HARDWARE

Rescue at cc:

Bruce Holmes had left his company for dead. Then a band of fanatical customers rushed to the Internet to save its life.
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>>> Haven has reached a point where we cannot pay our bills. I'm personally about $100,000 in debt and have no other sources for borrowing. ... We are simply shutting down." --Bruce Holmes, Haven Corp.

With the click of a mouse, Bruce Holmes sent his software company's obituary hurtling over the Internet toward 400 longtime customers. Hours earlier he had composed the announcement (word by excruciating word), printed a copy, and carried it out into the main section of Haven's Evanston, Ill., office. After instructing his staff to switch the technical-support line to voice mail, Holmes had led everyone into the conference room, and there his composure had fled. Handing the paper to technical-support specialist Mary Kuhn, Haven's president had sat in silence, head bowed, while she read aloud the message. "People were shocked and stunned," recalls Kuhn.

They probably shouldn't have been. Haven Corp., whose products served the mail-order industry, had a history of troubles. Castle, a Windows version of the company's signature program, Wizard, was years late to market, setting off an erosion in Haven's customer base and support revenues. Compounding the problem, the company's cash woes had forced it in the fall of 1999 to sell 60 customers a beta release still itchy with bugs. And Haven was hurting for programmers, which was not surprising given Holmes's inability to offer competitive salaries.

And yet... and yet...

And yet despite its woes, Haven was beloved. Beloved by its eight employees, who hung on out of fierce loyalty to Holmes and to Wizard. And beloved by its customers, who gratefully entrusted their companies -- chiefly small catalog marketers -- to a product so skillfully designed that many considered a tech-support contract superfluous. Service, too, was 24 karat, with Holmes himself setting the standard. And the founder was more than just a voice on a phone line. Customers knew him personally from the popular conferences and training workshops that his company had once sponsored.

Customers raved about Haven, and Holmes returned their regard, leavened with a profound sense of responsibility. That made his farewell all the harder.

>>> "To those of you who have put your faith in this company and will now be left high and dry, you have my most deeply felt apology. I speak for everyone here when I say that we have counted many of you as friends, and to think that we are letting you down is a bitter pill."

Holmes pronounced Haven's passing to his customers at 5:57 p.m. on August 15, 2000. The next morning he flew to Seattle for a wedding that he was committed to attending. But while Holmes was gone, Haven's fate rapidly came unsealed. The founder's E-mail triggered a response among customers at once so passionate and so pragmatic that it ultimately would resurrect the business -- albeit in a whole new form. Think It's a Wonderful Life, only with the Internet, rather than an angel, as the deus ex machina.

>>> "I am very sorry to hear this news. Of course, it's not good for our business, but the hardship we will face is nothing compared to what you must be going through now. It takes great courage to build a company on faith and sell that faith to a community of people that love your product." --Victor Toso, Nada-Chair

Unlike Jimmy Stewart, Holmes was treated to no divinely engineered glimpses of a Haven-less world. He wasn't even around to read the volleys of E-mail fired off by Wizard users in the first two days after he lobbed his bombshell. In that period dozens of Haven customers used the "cc:" list on Holmes's original message to reach out across the Internet both to Holmes and to one another. The newly bereaved sought strategic and technical advice from their peers while extolling the company in ways that Holmes would surely have found gratifying.

Many of the first writers asked anxiously for news of Holmes, who had said nothing about his immediate plans, was clearly in poor spirits, and failed to respond to phone calls or E-mail messages.

>>> "Just writing that letter and shutting the door had to be a wrenching experience. He is probably envisioning people with drums and torches scouring Evanston looking for him." --Charley Kehoe Tonquish, Creek Fire Co.

Others balanced present sorrow with recollections of palmier days.

>>> "On December 31, 1999, at 6 p.m., we were closing out the year and hit a bug. We called Haven tech support and got...Bruce at home! That is dedication to a product." --Paul Richardson, Russian Life magazine

Some mused about what might have gone wrong.

>>> "To my way of thinking, Bruce's major mistake over the years was not charging enough. We all got a huge bargain. Now we're paying for it." --Dick Monahan, PhysicianEd

A very few seethed.

>>> "Let me get this straight. I update to Castle back in November of 1999 and purchase a nonworking program. I spend nine months helping you find the bugs in this program and now you say you can't finish it quickly enough? Then why did you take my money back in November?" --Anonymous

Mostly though, the customers sympathized. The majority of Wizard users were small-company owners themselves, so they had already walked the requisite mile in Holmes's shoes. And, of course, they were also entrepreneurs. So perhaps it was inevitable that within 24 hours the online wake began to morph into a flurry of business plans, as customers traded ideas for salvaging the company -- or at least the product.

>>> "Fellow Wizard Users, I don't know about you, but I think there's still hope .... I am willing to put a sizable investment in Castle because I believe so strongly in it. By sizable, I mean a minimum of $20,000. But even if everyone else put $1,000 in, then we might be able to convince Bruce to keep going." --Cathy Milos, Stylin Concepts

Customers' suggestions for reviving Haven ranged from raising capital themselves to locating a venture investor to forming an independent technical-support organization using employees snatched from Haven's embers. The most enthusiastic supporters of the various plans had a big stake in the new program, Castle, which would die aborning if Haven ceased to exist. Cathy Milos, for example, had begun beta-testing Castle the previous year at her mail-order automotive-accessories company in Independence, Ohio. She needed a bug-free version, and she needed it soon.

>>> "Greetings, all! I bet Bruce never figured there was as much support as has been expressed in the last 24 hours. I haven't had time to read all the E-mails this morning, but I've read enough to know that the response is overwhelmingly in favor of trying to make something positive happen -- for all of us." --Tom Danner, Advanced Multimedia Concepts

With amorphous plans swirling in the ether, Haven's rescue effort needed an organizational white knight. One appeared almost immediately, in the person of Tom Danner. Danner had used Wizard for eight years to manage order flow and inventory for his data-storage company in Redmond, Wash., so he was among the recipients of Holmes's farewell message. "I couldn't believe Bruce would do that," says Danner. "But my first concern was for him, the employees, and the users. I wanted to coordinate the line of communication."

Danner's second concern was a touch less selfless. A serial entrepreneur who had founded four companies, Danner detected in Haven's dark skies a glint of opportunity. His plan: to raise money from fellow users and build a whole new company on the foundation of Haven's employees, intellectual property, and customers. Danner's own investment would be approximately $100,000. He figured he could count on Wizard users for an additional $300,000, based on informal pledges that had surfaced in the barrage of E-mail messages.

But Danner fretted that any resuscitation effort would prove futile if the 400 E-mail addresses listed in the "cc:" section of Holmes's note fell into competitors' hands. (Only about a third of Haven's customers were included in the original E-mail. The rest found out something was wrong when they called Haven's offices and found that the lines were dead.) Already the vultures were circling.

>>> "Haven and Dydacomp have been competitors since the earliest days of PC-based mail-order systems. We're the logical choice to continue your operation." --Dave Kopp, Dydacomp Development Corp.

The day after Haven closed its doors, Dave Kopp, the president and CEO of Dydacomp Development Corp., producer of a Wizard competitor, had sent Haven's customers an E-mail message that had a sales pitch embedded with hot links. Danner knew there would be further attempts to storm Haven's user citadel, and he wanted to erect some obstacles. So he quickly persuaded his fellow Wizard users to move their conversation to eGroups, a free Web-based forum where they could communicate without giving away the farm. The forum, dubbed HavenWizards, was launched on August 16 -- that same day.

Next, Danner took all the action -- briefly -- offline by telephoning Haven's stunned employees to gauge their interest in a company revival. He reached many at the office, where they were packing up their belongings and -- in a few cases, at least -- continuing to offer technical support without pay. "From the minute Bruce sent that E-mail, Tom was on the ball," notes Russ Horton, Haven's director of sales. "He said, 'Listen, I think this thing can still work. If you're up for moving ahead, I'd like to work at making that happen."

The employees were eager to make it happen as well. "I'd turned down two jobs because I wanted to be a part of this new company," says Joe Purcell, director of technical support and the father of seven children. Technical-support specialist Kuhn says: "When I heard there was the promise of a new company, I wrote to Tom immediately. I wanted to go back and finish what I started."

>>> "Monday morning I sat down to my E-mail expecting a load of justified vitriol, and instead was overwhelmed by kindness and good wishes .... A users group led by Tom Danner, someone I view as immensely capable, is creating a new company to carry on the work of Haven Corp. ... I will not be a part of the new company." --Bruce

When Holmes finally resurfaced on August 22, in message #209 of the HavenWizards forum, he put to rest both his customers' lingering concerns for his well-being and their questions about who would head up the new company. Danner was the undisputed leader. And he knew what he needed. "We had to get the source code, the intellectual-property rights, and access to the customer database," Danner says.

More easily said than done. The next several weeks were grueling as Danner carried on protracted negotiations with Holmes, whom he describes as often hard to reach, emotionally drained, and, of course, nearly 2,000 miles distant from Danner's home base in Redmond. At the same time, Danner was running his own company and trying to nail down financing for the new organization.

Distracted as he was by the exercise in on-the-fly company building, Danner still worried about Wizard users' defecting to competitors, who had the undeniable advantage of existing. He viewed HavenWizards -- where Wizard watchers traded technical advice, resource information, and news -- as the perfect circling of wagons. Consequently, he continued to moderate the forum and post daily messages, even when life became almost unbearably hectic.

Danner's faith in the forum's cohesive powers proved to be well placed. Conventional wisdom would have predicted that the longer Wizard users went without technical support, the more susceptible they would be to outside pitches. But as time wore on, the HavenWizards grew increasingly protective of both their forum and its nascent project. When one member tried to set himself up as a reseller of a Haven competitor's product, the rest of the forum voted him "off the island," Survivor-style. "I was pissed," says Peggy Glenn, owner of Firefighters Bookstore, in Huntington Beach, Calif. "One of our own was working to resurrect the company, and along came the piranhas."

>>> "I think when the dust settles, this will be one of the great stories of belief of customers in the current and POTENTIAL products of a supplier in trouble and how they got together, fought off the circling sharks, and emerged with a commitment to support the current product and resources to produce new ones." -- Charley Kehoe

Then, in late August, events took an unexpected turn. Smith-Gardner & Associates Inc. (recently renamed Ecometry Corp.), a $50-million publicly traded provider of enterprise software based in Delray Beach, Fla., approached Danner with an offer to buy or invest in what remained of Haven. Once again, HavenWizards played a crucial, if unconscious, role. Smith-Gardner president and chief operating officer John Marrah, who had spent hours lurking in the forum, says that the passionate customer support he witnessed there was "absolutely one of the deciding factors" in moving forward with an offer for Haven. "It really helped us make our decision very quickly and easily," he says.

But the new player immediately complicated Danner's relationships both with Holmes and with HavenWizards by insisting that Danner sign a nondisclosure agreement. For some six weeks the previously outspoken Danner was forced to craft forum postings that were unflaggingly optimistic without being wholly forthcoming. Holmes, meanwhile, knew nothing of the potential acquirer when he signed over Haven's intellectual property and source code to Danner. Danner planned to reassign the rights to Smith-Gardner when the deal moved forward.

>>> "Greetings! I'm pleased to announce that the first phase of restructuring is complete and we will resume support of all Wizard users immediately at no charge. I will be traveling to Chicago this week to wrap up details with Bruce and the crew." --Tom Danner

A collective sigh of relief rose up from forum members in late September, when Wizard technical support returned. With it came the software's development team. In mid-September, Danner had signed contracts with six of Haven's eight former employees. It was progress, clearly, but only partial progress. And that wasn't good enough for forum members, who were being forced to make long-term plans based on short-term information.

>>> "We've had a few drabs of partial announcements on the new company since your news on 9/25. When can we expect some significant updating as to the status of plans for Wizard and Castle?" --Cary Harwin, Catalyst Development

Danner tried to answer Harwin's question as diplomatically as possible. He hadn't posted in a while because he didn't want to "appear to be saying a whole lot about nothing .... The slowdown in progress has been very frustrating but necessary," he wrote in his next posting. The truth was that Danner was itching to formally announce the acquisition, but Security and Exchange Commission rules sealed his lips. Meanwhile, the due-diligence wheels ground slowly. Holmes, too, had become more demanding in his dealings with Danner after learning -- from one of his former employees -- that Haven's savior would be a large company rather than a gallant band of users. Danner now owned Haven's intellectual property and customer database, but he still needed Holmes's expertise and sought to bring him along as a consultant. That deal wasn't signed until early November, and it would give Holmes terms more favorable than Danner had originally offered.

But aside from the delays, signs of restlessness among the forum's natives disturbed Danner, who had worked so hard to placate them. Indeed, like any parent of a growing child, he found himself increasingly confronting an independent entity with a will of its own. And with 400 members and more than 1,000 postings, HavenWizards was an entity to be reckoned with.

And then on November 15, the child began to turn on him.

>>> "Tom, why do I have to read this on PR Newswire?" --Anonymous

The above message referred to a press release from Smith-Gardner, which the subscriber had pasted into his posting. The release announced the formation of a subsidiary called NewHaven Software, with Danner as general manager. Danner had intended to notify forum members by E-mail at the same time that Smith-Gardner notified the world. But on the day that Smith-Gardner chose to raise the curtain, Danner was at Comdex, the computer trade behemoth in Las Vegas, and a series of communication snafus prevented him from learning about the cat's departure from the bag. Some of the HavenWizards were not amused.

>>> "Tom, this is very disturbing. What about those of us who wanted equity in the new venture? Don't you think a third-party involvement should have been disclosed to us? I'm in shock." --Mary Beth Wright, Avinet Inc.

For the next day or two Danner soothed tempers, indulging his renewed ability to speak openly while taking care not to appear defensive. His postings simultaneously explained his actions and trumpeted the results of those actions as a culmination devoutly to be wished.

>>> "Now that the deal is official, I can tell you that I think we have worked a virtual miracle. Funding and other resources to complete Castle are now a certainty -- -- something many of us have been waiting to hear for many years." --Tom Danner

And that, for most members of the forum, was good enough. Three months before, they had proclaimed their loyalty to a fading friend; now they celebrated a new incarnation of the company and closed ranks behind its champion.

>>> "I think I can sense sincerity and integrity in people. I doubt that Tom gains anything from this other than more work to do -- -- and a small salary -- -- and in truth, he saved something from dying, and placed it with a source likely to really care. YIPPPPPEEEEE!!!!" --Peggy Glenn, Firefighters Bookstore

Glenn singled out Danner for praise, but she could also have listed herself and her fellow HavenWizards in the closing credits. For as Danner agrees, without the Internet forum's ability both to sustain and to unite, Haven might never have risen from the ashes. Because of the HavenWizards' community activism, the company's former employees have jobs with considerable promise, and Wizard users have support for old products and the realistic prospect of new ones. As for Holmes, he comes away with a consulting contract, a path out of debt, and a happier ending than he ever expected.

>>> "Running a software company is incredibly expensive, and running weak-kneed in the red means that the users suffer. Things will cost more with the new company. But I believe you'll get a whole lot more. And the users who do stick around will be working with a major power that can make things happen. I think Tom pulled off a minor miracle here and has come up with the best possible solution." --Bruce Holmes

Donna Fenn is a contributing editor at Inc.


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

Last updated: Feb 1, 2001

DONNA FENN | Inc.com Contributing Editor

Donna Fenn is the author of Upstarts! How GenY Entrepreneurs Are Rocking the World of Business and 8 Ways You Can Profit From Their Success, an exploration of the ways Gen Y is changing the entrepreneurial landscape.




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