As told to Sarah Goldstein

Industry: Advertising & Marketing

2007 Inc. 500 Ranking: 43

Three-Year Growth: 2,539%

Mike Walrath was a classic dot-com kid, except that his response to the bust was to come up with an industry-changing technology platform. Right Media, which Walrath founded in New York City in 2003, hosts an exchange on which online advertisers and publishers buy and sell ads via live auction, with Right Media taking a cut of each transaction. Four years and four billion ad impressions per day later, Walrath sold 80 percent of the business to Yahoo (NASDAQ:YHOO) (which already owned the other 20 percent) for $680 million. Walrath is staying with his company.

I was hired by DoubleClick during the dot-com boom and stayed on through the bust. We survived the bust relatively unscathed, and watching the reorganizations and layoffs was a great opportunity to learn how to run a business. When 20 percent of the staff is laid off, there are a lot of things lying around unattended. DoubleClick was business school for me.

When DoubleClick's media business was sold, I went with the new company. But I was starting to get antsy--the laboratory had gotten smaller. I was getting pretty frustrated with the pace of innovation in the industry. But this was 2002--it was still the nuclear winter; there wasn't a lot of investment being made.

So in January 2003 I started Right Media. I called a friend of mine who had a company and said, Hey, I need a place to squat. They lent me a desk and an old computer and a storage space and I think I paid them $300 a month.

I had a customer at DoubleClick and when I told them I was leaving they said, "Hey, what are you going to do?" I said, "I'm going to start something," and they asked, "Well, do you need some seed capital?" Uh--yeah.

We basically started as consultants, doing whatever companies needed us to do--selling or buying, or consulting on how to operate sales or buy a business. Pretty quickly we decided that we wanted to actually put some of our ideas into practice. So we created our own online ad network, called Remix Media. It's still around today.

As an ad network we were working with both buyers [advertisers] and sellers [Web publishers]. What we realized while doing this was how inefficient and opaque the market was and how little information companies had about the prices they were paying as a buyer or the revenue they were getting as a seller.

That's when the vision for the exchange solidified. It was to create an open and transparent marketplace. Most people thought we were just out of our minds. "The advertising business has been inefficient and not transparent and built on relationships for decades and you're not going to change that." We heard a lot of that. Or, "What you're trying to do is just technically too hard. You can't auction a hundred thousand ads a second to thousands of buyers and sellers." So I think there was a certain hardheadedness on our side.

The nice thing about our deal with Yahoo is that there wasn't really that unknown regarding what they wanted to do with our business. Yahoo was an investor in the company, so we got to know the Yahoo executives and culture very well. If I were advising other entrepreneurs, I'd say that if you care deeply about your business and you're thinking of selling and staying on with the new company, your No. 1 concern should be whether the buyer's vision and ideology align with yours. Once you've given your blood, sweat, and tears to building a successful business, it's hard to imagine anything more painful than having to watch, or even participate in, the destruction of what you've built.