This article appears in today's online WSJ:
September 28, 1998
CheckFree's Pete Kight
By PAULETTE THOMAS
It's a romantic refrain from entrepreneurs who made it big: Oh, to go back to those glory days of launching a business from a garage as starry-eyed innocents, full of big dreams and endless energy.
Get real, says Pete Kight. The 41-year-old founder and chairman of CheckFree Corp. says it's impossible for fledgling entrepreneurs to overestimate the toil and sacrifice a new business will require. The early years are full of financial pressure, grunt work you can't afford to hire out, and unrewarding chases to dead ends. The demands fracture families and exhaust the principals.
"The fact is," says Mr. Kight, "the vast majority of businesses are just hard work beyond people's wildest expectations."
He warns: "You'd better be prepared, personally and financially."
It was a lesson that held true this summer, when the high-flying company suffered a devastating blow to its stock, losing roughly half its value in 24 hours after Mr. Kight warned Wall Street that revenue for the year ending June 30, 1999, would be lower than expected. But Mr. Kight isn't worried, having had his share of ups and downs. He considers the shortfall to be a temporary setback, and says his broader business plan is on track. "This pales in comparison to those tougher days," he says. Now, he says, "We own our own destiny."
Running Track, Then a Firm
In 17 years, Mr. Kight has built the leading provider of electronic-billing services in the U.S., employing 1,500 and serving hundreds of businesses and financial institutions. Estimated revenue next year: $270 million.
Back when he was a philosophy major at California State University, Bakersfield,his primary interest was actually track and field. His event was the decathlon. He dropped out of college after an injury, and started managing a chain of health clubs in Houston.
In what he calls "blissful ignorance," he began looking for a way to make membership re-enrollment automatic rather than give members a monthly or yearly opportunity to drop their memberships. In talking to
various businesspeople, he hit upon a system used by life insurers to debit accounts for policy premiums. He wondered: Why couldn't such a system apply to other businesses?
Here, he decided, was a business opportunity. It was 1981 and he was 24 years old.
He moved back to his hometown of Columbus, Ohio, where he managed a string of apartment complexes and lived in his grandmother's basement to save money. It was also where Banc One Corp., an industry pioneer,
was based. He managed to draw the interest of the bank's top executives, who agreed to work up an electronic bill-payment system if Mr. Kight could find anyone who actually wanted to use it.
Mr. Kight spent his time working with the bank executives on the system and knocking on doors of apartment renters. He asked tenants to agree to electronic rent payment -- allowing their bank to debit their checking accounts for their rent. Many went for it. And he signed up health clubs too.
He couldn't afford a computer, so he leased time on the computer of the apartment-complex owner. Nights he did the tedious data-entry work as he painstakingly won accounts. A programmer worked for him by the hour. That's how it went for three years.
In the meantime, he married. But while his door-to-door canvassing was an excellent way to learn first-hand what consumers thought about on-line banking, it was a terrible way to spend time for a newlywed. His wife "just basically never saw me," he recounts. The marriage
lasted one year. That's when Mr. Kight realized he had been unrealistic about the demands of building a business.
Giving Up Domestic Life
So he gave up on marriage temporarily and concentrated on courting bigger accounts instead. He took his show on the road, with zero money in the bank. He stayed at the worst, cheapest hotels, the kinds of places that gave 2-nights-for-1 coupons. A low point occurred in a ratty New York hotel, where plaster crumbled onto his head as he showered. He tried to shampoo his hair holding a towel over his head, as plaster collected around his feet.
He looked for every angle to exploit. He spoke for free at trade shows to get access to their coveted mailing lists. At one health-club show, he walked around the floor, looking at nametags and muttering the names into a tiny tape recorder. Matching the names with the mailing list, he sent personalized letters, asking to pitch his
business to them. (He recalls the happiness of hearing the mail arrive at his office one Saturday with a thud that translated into a 34% response rate.)
At the same time, however, he wasted valuable time trying to get venture capitalists interested. None wanted to invest, but they all wanted to hear about it, resulting in days and weeks of meetings and major frustration. "It was an absolute disaster," he says.
What kept him going was his belief that his vision wasn't just a business, but a brand new way of doing business. "It was about 50% the excitement of actually doing this," he says, "and 50% fear that it wouldn't work."
Change in Fortune
Then in 1984, an attorney he knew recommended approaching life-insurance companies, since they were familiar with the backshop payment process that he learned about back in Houston. "Boom!" he says. "In about three months we put together four insurance
companies in Columbus for $3 million" in investment. CompuServe Corp., a Columbus Internet-service provider, began offering CheckFree's system to subscribers that same year.
It wasn't until 1985 that he married again, when he trusted himself enough to take some weekends off and have a life. He made certain his new wife, Terri, understood the demands on his time. She was fine with
it. She had her own ambitions -- getting her master's degree in architecture and becoming an architect. They agreed not to have children until he could be home every night at 7 p.m. It took eight years for that to happen, and now they have a four-year-old daughter and a two-year-old son.
But even now, after taking his company public in 1995, there are bumps in the road. This summer, some of his big bank clients began pulling back on their marketing of their Internet banking services that CheckFree provides, as many focused on mergers and acquisitions. Then Mr. Kight lowered the company's revenue forecast and on Aug. 12, the stock plummeted.
"You can't help but feel like you let people down," he says. "It's a short-run problem, but that doesn't make it any less painful.
-- Ms. Thomas is a Wall Street Journal reporter in
Pittsburgh.
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