Where Really Bad Ideas Come From
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Before starting their fast-growing companies, Inc. 500 founders explored some less-than-inspired concepts. Now, looking back, here's what they tell themselves about those duds
1. 'I've learned more from my failures than I have from my successes.'
If the above adage contains even a scintilla of truth, Doug Monahan must be the brightest bulb on the string.
Monahan seriously explored at least five dubious business ideas before he founded Sunset Direct (#28), the Austin-based marketer of Internet-commerce products that he's grown to $13 million in just five years. His most promising idea before that was--well, come to think of it, they all seemed promising when he was absorbed in them, which is part of the sly charm of unworkable ideas. Up close, they can look eminently feasible; from a distance, they become source material for the kind of homilies aimed at elevating them from their root rottenness.
From a tender age, Monahan was pursuing questionable ideas. At 11, he started a door-to-door mistletoe business that ultimately foundered because of the sprigs' short shelf life. Later he launched an employment agency in Houston--during the oil and gas bust of the 1980s. "I had people calling businesses out of the yellow pages to ask if they had openings," he recalls. Not enough did. It tanked. As did his next venture, a short-lived game he invented, called Trivial Compute. There followed a brief stint in Philadelphia, where he tried to take on AT&T in the directory-assistance business. "I couldn't raise the money," he says. Finally, there was the pet hot line that charged people who found lost pooches. "I'd tell them, 'Don't worry about it, the owner will reimburse you." Apparently, they didn't believe him.
Despite all the flops, Monahan today claims a net worth that's around $50 million--and climbing. He's now toying with a technology that allows people to send faxes over the Internet. "If it works," he says, "I'll be rich."
2. 'There's no such thing as a bad idea, only bad timing.'
"I had fallen in love with portable computing," recalls John Moriarty, pinpointing the emotion that blinded him to his own wayward thinking. "My view was that the CPU should be as ubiquitous as the telephone booth. People didn't want to lug these things around." Moriarty tried to persuade his employer at the time, Data General Corp., to rent laptops to travelers in hotels, on international flights, and in car-rental agencies. Maybe the reaction he got should have told him something. But love, after all, is blind. So with the help of a handful of investors, LapStop was born.
And a fussy infant it was. The cash-strapped Moriarty had trouble getting companies like Lotus Development Corp. and Apple Computer to donate the supplies he needed. But he finally persuaded Avis Rent a Car and the Trump Shuttle to try it out. And? "It was an abject failure," he reports.
Today the CEO of software-developer MicroScript Corp. (#172) still waxes nostalgic about LapStop, which lasted two years. "I was at a hotel in L.A. recently, and they had a station just as we intended," he claims. So is he tempted to rescue his idea from the ash heap of entrepreneurial history? "Absolutely not," he says.
3. 'Market research doesn't always tell the whole story.'
"I didn't know the lighting industry before I got into it." So concedes David
Petersen, now the CEO of Telemarket Resources International (#235). Back in 1985, Petersen took what money he had, raised more from his family, and bought a distributorship from a California company selling an energy-saving add-on for fluorescent lighting.
The Southern California companies Petersen scouted were cutting their energy costs in half, and he was excited about bringing the same rich combination of profit potential and energy efficiency to Omaha, where the market was totally untapped. For a reason, as it turned out. "I thought I had done plenty of due diligence," Petersen says, recounting the market research he did. "I checked the company out with reporting services. Talked to every reference they gave me. What I didn't do was investigate the difference in the cost of kilowatt-hours between the coast and where I lived."
Turned out, companies in Southern California were paying 10¢ to 12¢ per kilowatt-hour. In Omaha, the cost was 3¢ or 4¢. "What I thought was a huge market suddenly disappeared," he recalls. "In order to benefit from this in Omaha, you had to be a factory with two or three shifts, or a big store operating 24 hours. Omaha didn't have too many businesses fitting that description." What Petersen ended up getting out of his company, called Advantage Distributing, was a huge debt and two years of misery. Separation. Divorce. Litigation.
It was seven years before he decided to try again, with Telemarket Resources International, a $4.4-million provider of telecommunications equipment and services. This time around, he notes, "we made doggone sure the products and services were absolutely needed."
4. 'We were just a step ahead of the public's taste.'
"We think we know what tastes good," says Lisa Thomas, cofounder with Gary Erickson of Clif Bar (#152). "We make what we like."
Back before their days in energy bars, when they were selling more-traditional baked goods, one dessert they liked was "Choclava," a chocolate version of baklava that Erickson had concocted. "It was amazing," says Thomas. "We thought we had it made. We were going to be on the cover of Gourmet magazine."
So they channeled their energies into Choclava. Layering the temperamental phyllo dough. Chopping walnuts. Blending in quality chocolate. It wasn't easy to produce, but they were inspired. In the end they couldn't bulldoze it off the shelves. "People are either hot or cold on baklava," acknowledges Erickson. In retrospect, he adds, "we're probably lucky. Phyllo is incredibly hard to work with."
At Clif Bar, the two are now making energy bars in 10 flavors, including such recent additions as carrot cake, cookies and cream, and chocolate almond fudge.
Wait. There seems to be a trend here. "Yeah," Erickson says. "Coming soon, the Choclava Clif Bar. With phyllo dough." He pauses a moment. "You know, we could actually do it."
Ron MacLean is a freelance writer based in Jamaica Plain, Mass.
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