In today's high-tech mythology, entrepreneurs who don't have venture
capital right off are losers. After all, product cycles get shorter
everyday. And nothing helps like cold cash when you're trying to get a
product out first. Good thing Glenn Ballman didn't pay all that much mind
when he started out in business two years ago. The Vancouver (B.C.)
entrepreneur had an idea that was really novel at the time. His Web compa=
ny,
then called MegaDepot.com, aggregated shopping and services aimed at
Canadian small businesses. Most sites just sold one type of product. And
small-business offerings were still few and far between. No VCs were wait=
ing
in the wings to fund Ballman. That didn't deter him, though.
Ballman, then 25, had $20,000 (U.S.) of his own for startup money -- whic=
h
got him a windowless walk-up for an office with a few sticks of furniture.
When visitors called, Ballman and four colleagues would dash down to an
obliging furniture store on the street below and lug back leather sofas,
plants, and artwork. They even borrowed computers to pad out the office's
paltry array. "If they had come back in two hours, [the place] would have
been empty," he says. Twice, Ballman pawned his CD player -- his only ass=
et
aside from an 11-year-old Renault -- to keep the phone service on. Lackin=
g
anything more portable, he hauled his server to client demonstrations. Wh=
en
short of gas money, he crashed in a sleeping bag on the office floor.
"It's the Wild West -- you've got to get things done, and little details
like furniture are inconsequential. Working on the bigger business model =
was
all that mattered," he says with a shrug. In February, 28 months after he
began, his company got $11.7 million in venture capital from Mohr Davidow
Ventures, Internet Capital Group, Stanford University, and individual
investors. That gave the fast-growing company the cash to launch a site f=
or
the U.S. market, Onvia.com, and capitalize on the success of its Canadian
business, which was becoming a force to be reckoned with in that country'=
s
online office-supply market. The company, which has taken the name Onvia.=
com
Inc., also quadrupled its staff from 15 to 60 people in 90 days, expanded
its office space to 20,000 square feet from 1,200, and launched a glossy =
ad
campaign.
Onvia.com's scrappiness endeared it to the VCs. "We've heard some crazy
stories from them," says Nancy Schoendorf, a general partner with Mohr
Davidow. "But that's one of the reasons they struck us as such outstandin=
g
entrepreneurs. Right now, times are very strong for lots of companies, bu=
t
every company also goes through tough times. You've got to be sure you ha=
ve
entrepreneurs willing and able to drive the company through those times
too." Ballman is unabashed about his group's single-mindedness: "It's a
company full of triathletes, long-distance runners, mountain bikers, and
hockey players. We'd sooner totally burnout and collapse and end the day
like that than be just an OK player."
A Saskatchewan farm boy, he surfed around the South Pacific for a few yea=
rs
after college, then worked for an E-commerce company, where he started
thinking about Web companies that serve small businesses. In 1996, he and
Rob Ayer, his former boss, struck out on their own with the original
MegaDepot.com idea. It took them eight months to develop proprietary
software that all their suppliers could use and four months to persuade a
bank to let them accept credit-card orders over the Internet.
Glenn Ballman
Their model was to get wholesalers to send the goods directly to the
customer -- after slapping their company label on them. That meant gettin=
g
big companies used to dealing in small quantities. "They had never done
shipping with a company like ours, and we had to teach them how to do it,
endure their laughter, and come back again and again," says Ballman. The
cash situation was always dire. As a new company without assets, no one
would give the venture credit. Ballman's $20,000 ran out fast -- on Day 9=
0
of his venture's short life. Unfazed, he launched a second company,
SunCommerce Corp., that designed E-commerce sites. Ballman, Ayer, and Ede=
n
Clark, a third principal, found clients by keeping abreast of new sites.
They would then approach companies' competitors and offer to get them up =
on
the Web in 60 days. All SunCommerce's proceeds went back into MegaDepot,
often within the hour -- especially on payday. Their biggest challenge wa=
s
building a customer base with no marketing budget. The entrepreneurs urge=
d
customers to promote the company to friends via E-mail. They got clients =
to
share customer lists and ran contests for PalmPilots.
By January, 1998, five months after the site went up, revenues reached
$100,000 a month, and kept growing by 30% to 40% a month after that. "Tha=
t's
when we knew it was a viable concept," says Ballman. They weren't rich ye=
t,
though. They lured top job prospects using founders' shares, not salaries=
,
as bait. They were constantly angling for ways to get cash. Even new hire=
s
were fair game. "'How much open balance do you have on your credit cards?=
'
isn't a standard interview question, but when we had lunch, and they took
out their wallet, we'd think, 'Hmm, a gold card,'" Ballman says with a
chuckle. "Every day, we had to be so creative and come up with new ideas =
to
stretch dollars," recalls Clark, now public-relations director. "It was
stressful, but at the end of the day, we'd say: 'We're going to look back
and laugh at this someday, because we're all going to be millionaires.'"
In June, 1998, they moved the company to Seattle -- their plan since Day
One -- to be closer to the vast U.S. market. Last November, six angels
pitched in $50,000 each, enabling the company to develop an investment pl=
an.
At that point, the site listed 25,000 products, as well as services such =
as
payroll outsourcing, marketing tips, Web design, Internet access,
long-distance phone services, debt collection, and recruiting. In January=
,
1999, Ballman finally started looking for venture capital. Investor appet=
ite
was whetted by market research predicting that the business-to-business
markets online will far outstrip cyber consumer markets. Onvia.com receiv=
ed
term sheets from five VC groups over 10 days in February. The company clo=
sed
a deal with Mohr Davidow in 23 days. About 70% of the funding will go to
marketing, advertising, promotions, and partnerships, the rest to equipme=
nt
upgrades and staff.
But Ballman didn't give away the store: He still has 20% equity and other
employees have 60%. The penny-pinching continues: Employees share hotel
rooms on trips and eat take-out food. They still work in an open room
without dividers. They have permitted themselves a few perks: Ballman's n=
ew
car, a 13-year-old Honda Accord, is worth $2,000 -- twice as much as his
Renault was. And the company did finally buy those three leather sofas fr=
om
the furniture store. "At a good price, of course," says Clark with a laug=
h.
Tushar J. Mehta
email: [email protected]
voicemail: (206) 405-2335