phase, year-long contest started in late 1998 as a way to give Wharton’s start-up minded students access to financial and intellectual capital. Sponsored by Wharton’s Goergen Entrepreneurial Management Program, the competition is attended and sponsored by venture capital, corporate and entrepreneurial heavyweights from across the country who judge, mentor and put up more than $40,000 in prize monies. Last year’s contest drew 128 student teams comprised of more than 300 participants. This year, the competition attracted 226 entries, or more than 430 participants, as well as an impressive line-up of lead sponsors: E*Entity, an e-commerce accelerator; Booz Allen & Hamilton; Safeguard Scientifics Inc., a Pennsylvania-based venture capital firm that funded last year’s $25,000 top prize; and Innovation Factory, an Internet incubator. The competition attracts both undergraduate and graduate contestants from across Penn and culminates with a final round Venture Fair held in the spring. Over the course of months, contestants are whittled down to 25 semi-finalists, then eight finalists, and finally one winner, who collects the $25,000 top prize.
As this year’s Business Plan Competition enters its final phase, we catch up with the imaginative, ambitious young men and women of last year’s Great Eight. Their stories follow.
Kevin Spain and RadioXchange
Kevin Spain is proof that what you start out with might not be what you end up with.
His idea, the Business Plan Competition’s top winner, began as RadioXchange, an e-market-place to the radio industry that would create an Internet-based auction to sell remnant radio advertising inventory. It was a bold, entirely new idea with seemingly limitless potential, and the Business Plan Competition judges loved it. But few would have predicted its outcome.
After winning the business plan competition and graduating from Wharton, Spain, WG’99, moved to San Francisco, where he had accepted a job at a San Francisco investment-banking firm. Energized and emboldened by his win at the Business Plan Competition and his start date still a couple months away, Spain teamed up with former colleague Andrew Donner to seriously explore the possibility of a start-up. The pair ramped up the RadioXchange idea a bit to assist with raising capital, creating an entity called waveXchange, which expanded the initial concept to include remnant advertising space from all air waves, including television. Spain began searching for seed capital, and quickly pieced together some initial funding. Feeling confident that they had a sure thing in the making, the pair decided to abandon their corporate jobs and pursue waveXchange full time. Donner quit his investment- banking post and Spain declined his offer. The pair rented office space, incorporated, and recruited some senior level managers – a vice president of marketing and a vice president of sales. “It was a very exciting time,” Spain says.
But the bubble was about to burst. When Spain finally hit the streets to sell waveXchange to the broadcast industry, he quickly hit a wall. Radio and television stations, he found, were not willing to sell advertising air time at discounted prices because they believed it would stymie their ability to negotiate with full-price buyers. Spain also learned that most advertisers don’t buy advertising at the last minute. Rather, they plan many months in advance so they are able to secure exactly the airtime they want. The boom economy also meant radio and television stations had less remnant space available and were so fat and happy that incremental revenue opportunities really didn’t pique their interest. Spain’s once-heady outlook began to teeter.
His final blow came in August 1999, at the National Association of Broadcasters convention in Orlando. That day, described by Spain as “the most depressing experience I’ve ever had,” Spain and Donner pitched waveXchange to the CEOs of every major radio group in the country. Universally, they panned the idea and said they would never support it.
“We were devastated. And the worst of it was that we had just hired these two people. We were down in Orlando sitting in a hotel room feeling destroyed. I had turned down this job, and Andrew had quit his job, we had these employees coming on, and it seemed ludicrous what was happening to us,” Spain says.
Spain returned to San Francisco scrambling to regroup. In what he describes as a “very haphazard fashion,” he and his new team spent many late nights brainstorming, trying to decide whether to start over with an entirely new concept, and if so, which one. All the while, they were running out of money. In the end, some two months later, Spain decided on a business called AtMadison.com – an online advertising agency that focuses on a traditionally under served market segment – the small-to-medium sized business. The new business would capitalize on the many years of advertising industry experience of Spain’s new hires. Once again, Spain and Donner hit the streets in search of funding. And within a week, the two had raised more money than they had for waveXchange.
How has Spain raised funds with such apparent ease? He credits his prior work experience in corporate finance and mergers and acquisitions, as well as the reality that many investors today seeking dot-com investment opportunities. “People are willing to fund concepts at this point,” he says.
As for AtMadison.com, Spain anticipates a full site launch in June. The dot-com will feature an online expert system to walk clients through the process of planning a media and marketing campaign, thus streamlining the traditional, human-intensive advertising agency experience. The campaigns will then be executed via advertising powerhouse Leo Burnett, which recently signed an exclusive agreement with AtMadision.com. “We deliver the same resources – research, knowledge, and buying power – that large advertisers have and we deliver it via the Web and at a much lower cost,” says Spain, who foresees an IPO in the near future.
Spain, 27, learned some huge lessons riding the pitches and swells of waveXchange. The most important? It’s vital to know an industry inside and out before trying to enter it as a newcomer. “It’s easy to get people to say it’s a great idea and that it makes sense. But when you actually go out and try to sell it to them, things change,” he says. Leading and managing employees who are older and more experienced than their 20-something boss was also a key challenge. “We went through an incredibly tumultuous time during which I was at the helm and I had senior, experienced managers looking to me for guidance and for the first time in a long time learning to be in a subordinate role. There were days I really felt beat up and at times inadequate.” He overcame this hurdle by focusing and mobilizing the group on creating a new entity.
Spain also offers a word of caution to other prospective entrepreneurs: be wary of vendors who try to sell you products or services in exchange for equity in your company. “You have to be really, really careful,” he says. “It may seem like one-tenth of a percent is nothing when you’re in the early stages of trying to raise money, but it’s really pretty valuable. You have to learn by talking to others that have done this what you should pay people for and what you shouldn’t. You have to realize that equity is valuable regardless of the stage of the company.”
John Tedesco, Jeff Grass and PayMyBills.com
Of the Great Eight, few would argue that PayMyBills.com is so far the most visible success story. What started out as a three-man WG’99 team – John Tedesco, Jeff Grass and Kyle Harrison (Harrison left the team to pursue his own start-up, Mousedriver.com) – has become a hot dot-com to watch. Spawned from the golden cocoon of Idealab!, the Pasadena, California high-tech incubator that has helped birth some of the Internet boom’s most successful dot-com companies, PayMy-Bills. com is a web-based service created to eliminate a dreaded household chore: the monthly task of paying bills.
Tedesco and Grass, both 29, got the idea for the service in the summer of 1998 when they arrived home to a nasty surprise after six weeks in Guatemala: stacks of unpaid bills, late notices and shut-off threats. They continued exploring the concept of an online bill-paying service later that summer while working as interns at McKinsey, then devoted virtually their entire second year at Wharton to moving the start-up forward. In addition to entering and rising to the top of the Business Plan Competition, they focused much of their coursework on entrepreneurial study. All the while, they interviewed hundreds of potential customers to try to understand what they would want in a bill payment service and even created a board of advisors for their fledgling enterprise. Through one of the board’s members, Tedesco and Grass linked up with Howard Morgan, a former Penn professor and a partner in Idealab!, the Pasadena incubator.
Morgan loved the PayMyBills.com concept, and momentum began to build. After the Business Plan Competition, Tedesco and Grass flew out to California to meet Idealab! founder Bill Gross and returned with a seed capital offer. From there, their breakneck pace never faltered: Tedesco and Grass graduated on May 16 and three days later flew out to Idealab!’s Pasadena headquarters to begin working on PayMy-Bills. com full time. Sixty days later, the dot-com had 25 employees and was officially launched.
Today, the company has tens of thousands of customers, 125 employees and has moved into a 25,000-square-foot office in Pasadena, having graduated from the Idealab! environs. “It’s been a fantastic growth trajectory,” says Tedesco. Since their initial seed capital investment from Idealab!, the company raised an additional $5 million, and most recently, a $30 million round of financing with online brokerage E*Trade as the lead investor.
“The key for us is acquiring customers,” says Tedesco, a New York native. “We think we’ve struck a chord with consumers because people hate paying bills, and this is a technology that actually simplifies people’s lives. I don’t think that’s necessarily true of a lot of other technologies that are out there. We believe there is a new level of maturity of the Web: not just information, distribution or communication, but life simplification services.”
Though major financial Web sites and banks are rapidly making claims to the online bill paying market, Tedesco and Grass say they aren’t worried about the competition. “There are 100 million households in the U.S., and all of them pay bills. Thirty million households are online. There are going to be other competitors playing in this space, but our service works today, and it works for all of your bills.”
And despite their soaring growth, Tedesco and Grass admit to plenty of growing pains. “We far exceeded all of our expectations; maybe that’s why it’s been harder than we thought. It is not easy. Especially with rapid, rapid growth, all of our estimates in terms of the maturity of the market and competition arising were all off base in the sense that it happened so quickly. And when everything is that quick, you find yourself managing many, many variables simultaneously.”
Recruiting top-notch employees has been Tedesco’s biggest challenge. “When it comes to our growth, it won’t be competition or financing that hampers us,” he says. “It will be our ability to get quality people onboard quickly. We went from two people to 125 people in nine months. Access to talent, technical or otherwise, is a huge challenge because people are the driving engine of the business. It’s been amazing how much time it takes and how hard it is to find good talent quickly.”
Tedesco also learned some lessons the hard way. For instance, he and Grass spent countless hours analyzing their idea and writing business plans. They realized after the fact that nothing sells an idea better than people seeing it in action. “We spent a lot of time creating a business plan and research and analysis and trying to communicate to potential investors, but once we put a demo together, it sold itself. Everyone knew the service’s value immediately. So my thought is, prototype early. It’s worth it to get it out in front of potential customers.”
Tedesco also found that anxieties about someone stealing your idea are largely a waste of energy. In PayMy-Bills. com’s early days, Tedesco says he was too concerned about potential competitors snatching up his idea. He came to realize that “at the end of the day it’s all about execution, and the person who copies the idea will never have the same passion or vision as the person who came up with the idea.” And the only way to reap the benefits of relationships that networks can bring, he says, is to be open about your concept.
As for starting PayMyBills.com, Tedesco felt he had nothing to lose by trying. “The traditional jobs will still be out there. If anything happens and it fails, we are richer for the experience. It’s been a fantastic ride. When Jeff and I look around and see what we’ve built, it’s invigorating, though most of the time our heads are down.”
Molly Kerr and MyFlyMiles.com
Like most of her best ideas, Molly Kerr thought of MyFlyMiles.com because it was something she wanted. Kerr, 30, WG’00, was trying to plan a ski vacation with her husband and wasn’t enjoying the task of combing through pages of different airline statements, then making multiple phone calls, just to figure out how many frequent flier miles they had accumulated.
Wouldn’t it be great, she wondered, to simply log on to an Internet site, punch in your name and have all of your frequent flier miles appear? After pitching the idea to some second-year MBAs working in the Wharton Small Business Development Center (Kerr was the only first-year MBA of the Great Eight), she decided on a whim to enter MyFlyMiles.com in the Business Plan Competition. “I was just looking for the experience the exercise would bring. But then I just kept passing into the next round and the next round, and then I was in final round and I thought to myself ‘Wow, I’d really better take this seriously; clearly this is a really great idea,’ ” Kerr says.
Though she had no aspirations to launch a dot-com, Kerr seriously considered it after coming so far in the competition. She decided to spend a couple months studying the idea and found a CEO candidate to partner with. Together, the two began to research the idea in earnest.
Early on, they came across another Internet site called MaxMiles that offered essentially the same service she envisioned for MyFlyMiles.com. But MaxMiles charged consumers more than $30 to access their miles, while Kerr’s site, to be supported by advertisers and sponsors, would give them the information for free. Given this key difference, Kerr still thought the idea might be worth pursuing. But knowing it could take up to18 months to actually develop the site, she thought it wise to get a better sense of what MaxMiles’ plans were before plunging forward. She arranged to speak with the company’s CEO, and what she learned changed everything. The upshot: MaxMiles had sealed a partnership deal with American Express, SkyMall and some other major companies that would allow the company to offer its services for free. In the meantime, she also learned of another similar dot-com-in-the-making in Los Angeles that had already begun develop-ment efforts. Kerr, seeing the competitive writing on the wall, decided not to move on MyFlyMiles.com. “It’s still a really good idea, but it’s hard to rationalize launching an Internet start-up when you’re not first or second to market,” she says.
Since the competition, Kerr has still kept her hand in the world of dot-com start-ups. While finishing her second year at Wharton, she handled business development for ExpertCentral.com – a site launched in October 1999 that offers expert advice on everything from dogs to personal finance. In January, three months after its launch, the site sold for $30 million.
As for the future, Kerr has committed to return to Bain & Co., where she worked prior to Wharton. The Boston native says she has no regrets, despite MyFlyMiles.com’s never evolving beyond the great idea stage. “The Business Plan Competition was the highlight of my two years at Wharton,” she says.
Dain DeGroff and Surgisoft
The Surgisoft team, which won the Business Plan Competition’s $5,000 Arthur Andersen Technology Prize, seemed to have a winning concept: a computer system and software designed to simplify surgical procedures, as well as improve their cost, safety and efficiency.
After graduating, Dain DeGroff, WG’99, his wife and team member, orthopedic surgeon Jennifer Schneider, and Rhea Tombropoulos, another team member, planned to acquire intellectual property protection for Surgisoft, then pitch the idea to some venture capital firms. “I wasn’t planning to devote my career to the idea, and so we were hoping to drum up interest and commitment from another interested party,” says DeGroff, who had taken a job with Hambrecht & Quist in San Francisco. But after hiring an attorney to begin the intellectual property procedure, the trio quickly found themselves mired in a lengthy and expensive legal process. Academic articles had already been published on the software-assisted surgery concept, so the idea was considered public knowledge and not likely to receive intellectual property protection. In addition, Surgisoft could have been viewed as a medical product and thus subject to FDA approval.
The team’s interdependency on one another’s expertise was also an issue. DeGroff and Tombropoulos didn’t want to commit to a start-up, but each were pivotal to the project’s success: DeGroff was the financial alchemist of the team, while Tombropoulos had critical technical knowledge. “The team became unsure of the next steps to take, and so there obviously wasn’t enough commitment unless we could get others interested,” DeGroff says. Another catch-22: a start-up needs a management team to attract venture capital, but managers are wary about joining a fledgling company with no funding. “Given all of this, it’s really not gone very far,” DeGroff says.
DeGroff and Schneider learned some hefty lessons through their foray into the intellectual property process and advise other potential entrepreneurs to start early, be careful when choosing attorneys and be sure you are completely committed to moving forward with a business before turning an attorney loose on your behalf. DeGroff, 32, and Schneider, 33, were handed massive legal bills for some very preliminary patent search work. “They were much, much larger than we had anticipated given our initial estimates from our lawyers,” he says. “We were pretty stunned.”
Schneider remains interested in playing a major role in a start-up focused on developing medical devices but has decided to take more of a “baby step” approach by working toward launching a smaller, simpler product or two. “I’m more disappointed for my wife than myself,” DeGroff says, “because I definitely wanted to be in the periphery, but I wasn’t ready to not take this job to pursue a start-up. But she hasn’t given up, and I really think this is an idea that has merit and is going to be an enormous market.”
Dennis Molnar, Salvatore Tirabassi and Adhere Technologies
After graduating from Wharton in 1998 and with a child on the way, Dennis Molnar, WG’98, decided he’d better take a full-time job at a suburban Philadelphia biopharmaceutical. But he remained preoccupied with Adhere Technologies, his idea from the Business Plan Competition for a portable interface that dispenses medication and tracks patient medication use. He felt strongly that he wanted to pursue the idea where possible, so he talked to his Business Plan partner, Salvatore Tirabassi, WG’99, about Tirabassi continuing the search for seed-capital full-time. The two had hatched the Adhere concept while interning at Penn’s Center for Technology Transfer. They agreed that Tirabassi would tackle funding, and that Molnar would join him full-time once they were funded.
But the funding has yet to materialize. Adhere had what Molnar, 30, now calls its “best moment” right around the time of the Business Plan Competition: it looked as if the idea would be funded by Pennsylvania Early Stage Partners, a Safeguard Scientifics-managed seed capital fund. But the seed capital was contingent on licensing several patents, and an earlier patent search had revealed that four patents were already claimed for similar product ideas. “The folks holding patents hadn’t put the entire concept together,” Molnar says, explaining that Adhere would have combined several of these concepts. “Each one held a separate patent for a piece of our overall concept. One patent covered a method of registering when a pill was taken. Another patent covered the idea of prompting a patient to take his or her medication, and so on.”
Tirabassi and Molnar found that the other patent holders wouldn’t commit to giving up the intellectual property rights to their ideas. With no patent licenses in hand, Molnar and Tirabassi have been unable to secure funding. Tirabassi was forced to move on and take a full-time job after graduation working for a telecommunications-focused venture capital firm in New York City. Molnar, who now has a one-year-old son, felt he couldn’t give up his full-time job to continue chasing the idea. “At the moment, it kind of sits there as another idea that the clock is ticking on,” he says.
Molnar admits he’s been frustrated and disappointed by his and Tirabassi’s inability to bring a promising concept to market. But he learned several critical lessons through the process, including the reality that it’s not possible to foster a fledgling business while also being a good employee to another business. “Doing both and trying to maintain some semblance of family life just isn’t possible. You have to have at least one heartbeat behind the idea, because even if it’s not going to work out, you find out in ten months versus two years,” he says. “You waste a lot of time and energy, and something has to give. For us it was Adhere.”
The pair also ran up against the “Internet phenomenon,” the reality that many fewer investors are interested in funding physical products and companies when the lure of massive Internet stock valuations looms so large. “We needed seed money up front – not just walking around money for Sal and me, but money to actually do product development,” he says. The Philadelphia area is rich with venture capital, but it is infinitely more conservative than many other markets, Molnar says. “We could have come to the same conclusions a lot earlier had we given up our full-time jobs and focused on this exclusively,” he says.
Despite his many roadblocks, Molnar hasn’t completely given up on Adhere. He and Tirabassi continue working with the Center for Technology Transfer and are considering selling the Adhere idea or combining efforts with other complementary local start-ups. “We are going to keep at it a little longer, but we haven’t made it yet,” he says.
Lawrence Berger, Adam Breslin and Pinpoint Training
Unlike many of the Great Eight, Lawrence Berger was so sure he wanted to be an entrepreneur when he started his MBA that he even wrote about it on his application. He and childhood friend Adam Breslin, now his business partner, attended Wharton at the same time with the idea of graduating and launching a business together.
They even knew what the business would be: Pinpoint Training, a company offering customized, high-end business training for attorneys, technical managers, business consultants and other time-pressed market segments. “The idea is that there are several markets where people need business training and are under served by what’s available,” Berger says. “We aren’t looking to compete with university executive education programs. We are looking to tap the short-course market – a few hours, and very specific subject matter.”
Berger and Breslin, both WG’99, spent their entire first year of business school testing the idea. His first week at Wharton, Berger located all of the attorneys in his class, then asked for their thoughts and ideas on Pinpoint Training. “The idea held up,” he says, “and continued to hold up through the Business Plan Competition.” Breslin graduated last May and Berger in December. Both are devoted full-time to launching Pinpoint Training, to be based in Washington, and have hired 18 people to help create their classes, including business school professors, curriculum design experts and 11 attorneys. “We are creating the content through a group approach to ensure that it is academically sound and practical,” Berger says. The pair are bullish, with a sales and marketing debut scheduled for May, and recently raised $1 million in seed capital.
But funding a non dot-com has been anything but easy. “People think there’s so much money out there, and there is so much money out there. But it’s for dot-coms that are trying to be enormous. There are very few people looking to really deploy less than $2 million to $3 million, so if you’re looking to start a little slower, maybe go a little more high-end like we are or be a little more service oriented, there’s not very much money out there.”
The pair have a more traditional view of business than many of their Great Eight peers. “We want to include the Internet, but we want to create a business that actually makes money and creates cash, and it’s amazing how few people are looking for that type of thing,” Berger says.
Like the others, Berger, 28, stresses that early fears about someone stealing your concept are largely counterproductive. “We strongly believe that what’s going to make or break our business is not the idea, it’s whether we execute well. Our idea has become so much more powerful and I think will be so much better accepted by the market because we’ve gotten so much feedback on it,” he says. Because of this feedback, Berger and Breslin’s idea has changed as it has evolved. For instance, their initial, near-total emphasis on live instruction has shifted, with the Internet now playing an equal role.
Ultimately, Berger sees a national rollout for the legal industry, then plans to tap other training-scarce markets, such as the medical and management consulting fields. “The vision is of a large education company that offers a very high-end product by combining the best of live instruction and the Internet.”
Chris Gatti and Living Strategies Inc.
Chris Gatti spent the first two months after the Business Plan Competition jumping through myriad hoops for a leading venture capital firm, only to come away exhausted, nearly broke and with no seed capital.
Gatti’s idea, Living Strategies Inc., won the Competition’s $10,000 Snider Seed Prize for its combination of a proprietary Web-based system for elder care planning, placement and management with a nationwide network of top-flight professional geriatric care managers. Gatti, WG’98, and teammates Lynn Dwyer WG’98 and Sandeep Wadhwa, WG’99, had worked to build the business since Gatti and Dwyer graduated. The Business Plan Competition, they reasoned, would give them even greater exposure to potential sources of seed capital. And indeed it did: after becoming one of the Great Eight, a major venture capital firm called Gatti and his team, eager to talk.
“Our first phone call, they said they’d seen us at the competition and we really knocked them dead. They wanted to schedule a meeting for the next week,” says Gatti, 33, the company’s president.
Gatti and his group worked feverishly on their presentation and to complete their due diligence, then met with the VC officials. “They said, ‘You folks are great and so is your business model. Please come back next week, and if you don’t mind, show us what would happen if we added a new component to your business,’ ” Gatti says.
Gatti and his team worked feverishly to rework their business model, adding the new component. They sat down again with the VC group, which now had grown to eight people. “During the second meeting, they said, ‘We should give you a check today for more than you want. Promise that you will cease any other fundraising efforts so our deal isn’t complicated. Please come back next week, and if you don’t mind, please rebuild your business model taking out most of your existing plan and adding these dimensions,’ ” Gatti says.
Again, Gatti and his group scrambled to make the requested changes. A third meeting took place, with 12 people attending from the VC. “They are asking us, ‘So what is it you do again? Interesting concept but you haven’t figured out exactly what you do. Come back next week and figure out what would happen if you were a pure Internet company,’ ” says Gatti.
Gatti and his team furiously reworked their business yet again. “During the fourth meeting, seven weeks after the first one, they told us, ‘I don’t think you have much of an Internet business. Come back if you figure it out.’ ” And Gatti had just about had enough. “By the end of this process, we were just about broke. We stopped chasing the VCs. We took what money we had left and spent it getting the prototype of our software done. The prototype gets finished and boom, we get funded,” he says.
Lesson learned, the hard way. Today, some nine months later, Living Strategies has a dozen employees and a national network of hundreds of elder care professionals. The company just rented a roomy, upscale office in a posh Philadelphia suburb. Wadhwa has since left the Living Strategies for another job, but the company is otherwise packed with Wharton alums working in various senior-level capacities. And Gatti, after a tumultuous start, is riding high. “Things are really good. We are bringing in top-flight people. The market response has been terrific, and we just raised an additional $1 million.” The only missing piece of the puzzle: Gatti is searching for a key marketing hire.
Gatti, a former attorney, is the first to admit that many days, he and Dwyer felt as if they were “pushing against a rock every day.” During their earlier months in business, the two practically lived in a tiny, rented office. They didn’t pay themselves, Gatti’s wife was pregnant with their first child, and times were tough. But they kept grinding away. “Everything’s about momentum. You just keep pushing forward,” says Gatti, who always wanted to start his own business, but “didn’t know if I had the guts.”
In recent months, Living Strategies has garnered media attention for its focus on finding solutions for the vast market of adults who find themselves caring for or concerned about an elderly person. About 22 million people now provide care or assistance to an elder, and an estimated 40 million more anticipate doing so in the next five to seven years. But other than Living Strategies, no single source combines comprehensive knowledge of elder needs and options with experienced local professionals who manage the process, Gatti says.
“Caring for an elder is a challenge confronting millions of people, but when they have an issue that arises, they don’t know where to turn,” Gatti says. “And that’s the gap that we fill. We’re building up our national network of service providers who are all professional, master’s level trained, nurses and social workers, and giving them the best tools via the Web to help people find ways to help an older person live optimally.” Gatti, who is in the midst of discussions with institutional investors, predicts rapid growth, the need for many more employees in the near future, and a likely IPO. “Believe in yourself and believe in your business. Consider what others have to say, but if you’ve done your homework, don’t let someone else force you to completely rebuild your business to fit their model,” he says.
Kimberly Guise and Nails on the Fly
Kimberly Guise, WG’99, had the entrepreneurial itch when she applied to Wharton. But Guise admits she got swept up in “the power of group think” during her first year, when most of her peers were focused on investment banking and consulting, and took an internship in investment banking that first summer to check it out.
She quickly realized it wasn’t her calling and spent her entire second year focused on starting her own company. What took shape was a company called Nails on the Fly, a nail care/manicure business for time-pressed women traveling through airports. After her success in the Business Plan Competition, Guise, 30, had every intention of pursuing Nails on the Fly full-time once she graduated. In anticipation of this, she began networking and talking to potential investors, including Paul Francis, the CFO of Priceline.com and her mentor during a stint at chic retailer Ann Taylor in the mid-1990s.
Guise flew up to Stamford, Conn. to meet with Francis and made her pitch for Nails on the Fly. Francis listened intently, but then turned the tables on Guise. He asked her to consider coming to work for a new business Priceline was hoping to launch. Intrigued, Guise then met with Priceline founder Jay Walker – a meeting she says was a turning point in her decision not to pursue Nails on the Fly. Walker challenged Guise about the wisdom of focusing her energies on Nails on the Fly, citing its likely size limitations and the potential real estate snags that often come with airport retail space. “He was brutally honest about where I was in life and whether I should spend the next few years on a business that didn’t have ‘really big’ growth opportunities,” Guise says. If Guise wanted to be in a start-up environment, Walker asked, why didn’t she consider assuming a major role in the Priceline WebHouse Club, a grocery offshoot of Priceline that, at that time, only had one employee. At WebHouse Club, he told her, Guise would learn from the experts and gain first-hand knowledge on how to quickly launch a business with tremendous growth potential.
Guise decided to go for it. She started as director of business development of Priceline WebHouse Club the day after she graduated from Wharton and immediately recruited four other WG’99 classmates – Vishal Daga, Dan Weiner, Andrew Rogers and Kathy Hwang – to help grow the new business. Priceline WebHouse Club launched on November 1 in the New York, New Jersey and Connecticut markets. More recently, the service expanded to the Philadelphia and Baltimore/ Washington D.C. markets, and officials expect the WebHouse Club to be available nationwide by the middle of this year. “It’s basically the same ‘name your price’ model that Priceline has become known for, but in the grocery market,” Guise says.
Today, after helping to manage many aspects of the start-up process, Guise feels it was the ideal environment for an aspiring entrepreneur. “You have to be willing to do it all – the glitz, glamour and strategy – but you also have to handle things like the payroll, hiring, and going to supermarkets to check the price of a can of tuna.” Building the right team was without question the biggest challenge. “We have gone from five people to 200 in eight months. But going from five to 50 was the hardest, because every person you hired had to come in and perform immediately.” The hyper-growth mindset that comes with a start-up, Guise says, can make for a chaotic environment that can be difficult for employees with traditional corporate backgrounds. “What you are working on, who your boss is and who reports to you are all things that seem to change almost daily,” she says. “We joke about the ‘strategy du jour’ and at times it can drive you crazy, but ultimately it’s what makes the job so interesting.”
Guise also admits she and her fellow Wharton MBAs have taken a lot of heat for “overanalyzing and over researching.” Jon Otto, the WebHouse Club’s CEO, would often chastise the group for relying too much on book smarts and not enough on common sense, Guise says. “Jon’s mantra for us during the prelaunch period was to think ‘fast and wrong,’ ” recalls Guise. “It was so counter to the way we had been trained to work, but without this mindset, we would have never launched on time regardless of the mistakes, and that’s what really mattered at the end of the day.”
And while she says she would happily invest in an airport nail care business, she doesn’t see a Nails on the Fly chain in her future. “It’s just not scalable enough,” she says. “But it’s a great business model, and I know that someday I’m going to see it somewhere and I’ll kick myself and think ‘That could have been me.’”
