With their own twist on the voice-personals business, Wayne Miller and Steve Lazar are outperforming the competition in an industry few had the vision to foresee
Emerging Entrepreneur of the Year
An individual whose company is founded on solid infrastructures that promise continued rapid growth
Wayne Miller and Steve Lazar
MicroVoice Applications Inc., Minneapolis
Developer of interactive voice- response software
Founded in 1989
$27 million in 1993 revenues
$1.6 million in 1993 profits
America II Electronics Inc., St. Petersburg, Fla.
Developer of integrated circuits and semiconductors
Founded in 1989
$63 million in 1993 revenues
$9.7 million in 1993 profits
Orthodontic Centers of America Inc., Ponte Vedra Beach, Fla.
Provider of management and marketing for orthodontic
Founded in 1989
$21.7 million in 1993 revenues
$6.4 million in 1993 profits
Tom Bartel is not at all upset that after spending more than $20,000 over the past five years on talking personal ads, he has yet to land a single date. He has no fond hopes of finding that special someone through the wonders of voice mail. He's in it for the money.
Bartel is the publisher of City Pages, a Minneapolis alternative weekly. City Pages' classified personals were not as popular or as lucrative as Bartel had hoped, and after six years, in 1989, when he got wind of a new technology that added a voice component to the service, he suspected it would be a great way to enhance an existing revenue stream.
Bartel's banker put him in touch with Wayne Miller and Steve Lazar, an energetic young pair with an idea and not much more: they didn't actually have a company or a product. But Miller, a certified public accountant with a degree in systems analysis who had been managing a small personals venture on the side, and Lazar, a software engineer from Control Data, were persuasive. Besides, they wanted to custom-build a voice-personals system that would exceed Bartel's demands, and they were hungry enough to do it for a small fraction of the cost of the only alternative Bartel had considered. Within weeks Bartel had agreed to purchase their personal-computer-based talking-personals system and had advanced them half the $12,000 total. "That was one of my better investments," he says today. "It's worked absolutely perfectly, with no bugs, since the day we turned it on."
"Hi. My name is Frank. I'm a 38-year-old divorced male, five feet nine inches tall, with black hair and big blue eyes. I'm a grounded, well-centered, well-employed professional who's funny and lots of fun to be with, and I'm financially secure. I am extremely gentle, tremendously kind, ultraconsiderate, and above all, definitely not boring or generic. . . . "
Frank is one of the estimated 5% of a growing singles population that uses voice personals. Whereas in 1989 Bartel's City Pages was one of a handful of papers to offer that service, today virtually every alternative weekly and high-circulation daily, as well as scores of smaller papers, participate in what's been called the "virtual bar scene." Typically, a consumer places a free classified ad, is assigned a voice-mailbox number, records a greeting like (or unlike) Frank's, and then, by dialing a 900 number, pays anywhere from 99¢ to $1.99 a minute to listen to his or her "mail" -- responses to the ads. And the people who phone the 900 number to leave such mail also pay the 99¢ to $1.99 charge. Ads run for two weeks on average before being replaced by the next crop. Eighty-five percent of users are repeat customers.
Miller and Lazar have enjoyed enormous success on the electronic dating scene. With that initial jump-start from Bartel, they have grown their company, MicroVoice Applications, from revenues of $168,000 in 1989 to $27 million in 1993 and an estimated $40 million this year. MicroVoice's eye-opening growth earned it the #5 spot on this year's Inc. 500 and was a significant factor in the judges' selecting its founders as the 1994 Emerging Entrepreneurs of the Year.
Miller was introduced to voice personals serendipitously, by doing the books and eventually running a small talking-personals outfit that belonged to a group of three passive investors. That little dating company was generating revenues of $10,000 a year by giving callers the opportunity to listen to and leave voice-mail introductions using the local phone carrier. From the start Miller recognized the long-range potential of the business, though he knew the service needed considerable improvement. He tried to persuade the group of investors to broaden the company's reach by switching to national, 900 pay-per-call service and to gain more control and a larger share of the revenues by writing the company's software in-house -- as opposed to purchasing it from an outside vendor. The trio didn't buy the idea.
"Like a typical entrepreneur, I said, ' I believe,' but I was hitting my head against a wall," Miller recalls. Fortunately, he was able to persuade Lazar, a neighbor and also a client of his, to join him. For three weeks the two worked nights -- Lazar wrote code and Miller helped debug it -- until they had a working prototype of a 900-driven voice-personals system. That's when Bartel's banker made the crucial -- not anonymous -- introduction. Miller and Lazar each threw in $500 to cover incorporation expenses, and MicroVoice Applications was off and running.
MicroVoice is in one of the toughest markets you can find. Selling to newspapers is most people's idea of hell." Venture capitalist Pat Cloherty's comment, which drew a round of nods from her fellow Entrepreneur of the Year judges, highlights another reason the judges were impressed with Miller and Lazar. MicroVoice continues to satisfy its tough customers with creativity and innovation, continually expanding its product line and adapting its service to the needs of individual clients. It still sells PC-based systems along the lines of Bartel's, but today's more sophisticated versions go for $25,000 to $250,000. To maintain security, the computer saves backups of every call; programmers are on call 24 hours a day to troubleshoot. And in addition to personals, MicroVoice's interactive-voice-response systems now allow customers access to a variety of voice-information (or audiotext) services that include stock price quotes; weather updates; lines for finding cars, real estate, and roommates; fantasy sports leagues; and even horoscope, humor, and soap-opera hot lines (known in the trade as "scopes, jokes, and soaps").
MicroVoice has worked hard to dispel suspicions of the 900 industry, which in the early 1990s was plagued by a rash of adult phone-sex purveyors and scam artists. MicroVoice's breadbasket origins have helped validate its wholesomeness: "We figured if they were monitoring these ads in the Midwest, it had to be OK," says Mary Jane Platrone, sales-and-marketing vice-president for the Boston Globe, a MicroVoice customer since the fall of 1993. And when papers balked at making a six-figure investment in what looked like extra work for them, MicroVoice introduced its service-bureau option. For a slice of the 900-number revenues, the company offers a turnkey audiotext service that develops the newspapers' promotional materials, handles incoming advertising calls, delivers mail and information, and furnishes camera-ready copy. "We do everything but actually print the page," says Miller.
He attributes MicroVoice's success to this "no lose" situation. Newspapers are spared managerial headaches and cash outlay: MicroVoice installs the service at no cost, and the phone company handles billing. MicroVoice produces ad pages and enjoys a continuous revenue stream. Each deal varies, but MicroVoice's take ranges from 10% to 50% of the gross pay-per-call revenues that remain after the phone carrier takes its fee, an average 30% of the gross. Everybody plays. Everybody is happy.
MicroVoice is quickly maturing. The company carries no debt, and Miller and Lazar own it entirely. They are on the acquisition trail: they recently purchased three companies and plan to add more, hoping eventually to dominate the voice-personals market. Miller believes he has erected significant barriers against competition: a $4-million telecommunications infrastructure, a three-year, $53-million deal with AT&T that reduces phone rates as much as 20%, and an in-house promotions department. And if Bartel's case is representative, MicroVoice's customers may never turn to its competitors. "MicroVoice's system really runs itself," Bartel says. "It's like a drug. Once you get hooked on it, you can't get off."
Wayne Miller, 37
Steve Lazar, 36
Family: Both married, with young children
Personal funds invested: $500 each
Equity held: 50% each
Salary: $200,000 each
Last job held: Miller was a certified public accountant with his own practice; Lazar was a software engineer for Control Data