Login or signup
36
MONEY

Start-up Springboards

No cash? No customers? Don't let that stand in your way. These Inc. 500 companies sure didn't.
Advertisement

Making the Inc. 500 takes chutzpah. At every stage in the growth of their companies, entrepreneurs exhibit a brazenness, a brashness -- a downright ballsiness that's awesome to watch. At no time is that more true than when they're in start-up mode.

Because for start-ups it's all about customers and cash: you get both -- and fast -- or you die. What follow are some of the ingenious ways the founders from this year's list brought their companies into existence.

Landing that first big fish
You might think that amassing the right amount of capital is the key to getting a company off the ground. But all the capital in the world won't get you anywhere unless you've got customers.

Anthony Triglione's company started out with nothing more than an idea. While selling exhibit space at Boston's Hynes Convention Center, Triglione noticed that specific corners of the floor were "dead." Attendees would stay away in droves from those notoriously stagnant spots unless there was something exciting to lure them there. Triglione figured a golf simulator and a promotional tournament could draw attendees into those formerly unattractive areas.

On a lark he called a trade-show-production association to pitch his idea and get a few leads. And what a break -- the association was putting on a trade show itself. Triglione would have an entire convention hall full of potential customers -- trade-show planners -- in one place. He struck a deal with the convention planners: he'd provide the golf-simulation-based service gratis for the association's show if he could have one of the dead spots on the floor at no charge.

The production company agreed, and Triglione was on his way. The only problem? He didn't actually own a golf simulator. "I had to beg, borrow, and steal from some family members in order to raise enough money to buy a used golf simulator." It took him five days to figure out how exactly the machine was supposed to work. Triglione eventually packed his station wagon to the gills and drove to the association's trade show in Atlanta, where he hoped to meet enough potential customers to justify the investment. Which he did. "We ended up with two or three paying customers and just a tremendous amount of goodwill," he said. "Even though it was a barter, it really worked out well for us." Triglione's Traffic Builders Inc. (#403) now boasts 173 trade-show and specialty-event productions to its credit. And with $1.6 million in 1999 revenues, working a show sans fee back in 1992 seems to have paid off big in the long run.

If working for nothing to get customers seems unpalatable, what about paying for access to them? Pay is what InfoSphere Inc. (#231) president Cameron Ware had to do in 1994 in order get his first client. As a consultant with an enterprise-resource-planning integrator, Ware worked closely with one of that company's Austin-based clients. When he decided to leave the organization and start his own business, Ware wanted to take the client that he had spent a good deal of time cultivating with him as his first customer. However, his noncompete agreement made it difficult -- not to mention legally risky -- for him to even approach the company with a pitch.

Ware wasn't deterred. "I went to my former boss and asked him how much he would charge me to go after a client of his," Ware remembers. Lucky for him, his former boss didn't see much of a future with the customer. The price tag for access: $10,000, which didn't buy Ware a customer -- just the legal right to approach the client. "In retrospect, it was crazy. But then again, this whole thing was kind of crazy," says Ware. His gamble paid off. InfoSphere pulled in $672,000 in its first year alone. And last year the E-commerce-consulting company boasted revenues of $7.9 million.

No cash? No problem
Sometimes customers aren't the limiting resource: it's cash. Some entrepreneurs find themselves tantalizingly rich with potential customers but frustratingly short on the capital to give those customers what they want. In such cases, start-up success typically requires a little financial legerdemain.

After splitting with his employer, James Salter went out on his own and founded Infinity Contractors Inc. (#413) in 1994. His investors gave him $8,000 to get started, but without the necessary cash to buy large quantities of building and plumbing supplies, he was stuck doing small jobs that were getting him nowhere. "I was as broke as a plumber-pipe fitter could be," Salter says of his early days.

Eager to finance bigger projects, Salter returned to his investors and asked for an additional $70,000. To get the money, Salter had to cede majority control, leaving him with only a 40% stake in his own business. So he proposed a plan to recoup majority ownership and make his investors happy. He promised to double their investment through a combination of payments he'd make to them directly and interest they'd earn on the $70,000. And once he did, "I would buy back controlling interest in the company," Salter says.

Salter repaid the investors bit by bit, regaining company ownership a little at a time. His big break came when he nailed a $2.5-million dormitory project at Texas Woman's University, the cash from which allowed him to complete the ownership buyback. Today, Salter is the majority stockholder, owning 82.5% of the $7-million company. His original investors still have 10%, and two of his employees hold the rest.

For Chet Reilly, CEO of Total Pay Management Inc. (#257), start-up financing meant teaming up with the right customer -- but it wasn't your typical vendor-client relationship. When Reilly started his payroll-services company, in early 1994, he listed among his clients superstar insurance broker Van Beurden Insurance Services Inc. Van Beurden liked the way Total Pay Management handled the insurance agency's payroll and suggested that the two businesses join together to sell payroll services and insurance to both companies' customer lists.

By August 1994, Reilly and Van Beurden Insurance had formed a partnership. Van Beurden provided seed capital and infrastructure in exchange for a majority stake in Reilly's company. Now, Total Pay Management boasts revenues of $2.7 million and has never had to seek outside financing -- something that Reilly says would have been next to impossible without the Van Beurden partnership. "If I had wanted to grow, I would have had to look for outside capital anyway," he explains, "or we would have stayed a small company."

Bruce Nagle of RW3 Technologies Inc. (#427) eased into his field-sales-force-automation company while he was still on the payroll as chief information officer of Carey, Ahrens & Raynsford, a food broker in northern California. Nagle had built a sales-force-automation software system to serve his employer's business in 1992. He soon realized that his product would be useful outside the company as well. "As we were building the product, I said, 'Hey, this would be a no-brainer for any food broker,' " Nagle recalls.

But with little cash to go out on his own, Nagle kept his day job. His bosses at Carey, Ahrens & Raynsford allowed him to sell the software over the phone. And in 1994, Nagle decided to venture out on his own. Since he had developed the software in-house, Carey, Ahrens & Raynsford decided to treat Nagle's business entity as a spin-off but allowed Nagle to retain majority control of it. As the business has grown, Nagle has gradually been buying the other shares from his previous employer.

Anne Marie Borrego is a reporter at Inc.


Please e-mail your comments to editors@inc.com.

To learn more about the Inc. 500, visit the Inc. 500 area.

Last updated: Oct 15, 2000




Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Comment and share features
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: