Phone Improvement

SoloPoint's founders eyed an exploding market -- people who work in home offices -- and reversed the usual Silicon Valley order of business. First they learned what those customers wanted. Then they built it

In Silicon Valley, it's technology that excites entrepreneurs, seduces venture capitalists, and lures talent to a start-up. In the Valley, technology is sexy, products are meat, and consumers are dogs, as in the crude but commonly asked question there, "Will the dogs eat it?"

When Martin McKendry and Charlie Bass cofounded the company that would become SoloPoint Communications, on April Fools' Day, 1993, they couldn't talk about their technology, because they didn't have any. That made SoloPoint rare in the Valley, where technology-driven start-ups flare up and burn out like autumn brushfires in the palomino hills. McKendry had already been singed by two such ventures. He had come north from Orange County in 1990, looking for an opportunity after three years at FileNet, at the end as principal engineer of the then $103-million public company. At Focus Systems, which dissolved, and later at Network Computing Inc., which failed to meet investors' expectations and merged with Seagate Technology, McKendry experienced disappointment firsthand. But it was experience he could use. It suggested to him that nobody he had worked for yet had shown him anything he couldn't do himself. And it taught him something about why so many high-tech start-ups didn't work.

"The fundamental problem in both companies was the fit of the products to the market and the channels," McKendry says now. "We couldn't say, 'This is what it costs, this is what it will do, here are the people who will value it at this price, here's how they buy products, and here's why this one is a natural fit for those channels.' "

Bass, meanwhile, was thinking along parallel lines, albeit from a loftier vantage point. He had a long and fabled history in the Valley. In 1979 he had cofounded Ungermann-Bass, now a $200-million subsidiary of Tandem Computers. Currently, he's general partner of Bass Associates, a small venture-capital firm in Palo Alto, Calif., that exists mainly to give others the opportunity to participate in deals he likes. Bass has had a directorial hand in more than a dozen high-tech start-ups, including Focus Systems and Network Computing, which is how McKendry appeared on his radar. In McKendry, Bass saw an ideal partner with whom he could apply some of his own beliefs about what makes a high-tech enterprise successful. Those beliefs are crystallized in a mantra Bass borrowed from one of the patriarchs of venture capital in the Valley, Don Valentine. "Markets," Bass says. "Markets, markets, markets."

Bass set McKendry up in an office at Bass Associates, designated him "entrepreneur in residence," and gave him $250,000 of the firm's money -- pocket change in Valley terms. In exchange McKendry agreed to spend up to a year scoping out new product possibilities in a hot new market Bass was eyeing: the people who work in the more than 45 million small offices and home offices, known in marketing jargon as SOHO workers. "I was intrigued by this individual-office phenomenon, and I did not see in it the elements of control, management, and sophistication I felt could be applied to it," says Bass. "I simply engaged Martin in that thought, and as I assumed before engaging him, he got it."

Instead of technology first, product second, and hope the dogs eat it, McKendry and Bass were taking the approach Procter & Gamble would take if P&G made dog food: start with a promising market, create a product you know the dogs are hungry for, and serve it up.

Though McKendry is very much SoloPoint's founder, he's neither the chairman (that's Bass) nor the chief executive (that's Edward Esber Jr., who wasn't hired until last October). McKendry's title is chief technical officer. He has equity (13%) but didn't have to pay for it. His own risk is therefore contained; if SoloPoint flops, he keeps his house.

By last spring, two years after Bass engaged McKendry in his thought, SoloPoint had developed a working product: a computer-telephony device called a PCM, short for personal call manager. Last November, when the product was in beta testing prior to a launch this month, seemed like a good time to check in with the company to see how things were going.

SoloPoint's 19 employees had just moved into a new suite (much like the old suite, only bigger) in a glass-and-concrete office park in Los Gatos, Calif., outside San Jose. McKendry walked into the back room and pulled a prototype PCM off the shelf. It looked like a modem: a gray box with red and green lights on the front and phone jacks in the back. A PCM is not a modem, however, or a telephone or an answering machine. The presumption is, if you're a SOHO worker, you already have all those things. What you need is a way to consolidate the clutter and get all your telephony devices working together. That's what the PCM purportedly does. It's supposed to work like a switching device, separating faxes from phone calls and enabling certain fancy maneuvers McKendry likes to call "stupid phone tricks."

For example, with a PCM and a second phone line, you can turn the cellular phone in your car into an extension of your home-office phone. That's not the same as simply forwarding all your calls; the phone company can do that for a nominal monthly fee. What's different about the PCM is that it lets you listen in, undetected, on your car phone while the caller leaves a message, as if you were monitoring calls on an answering machine. If you decide you want to talk, you punch a number and you're connected. If not, you let it go and pick up the message later; the caller is none the wiser. You can also program the PCM to accept calls only from people you want to talk with and to take a message from everybody else, or to give everybody a choice of leaving a message or trying to reach you someplace else. If you need to take something down but don't have a pencil handy, it can even bounce a caller back to your answering machine after you're done talking. You can program it at home on your computer, using Windows-compatible software, or on the fly, using a touch-tone phone.

The PCM will sell for $379, based on market research that reveals certain price thresholds for SOHO workers. At $200, according to McKendry, they're apt to buy something off the shelf, take it home, and see if it works. At $300, they want to read a review first and know what they're getting. At $400, most people feel the need to consult with their spouses before they buy. "That told me that $400 is too much," says McKendry. The price ceiling helped determine which features would be part of the initial release and which would have to wait. But in defining the product, price was never the only issue.