The Great Persuader
Each February, Inphonic CEO David A. Steinberg holds a poker party for his top executives at Washington, D.C.'s Historic George Town Club. As a reward for their long hours, his executives are treated to scotch and cigars as they bluff and bet with members of InPhonic's A-list board of directors -- top venture capitalists, famous politicians, and John Sculley, the well-known former CEO of Apple and Pepsi. The tradition feels bigtime and established, the kind of ritual befitting a company that keeps stern oil paintings of past CEOs in its wood-paneled boardroom.
But InPhonic, which is in the very modern business of selling mobile phone handsets and services over the Web, is no such firm. It has existed for the grand total of five years and sports a founding CEO of the ripe age of 35. Instead, the annual poker night is one more way Steinberg creates the image of success and carefully guards it until, like wet cement, it sets and becomes real. Steinberg, says Sculley, "does a wonderful job of making you feel like the company is bigger and further along in its life than it is at the moment. It sort of felt like we were all grown up and we were only two and a half years old."
David Steinberg has created 350 jobs, raised $85 million in venture capital, completed an IPO, and bought his biggest competitor. The next challenge: profitability.
In five short years, Steinberg has taken Washington, D.C.-based InPhonic's annual revenue from zero to almost $200 million (making it the fastest-growing company on the 2004 Inc. 500 list). Moreover, he's created 350 jobs, raised $85 million in venture capital, completed an IPO that took in $160 million in November 2004, and bought his biggest competitor, A1 Wireless, for $20.9 million. The company's recent market cap: $950 million. In a sign of its market dominance -- or perhaps the return of an Internet bubble -- the company managed to go public even though it has yet to turn a profit. According to the Yankee Group, the prominent technology research firm, even before the purchase of A1 Wireless, InPhonic was the biggest seller of wireless phones on the Internet, with between 20% and 25% of the Web market -- which means it accounts for almost half of the Internet phone sales not made directly by the carriers. Overall, InPhonic was the fourth largest activator of phones in the U.S. in 2003.
Steinberg's tale is the story of a relentless salesman, a young man in a hurry who doesn't care so much what he sells or how he sells it as long as he's selling. Now he faces his next big test: the quotidian grind of running a public enterprise. But his mentor, John Sculley, doesn't describe Steinberg merely as a guy with impressive business skills; he compares him favorably to Bill Gates and Steve Jobs. So what is it about Steinberg that has inspired so many to buy shares in his dream? And for a man with such enticing visions, can selling phones be enough to fill an ambitious life?
David Steinberg has a lanky 6-foot-3 frame, supersized like so much of what he does, and he dresses in an unwavering workday uniform of light-brown pants and a custom-made blue patterned shirt. He looks as if he could be a distant cousin of actor Daniel Stern, and has always struck people as an old soul. "When I first met him," says longtime friend Kenny Albert, who's the son of sportscaster Marv and about the same age as Steinberg, "I thought he was five years older than me. I made him produce his driver's license."
Steinberg's interest in business was shaped by his relationships with two very different men: his father and his stepfather. He describes his father, Richard, as the quintessential Ivy League corporate guy of the 1960s. He had an M.B.A. and worked for more than three decades at what is now PricewaterhouseCoopers, making sure that companies were audited properly. "He was totally focused on internal controls and governance," Steinberg recalls, "and that led me to become a numbers-focused sales guy." (It's almost as if he has "a calculator built into his head," says a longtime employee.)
But a greater influence was Irving Siegel, Steinberg's degreeless, serial-entrepreneur stepdad. Siegel had made a fortune when he sold his last business, Getting to Know You, the country's largest homeowner-welcoming company, for $100 million in 1995. Although Steinberg lived with his father on Manhattan's Upper East Side for 13 years after his parents divorced, he was more fascinated by the entrepreneurial path Siegel had taken. And because he was precocious (not to mention 6-foot-2 by the time of his bar mitzvah), he was able to follow through on his youthful ambitions. "His mentality, his composure, his social graces, were years ahead of his age," says Siegel.
At 12, Steinberg started hanging around the Saddle Rock Grist Mill in his hometown of Great Neck, N.Y., offering unofficial "guided" tours to visitors. Four years later, on one of his biweekly visits to his stepfather's beach house in Westhampton, Steinberg discovered that the Polo Club -- the area's hottest nightclub the previous summer -- was empty. Although he wasn't even old enough to get in, he offered to promote parties in return for a share of the proceeds. The owner agreed and Steinberg pulled in $400 the first night. By the end of the summer, he was making $1,500 a week.
Steinberg was helped in this endeavor by Michael Masri, who grew up around the corner in Great Neck and who describes the complementary attribute to Steinberg's relentless ambition: competitiveness. "He's extremely, extremely competitive," says Masri. "When you would play tennis with him, even if you were just hitting, he'd want you to call the lines. He just drills that ball and he comes up to the net. He's always won and he always lets me know."
