Andreini and Burger are an unlikely duo. With shoulder-length dark brown hair, a ready smile, and a walk that resembles a run, Andreini peppers his language with words like neat and cool. Burger, 50, has closely cropped gray hair, was an assistant district attorney before he founded and sold his own business, and is forever reminding Andreini about the 10-Times Rule, which says, "If you think something is going to take one unit of time, always expect that it will take 10 times that."
The two hooked up through mutual friends who knew of Andreini's sputtering START and Burger's nose for an opportunity. To Andreini, Burger brought more than money and contacts; he brought an ability to play ball with the big guys. "I pride myself on knowing what I don't know," Andreini admits. And right then, what Andreini knew he didn't know enough about was how to negotiate the web of deals with heavy hitters like Metropolitan Life Insurance and MCI -- partnerships key to START's viability. Not only did Burger have contacts capable of opening doors at those companies, but his years as a lawyer and company builder gave him an edge that Andreini desperately needed. "Without Lew there'd be no START," Andreini says. Yet Burger quickly adds, "This is Larry's idea," making it clear this lawyer thrives on his young partner's unbounded energy and fresh thinking.
In September 1988 the two decided to combine their energies, and Andreini left his dusty warehouse desk and set up shop in Burger's Scarsdale, N.Y., home.
* * *
"START's greatest challenge is helping consumers overcome the idea that it sounds too good to be true," Burger points out. "It's analogous to handing out dollar bills on the street corner. People will pass it by just because they're sure there's a catch." To combat the credibility question, Andreini and Burger made an early commitment: "Every step we take has to reek of credibility." Every partner START hooked up with had to be blue-chip.
It was that conviction that brought Andreini and Burger to the New York City headquarters of Metropolitan Life Insurance. The second-largest insurance company in the United States, MetLife has 40 million customers; one out of every four Americans is a policy owner. This was the kind of firepower START desperately needed. Thanks to a friend of Burger's, the two made a presentation directly to a room of senior executives.
For the proposed START program, Andreini and Burger suggested that MetLife drop to $100 the typical $5,000 initial investment required to open an annuity. To cover the high administrative fees of an annuity, they offered MetLife the interest earned on the escrow savings accounts where consumers' money would sit between the time it was earned through their purchases and the time it was swept into the annuity, amounting to several million dollars a year. To give MetLife further incentive, Andreini and Burger estimated that, in the next 10 years, they'd bring 10 million new customers MetLife's way.
"It's a great way to get 20- to 49-year-olds thinking about retirement savings much earlier than they normally would," explains James Valentino, a senior vice-president at MetLife. Typically, an annuity holder is 55, which means MetLife has that money for only four years. Baby boomers still locked in their consumption years don't usually consider annuities. But START would bring this younger generation right to MetLife's door. Not only would MetLife have the use of baby boomers' money much longer; it would also gain an audience to which other MetLife products could be sold.
Twelve days after its first meeting with Andreini and Burger, MetLife agreed to START's terms, and six weeks later Burger and Andreini had a contract. While the good news put them a step closer to being in business, it also highlighted their biggest concern: money. For $10,000 they had secured Tradevest's original patent out of bankruptcy court in February 1989. But that purchase, along with the hefty legal costs of negotiating a deal with MetLife, had sucked their resources dry.
Up to then START's lifeblood had been the private coffers of Burger, Andreini, and a collection of friends and acquaintances. But legal bills, promotional costs, and phone bills had chewed up nearly all of the $250,000 raised. Looking ahead, the two could see the huge legal costs of fortifying their patent against copycats, not to mention the costs of soliciting and signing up a top-tier list of merchants, or cosponsors, through which they'd offer the START program. "We knew we needed new money, and fast," Andreini says.
That was when Andreini's high school algebra teacher came to save the day. Robert Podkaminer had left teaching to help launch a software-development company that had recently been bought by USWest. He had kept in touch with Andreini over the years and was aware of, and intrigued by, START. So much so that, armed with cash from the sale of his company, he pulled together a group of private investors that forked over $250,000.
Fortified with cash, and with MetLife backing them, Andreini and Burger began rapping on the doors of the biggest and the best -- MCI, GE, USTravel. Once again, the two knew that to be taken seriously in the marketplace, they needed big-name partners all the way down the line, from vendors to investors to merchants.
USTravel was the first to sign on, but it was tough going. "No one wanted to be the first to jump," Burger says. "Everyone wanted to wait a little longer." And when cosponsors did come aboard, their scrutiny was fierce. GE, for example, spent nine months rifling through every piece of paper START had ever generated. When GE did agree to sign up with START, there was just one proviso: it wanted the right to buy 5% of the company. Burger and Andreini agreed. What better endorsement could we ask for? they reasoned.
