Founders at Work.pdf

434 Founders at Work
The Boston Phoenix had personal ads in back, but then they moved in this
thing called voicemail ads. When I heard that, I said, “That’s kind of an incredible
idea.” It generates revenues—people call these numbers and you pay per
minute—but you can also hear the person, you get a feel for what they’re like. I
said, “You know, that concept could be applied to companies. Chief financial
officers and executives could communicate to the shareholders using telephone
technology.”
Telephone technology in the early ’90s was really hot. It seems like ancient
history now, but 800 numbers were coming in—interactive voice response systems,
voicemail was all fairly new technology. The concept was to put together
an 800 line for each company, which was a customized information service, a
hotline for shareholders.
A typical pitch was one we made to IBM, who became a client. We had
done some research. We said, “You guys are spending about a million and a half
dollars on printing quarterly reports. Every survey that’s been done, including
your own, shows that most shareholders think of those as junk mail. We propose
to stop sending quarterly reports out. Replace the service with what we call our
Shareholder Direct service, so all your interested shareholders only have to
make a toll-free call to your 800 number and they can then hear the latest quarterly
results, answers to frequently asked questions; and they can hear an
overview of the company. If you choose to, they can hear Lou Gerstner or the
chief financial officer commenting about the quarter.
“Based on our analysis of your shareholder base and the demographics, we
think that will cost you about a quarter million dollars a year. So you’re spending
$1.5 million now. You can take $1.25 million and drop that to bottom line in
savings. Spend a quarter million for our service, and the shareholders that are
interested in getting the information can get it much faster and in a more personal
form than they get it now.”
That’s how we got started. It generated cash immediately, because we
charged what we called a “subscription fee.” We didn’t want to call it this, but it
was really a retainer fee. We called it a subscription fee, billed in advance every
quarter: $4,000 in advance plus a per-minute charge.
And rather than going off and buying all the telephone systems ourselves,
which would have been my natural inclination as a technology guy, I outsourced
that to a large firm in Omaha called West Interactive. So I had no capital costs.
We turned profitable in the summer of 1994.
Livingston: That’s less than 2 years.
Gruner: Yes. We had a seed financing in July of ’92.
Livingston: Who were your investors?
Gruner: It was just a small group of about 8 to 10 of my friends and business
associates, who put in about $25,000 each. We raised $276,000. I nursed that
money very carefully, worked without a salary for quite a while. It turned profitable
in the summer of ’94, and I just grew the company organically until I sold
it to NASDAQ in January of 2006.