Wavve catches $10M in launch
amcity.com
Mark Larson Staff Writer
Bob Ingraham knew all along his business plan for a national Internet service company called Wavve Telecommunications was good as gold.
So he wasn't altogether surprised this summer when he nailed down $10 million in start-up capital from a far-flung board of directors, managing to score 40 percent ownership of the Rancho Cordova company for himself.
Wavve Telecommunications is set to go public. It will fill a publicly traded Canadian shell company, owned by Wavve's new Toronto-based board. By the end of the year, its stock will be trading on the NASDAQ.
If the company's stock gets no further than a dollar a share, Ingraham and his six managers will be millionaires.
"We've got a plug-and-play business unit here," says the boyish-looking Ingraham, who at 35 is already a telecom veteran.
He intends to become the Internet caretaker for businesses in 43 second-tier markets in the United States and Europe.
"The key to success will be taking the voodoo mistress-high priestess out of the Internet and making it useful for business," he says.
An `old dog' in Internet years: Ingraham is as friendly and unassuming as the can of Spam that sits near his computer.
Sitting in his newly leased 30,000 square feet of space on Tech Center Drive, don't let his mild demeanor throw you off. He has a sophisticated understanding of the Internet, and he's a schmooze-savvy deal-maker.
Sheldon Colin had Ingraham set up his Internet service provider company, Netshel, five years ago in Grass Valley. The operation has been glitch-free.
"He was just like a turn-key dude," Colin says. "I gave him the dough and he made it happen."
In the Internet, where one's career is measured in dog years, Ingraham at 35 is an old dog.
"A long time ago I worked in a GTE office where there was an old guy who knew how to do everybody's job," Colin says. "Bob's that old guy. He's got the big picture."
A growing Internet demand: While the Internet needs of big companies in large urban centers across the country are already being handled by third-party providers, the market is still virtually untapped in second-tier cities.
Ingraham, who has experience setting up Internet backbone services across the country, is targeting mid-sized businesses with annual revenue between $3 million and $50 million.
His local headquarters will manage all the online needs of a company -- such as e-commerce, billing, inventory control and auditing of employee use of computers -- for a flat monthly fee.
A client can provide its own equipment, or Wavve will. The system can be run and monitored 24-hours a day at Wavve headquarters, or via connections from a client company to Wavve's HQ.
Ingraham is quick to note the company is far from the usual dial-up Internet service provider. ISPs, in fact, will be among his clients. His company will monitor ISP systems to make sure customers get access and no hackers.
Two companies, Exodus in Washington, D.C., and AboveNet in San Jose, are already in the same business, Ingraham says. But because the market is so big -- the market for outsourced e-commerce business alone is estimated at $5 billion -- he figures there's enough to go around.
Wavve expects to bring in $14 million in revenue over the next 12 months. Its first profit should come at 13 months. Second-year revenue is projected at $35 million; third-year at $50 million; $250 million in five years.
Net income is expected in the 30 percent range.
Wavve plans to roll out in San Diego, Portland and Salt Lake City in its first fiscal year, adding one market per quarter. It hopes to have an East Coast presence and enter Europe in late 2001.
A tidy start-up amount: Getting $10 million in venture capital is a little above the low-end threshold most big venture companies are looking for, said Bruce Dravis, a venture capital attorney specializing in technology.
He points to ShareWave Inc. in El Dorado Hills. That company, which makes wireless home network technology, has so far gathered $42.5 million in venture money, says company spokesman David Smith. But then again, ShareWave is 3 years old. Its investors include blue chips like Intel Corp., Microsoft Corp., Cisco Systems and Ameritech.
Then there's Telestream Inc., an 18-month-old Grass Valley start-up that compresses video for transmission over the Internet. It has nabbed $13.5 million in three rounds of venture capital so far.
Still, Dravis says, "Any time you can get $10 million and you're an entrepreneur, you're having a good day."
Racking up experience: Ingraham's pitch for venture capital held water because he could show a group of hard-nut investors that he really knows Internet technology and what businesses need from it.
Born in New Jersey, raised in Concord, Ingraham always loved computers. At 17 he set up a genealogy database for a teacher he knew, netting $500.
He did some hacking into computer systems, but says he wasn't a vandal; he was just looking around to figure things out.
After a year of college, he hit the Silicon Valley in 1983 and caught on with a company where he wrote a speech recognition software program with a vocabulary of 255 words. It was turned into a prototype for speech-prompted phone dialing.
That's about when he began playing around with something then known as Arpnet, a research network linking universities like UC Berkeley and USC. It's now known as the Internet.
Ingraham worked a year at Hewlett-Packard Inc. on computer circuitry used in Ford Motor Co. vehicles, then left after a year to finish his business and electrical engineering studies at UC Davis. But he never finished. "I just kept getting pulled out into the industry," he shrugs.
He was drafted to Pleasanton to work on a palm-top computer that could send data over the Internet via a radio modem. In 1994, he set up a software program for Cardinal Health, a pharmaceutical distributor, to automate phone-in prescription orders. That was the year he saw the Internet as an emerging giant.
In January 1995 he started up Promedia, an Internet service provider in Rancho Cordova, and won a contract to put Sacramento City Hall on the Internet.
He sold that company a year later and joined Phoenix FiberLink, where he set up Internet links for business in Sacramento, Salt Lake City and Reno. That company was bought by Brooks Fiber, which in turn was bought in 1997 by Worldcom, the global long-distance carrier.
Worldcom asked Ingraham and his 30-member team ("we were like this rogue unit with no managers") to build out 53 cities with Internet service hubs. The company committed $100 million to the project.
"I was shocked. I was stunned," he recalls.
But after building out 12 cities, Ingraham was asked to help figure out technical difficulties arising from overloaded Internet backbone switching hubs, which were about to collapse due to their increasing loads.
In June last year, when MCI merged with Worldcom, the company asked Ingraham and his Internet team to move to Dallas. But the crew, having put family and roots down in Sacramento, decided they wanted to stay.
In an effort to stay put, Ingraham presented MCI Worldcom with his plan for an Internet business in second-tier markets. They turned him down, so he and his core unit left the company and set out to look for venture capital.
The rest may very well make local business history.
Red-eye to the Big Apple: One of the feelers he put out was to an investment banker in Bermuda who was connected in the Silicon Valley. It was through that connection that two months ago, in June, Ingraham was suddenly called to make a pitch to an unknown board of directors in New York City.
Not later, they said -- now.
They flew him in on an overnight red-eye. After a harrowing cab ride, he arrived at a swank hotel on Fifth Avenue overlooking Central Park. It was 7 a.m.
After four fitful hours of sleep, he gathered himself to make a luncheon pitch before a large board of directors assembled high in the hotel. Groggy, he squinted at his jury.
"It looked like the freakin' Mafia," he says. "I was sweating in my three-piece suit."
The board members were from Italy, Canada and Ireland. They chatted among themselves in multiple languages about their holdings in oil companies and gold mines, far from the wired world of the Internet.
Instead of eating the gourmet lunch placed in front of him, Ingraham started to make his pitch. He spoke excitedly, extensively of his 43-city rollout plan and of his plans for Europe.
He was met by poker faces.
"How much money do you need?" he was asked.
"Seven to 10 million," he said.
"Could you do it faster if we gave you more money?"
A week later he gave the company a tour of his jobs in Sacramento. Terms of a deal were then discussed in the Sheraton Hotel in Rancho Cordova.
The board owns three international companies. One, Techno Petrol, is in oil. Another, Bolivar Goldfield Ltd. is in mining. The third is Gran Colombia Resources Ltd. It was set up to run a gold mine in Columbia, but assets were liquidated when the mine failed. Now, it's a shell company whose stock is worth pennies on the Toronto Stock Exchange.
Their proposal was for Ingraham's team to receive 40 percent ownership. Wavve would be folded into the shell and rolled over to the NASDAQ stock exchange by year's end.
But after they flew back East, Ingraham got a sudden call. The deal was off. They were nervous.
"I was hot," he says. He'd been led to the altar by a runaway bride. His other efforts to raise capital had been put on hold. Now he was back at square one.
A month later, the board's financial people called again. They had looked deeper into this Internet thing and had decided Ingraham's pitch was on the mark. They wanted him to come to Toronto and do the deal.
No, Ingraham said. You come here.
They came. He got an extra $250,000 for start-up expenses, and, finally, all systems were go.
By Oct. 1, Wavve's new building will be officially open for business with his team of 62 tekkies. |
