Dot-com millionaires still looking to change the world: Biggest challenge is what to do next
By Mark Evans
Financial Post
11/28/2002
zli.bus.umich.edu
There is something engaging about a billionaire who answers his own e-mail within hours of receiving it. Then again, Mark Cuban isn't your typical ultra-rich businessman. He made a cool US$2-billion at the height of the dot-com bubble when his four-year-old firm, Broadcast.com Inc., was bought by Yahoo Inc. for US$5.7-billion. Since then, Mr. Cuban has enjoyed his wealth and celebrity.
The highlight was buying the Dallas Mavericks basketball team for US$280-million in 2000. His role as owner, head cheerleader and chief marketer includes personally answering e-mail from fans and journalists.
While Mr. Cuban is one of the highest profile -- and richest -- people to come out of the dot-com era, he is just one of many young, successful entrepreneurs who hit the financial jackpot by selling their companies or taking them public at the right time.
Not surprisingly, few of them have retired. After all, anyone who will happily work 14-to-16-hour days to pursue an entrepreneurial dream is unlikely to cut out for a life of full-time leisure.
As one of Abatis Systems Corp.'s first employees, John Seminerio had more than enough money to live a comfortable life when the telecom software maker was purchased by Redback Networks Inc. for US$636-million in July, 2000.
So Mr. Seminerio used his engineering skills to design a dream home after leaving Redback, complete with a high-tech electronics and control system. The problem, however, was that once the house was built, he needed another project. "I can't just sit around forever," he said.
"Everyone dreams of going to Hawaii and watching the sunset, but after you have seen the 45th perfect sunset in a row, you start to get bored."
Mr. Seminerio and Abatis co-founders Adam Lorant and Paul Terry have started a new company called OctigaBay Systems Corp. The company has been operating in stealth mode as it raises money -- Mr. Seminerio would only say that OctigaBay is focused on developing corporate technology.
The biggest challenge for many entrepreneurs is what to do next? How do you get excited about Act II when Act I was a huge hit? When you get into a new venture, how does one benchmark success when promotions, raises or even millions of dollars more are no longer relevant or important?
Mr. Cuban, who became a millionaire in 1990 when he sold MicroSolutions Inc. to CompuServe Inc. for US$5-million, said his criteria for new ventures is simple: "Is it fun? Does it get my competitive juices going? Can I make money at it or, in the case of the Mavericks, does the fun outweigh even the money?"
To date, the 43-year-old Mr. Cuban's biggest investment -- outside of the Mavericks -- has been HDNet, the first national television network to broadcast sports and entertainment shows using high-definition technology.
Tom Kinnear, a professor at the University of Michigan's business school, said many people become serial entrepreneurs because they thrive on the excitement of building something new, developing strategies, making deals and finding money. "You can't do that sitting around or playing golf," he said. "It's a lot like a professional athlete who retires but can't."
A good example of Mr. Kinnear's theory is Ottawa entrepreneur Antoine Paquin, who has scored twice by selling Skystone Systems Inc. in 1997 for US$89.1-million and Philsar Semiconductor Inc. for $186-million in 2000. "Making money is important but it is a means of keeping score," he said. "A majority of us will re-invest the money we make."
Mr. Paquin said selecting the next entrepreneurial vehicle involves many of the same ingredients as earlier projects. You want to work with a good team on an idea that hasn't been done before. At the same time, he said, people have high expectations because of your previous success.
While Mr. Paquin is taking his time before deciding what to do next, Evan Chrapko wasted no time after Toronto-based DocSpace Inc. was acquired by Critical Path Inc. for $530-million in late-1999.
Shortly after the DocSpace deal, Mr. Chrapko, his brother, Shane, and their business partner Val Pappes invested $2-million in Edmonton-based Exceedia Inc. A year later, the Chrapko brothers took on senior management roles, and have been quietly toiling away at the business intelligence software maker, which was renamed Time Industrial Inc.
Mr. Chrapko said he is seven years into a 20-year business plan to create high-tech companies that attack points of pain. Other than buying a Lamborghini, Mr. Chrapko says he has eschewed the trappings of success and life in the fast lane. "Why am I not golfing?" he said. "We will get there but we are all right now at the peak of our productive years. It would be a little bit of a shame to sideline all that. I am a horrible golfer and I don't do some of the other standard leisure stuff well."
Other entrepreneurs have taken a slightly different route by working with venture capital firms. This provides them with experience on the other side of the fence, allowing them to apply their high-tech expertise to a variety of opportunities. Another benefit for VCs is that if an entrepreneur gets excited about a particular company, they get to reap the benefits of his/her experience and track record. Ventures West Capital Ltd., for example, has become a stopover for many entrepreneurs creating an entrepreneur-in-residence program.
The VC path was taken by Mark Janoska after Extreme Packet Devices Inc., a semi-conductor designer he co-founded in 1999, was acquired by PMC-Sierra Inc. for US$415-million in March, 2000. Mr. Janoska fulfilled a contractual obligation by working at PMC-Sierra for two years. Although he was happy there, he wanted the freedom to not have to answer to anyone -- a typical stance by successful entrepreneurs.
After playing around for a year with the idea of retiring, he accepted a job at VenGrowth Capital Partners because it offered the best of both worlds. "I was too burned out to work for another company from the ground up," he said. "Instead of being involved in something day-to-day very intensely, why not stand back and see if I could paint with a larger brush."
One area where few young, wealthy entrepreneurs have become involved is philanthropy. Mr. Kinnear, who has done fundraising for the University of Michigan, said donating money is not something a typical 35-year-old thinks about. It is not that they don't want to do social good, he said, it is more that many of them believe they need their money for other ventures.
An exception to the rule is Montreal-born Jeff Skoll, who was one of eBay Inc.'s first employees. Mr. Skoll's stake in the online auction house, which cost him $68,000, made him a multi-billionaire. Rather than go into another high-tech venture, he has devoted most of his time to charity work since stepping away from eBay's day-to-day operations two years ago.
"It starts with the premise that a lot of problems in the world are caused by the gap between the haves and have-nots," he said. "Whether that is poor community vs. rich community or poor nations vs. rich nations, I see a lot of the roots to problems in the world deriving from that inequity."
To handle his philanthropic activities, Mr. Skoll created and financed a non-profit foundation that provides money and consulting services to social entrepreneurs and organizations working on interesting social projects. Mr. Skoll also started a film and TV production company called Ovation Entertainment that produces documentaries on social issues and people doing good work.
Mr. Skoll said his post-eBay career is motivated by his desire to create a better world.
"I grew up on the Ayn Rand philosophy of virtue and selflessness," he said. "There are a lot of things going on in the world that are very frightening. It seems that the ultimate benefit of this work is it creates a better world."
Mr. Skoll's commitment to philanthropy is shared by David Seguin, who became a millionaire when Ottawa-based FastLane Technologies Inc. was acquired by Quest Software Inc. in 2000 for US$100-million. Mr. Seguin's post-FastLane efforts have included an active role and directorship with the Ottawa Hospital Foundation.
"Giving to charities, friends and family can truly change someone's life," he said. "That certainly tops the feeling of driving a new Porsche or a new home. My kids won't remember me for the cool cars that I drive, rather they will remember what I did for my community, my family and my friends."
Robin Louis, president of Ventures West in Vancouver, said that most young, successful entrepreneurs are looking to do something exciting that changes the world -- whether it is designing next-generation chips, leading-edge software or simply improving the world around them.
"They could just go away to the beach, but they would be bored and it would not be very fulfilling," said Mr. Louis. "They want to do something big and important. They are not put off by the risk because there are always huge risks. The risks, in some sense, are part of the excitement."
THEY HIT THE JACKPOT AND KEPT GOING:
JOHN SEMINERIO, 44
BECAME A MILLIONAIRE WHEN Abatis Systems Corp. was purchased by PMC-Sierra Inc. for US$415-million in 2000.
CURRENT JOB partner, Magellan Angel Partners; co-founder, OctigaBay Systems Corp.
QUOTE " After you have seen the 45th perfect sunset a row, you start to get bored."
MARK JANOSKA, 36
BECAME A MILLIONAIRE WHEN Extreme Packet Devices Inc. was acquired by PMC-Sierra Inc. for US$415-million in March, 2000.
CURRENT JOB Partner, VenGrowth Capital Partners
QUOTE "What motivates me? It's learning new things and about new areas. I can't stand golf."
JEFF SKOLL, 36
BECAME A MILLIONAIRE WHEN ebay Inc. went public in 1998.
CURRENT JOB Philanthropy through Skoll Community Fund and business interests through Capricorn Partners
QUOTE " Our success is based on the people we work with and the metrics are different for each one.
ANTOINE PAQUIN, 35
BECAME A MILLIONAIRE WHEN Skystone Systems Inc. was acquired by Cisco Systems Inc. in 1997 for US$89.1-million, and when Philsar Semiconductor Inc. was sold to Conexant Systems Inc. for $186 million in 2000.
CURRENT JOB Working on his next project
QUOTE "Making money is important but it is a means of keeping score."
EVAN CHRAPKO, 37
BECAME A MILLIONAIRE WHEN Docspace Inc. was purchased by Critical Path Inc. for $530 million in December, 1999
CURRENT JOB President and CEO, Time Industrial Inc.
QUOTE "Why are we not out golfing? We will get there but we are all right now at the peak of our productive business years. "
MARK CUBAN, 43
BECAME A MILLIONAIRE WHEN MicroSolutions Inc. was sold to CompuServe Inc. for US$5-million in 1990.
BECAME A BILLIONAIRE WHEN Broadcast.com was acquired by Yahoo Inc. for US$5.7-billion in 1999.
CURRENT JOB owner, Dallas Mavericks
QUOTE "My investment criteria is: Is it fun?"
DAVID SEGUIN
BECAME A MILLIONAIRE WHEN FastLane Technologies Inc. was acquired by Quest Software Inc in 2000 for US$100 million.
CURRENT JOB Runs business interests through privately owned ClearSummit Investments Inc.
QUOTE "I don't want to do something big. I want to do something I enjoy doing." |
