Entrepreneur Tom Ashbrook leaps into the unknown
Tom Ashbrook chronicles his transformation from newspaper journalist to Web entrepreneur in his new book, The Leap: A Memoir of Love and Madness in the Internet Gold Rush. With cofounders Rolly Rouse and Shawn Becker, Ashbrook founded BuildingBlocks Interactive Corp., now HomePortfolio.com, an online home-design marketplace based in Newton, Mass. In this excerpt Ashbrook describes the partners’ warp-speed introduction to small-business financing. –the editors
It felt like a touch-and-go shuttle launch.
First came the roar and smoke and flames — of emotion and decision and tearing loose from life’s old gravity. The moment when you wonder if the whole thing will break apart before it’s even into the blue.
We signed an office lease, personally guaranteeing the rent, before the seed money was in. We had to. We had to keep moving. Up, up, or die. We went round and round with [potential seed-round investor] Rick Segal. BuildingBlocks was taking off, we said. This little company was hot as hell. We were absolutely confident we would raise at least another $1 million before the next six months was out. Did he want in at $500,000 for 10% now, or not?
We were the team. This was the deal. What did he say?
And then we prayed. Almost on our knees. Our little band of staff milled around Rolly’s bungalow, charting plans, keeping their heads down, clinging on in hope. It’s coming, Rolly and I told them. The money’s coming. And our eyes would lock for a split second and widen with the sickening, private awareness that nothing was certain here except desire. It is coming, right? Somehow. Soon. Soon!
In legal terms this is a flat-out crapshoot, a big fat lottery ticket, and you’ve been warned.
This was a new kind of vulnerability for me. Complete vulnerability. For our immediate needs — salary for the staff, computers to work on, telephone lines — there was no time to find other backers. There was no distant headquarters to squeeze. We were it. This was it.
Our steadfast attorney, Gene Barton, wrestled the paperwork and worked the phone. Rolly’s eyes were puffy, red-rimmed, resolute — almost wild with the strain of holding the line. Salamander eyes, [Rolly's wife] Carole called them. We had all read the warning of risk that Gene had insisted start right on the front of the private-placement memorandum, the draft of the document that would solicit the money and seal the deal. The warning was right out there in capital letters, in hideous bold type. It was boilerplate for a deal like this, Gene said. Absolutely standard. But wicked cold. Stone-cold sober, no bullshit whatsoever, so that no investor — nowhere, nohow — could ever say he or she hadn’t known.
You are stepping straight into the land of naked risk, it announced: The shares of common stock being offered hereby are speculative and involve a high degree of risk and substantial immediate dilution. The company is in the development stage, has a limited history of operations, with no revenue to date, and is subject to all the risks inherent in a business that is in the development stage.
And for anyone who still wasn’t getting the picture, there was this charming ice pick of a postscript: Investors must be prepared to lose their entire investment in the company.
Got it? In legal terms this is a flat-out crapshoot, a big fat lottery ticket, and you’ve been warned.
The noises [from Segal] were good; they were strong. But there was no substitute for the money. The money in the bank. Our bank. Soon. Please, God, soon. Rolly was starting to cover a gap now. He fed in $2,000 to keep us going. “Out of the chute and dead in the water!” he would mutter as we pushed blindly ahead. The roar of the takeoff was shaking us wall to wall. Up, up. More fuel!
And then it was there. Half a million. In the bank.
We held the little bank slip carefully in our fingers, like it was the commutation of a death sentence. Breathing shallow. Reading it again and again.
“Your balance: $503,103.”
We had closed our first money — our seed round, in start-up speak. We were launched.
I sat alone that afternoon in our new, almost empty office, tucked into the top floor of a grand old Methodist church building, with six folding tables from Staples and 10 stackable chairs, and I thought how quiet it must be in the spaceship once the roar of the launch dies away.
We were up. We were out there. On our space shot.
Now we actually had to make it all happen. We had launched the leap. Now we had to make the landing.
And the real education began.
Ed [Anderson, a partner at North Bridge Venture Partners, in Waltham, Mass.] met with us early one October morning in his sleek offices near Route 128. Bill Geary, another partner in the firm, joined us. I knew this was just supposed to be an advisory meeting, but I liked these guys. As they talked, I began to imagine they had read our business plan and were overwhelmed with an urgent desire to invest in us.
North Bridge did active early-stage investing, they said. They got their hands dirty with the firms they worked with, really got involved. They were just closing a new $80-million investment fund. They always came in as a minority investor, rarely owning more than 20% of a company. They came in expecting to work with a company for four to six years until a “liquidity event” — the sale of the company or a public stock offering that would make the company’s value liquid and let them take their profits.
We listened with interest, then gave an overview of what we were up to. Consumer expectations in housing were changing. People wanted unique, high-quality homes. Manufacturers were making the best products ever but couldn’t get them effectively in front of consumers. Home Depot and the big warehouse stores had come in and killed a lot of showrooms. Most consumers were seeing only a fraction of the great product options that were available. In the nick of time, here comes the digital revolution. Affluent consumers are getting wired up, ready to learn, communicate, and buy online. That’s the situation we were addressing. We would bring greater efficiency and convenience to choosing products in this big industry.
Ed and Bill nodded along politely, but they were clearly listening for something they were not hearing.
“What is the value-adding proposition of your product?” asked Ed. “Give it to me in one sentence.”
I glibly gave them the line on the front of our latest business plan.
“We’re creating the digital destination for home-design decision making and commerce,” I said.
They stared quizzically, as if to say, “Is that it? Is that as concrete as it gets?” I shot a hopeful look at Rolly, but he offered no miracle line to plug the gap.
“Well, let’s look at the demo,” said Ed, still all avuncular and friendly. We showed them. And Ed leaned back in his chair thoughtfully.
“That’s a great UI,” he said — UI for “user interface.”
“In fact, that may be the best I’ve ever seen. But don’t assume that the reaction your great interface gets from people like me means you’ve got a great business proposition.”
Then he laid it out for us. We weren’t going to get anything like a $5-million valuation from our next investors on BuildingBlocks, he said. Maybe $3 million, tops.
Advertising-based schemes on the Internet weren’t working out, said Geary. To him, it looked like we were an information aggregator. He said it with a sympathetic look, but it sounded like he was describing something just above a garbage collector or a tin scavenger.
They could see the disappointment in our faces. “Maybe you really don’t want to go the VC [venture-capital] route,” said Ed. “But if you do, don’t feel bad about what you have to give up in equity. We’ve built plenty of companies that ended up with values of $600 million or $700 million, and the founders go away with 10%, feeling very good indeed.”
Ten percent! We shifted uncomfortably in our chairs. The meeting was ending. They were smart and experienced and kind. But they couldn’t see our value-adding proposition. God help us.
“Maybe you should raise another million from friends and family,” Ed said as we packed up the laptop. “You could get your product built, then come back to the VC channel.”
We walked to the car in silence. Another million from friends and family! Exactly what million would that be?
People helped us through. First came [marketing professional and entrepreneur] Nick d’Arbeloff. Nick got us back to basics. Back to our customers: consumers and manufacturers, and the design professionals who worked with them. We weren’t ready to buy his first suggestion — an online product catalog. So he rolled up his sleeves and took us back out into the market to talk again, in depth, with consumers, our primary target users. And to talk again, in depth, with manufacturers. He disciplined us to listen and to coolly think about what we heard.
And the messages came up clear and compelling again, in interview after interview. Consumers wanted an easier, more convenient and effective way to learn their product options and act on what they had learned. Even architects and interior designers, experienced trade professionals, had trouble keeping up with the gusher of products and product information.
On the other side of the equation, manufacturers wanted a better way to get their products and product information in front of the consumers who wanted to learn about them. Physical showrooms were great, necessary even, but they didn’t begin to show all the options. And they didn’t give manufacturers a way to get their message to interested, or “prequalified,” shoppers. We could.
And another thing we heard again and again, especially from consumers and professionals, when we were done with the interviewing and let them see the demo: They loved it. They wanted it, in full-blown product form, right now. Simple as that. They needed it. It was exciting. How soon could they have it?
“There are your marching orders,” said Nick. “Don’t pursue a vision so elaborate that it saps resources and is complicated to use. You’ve got a great concept here. Rein it in. Get a single focus.”
And another thing, he said. Boot the [original product] name “New American Dream Home.” It’s not what people are asking for. He was right. Everyone we talked to wanted a way to find the right products and save them to a scrapbook for planning projects and purchases. That original insight was resoundingly confirmed.
We had been working with Jennifer Karin, a local public-relations consultant, on the right name. “Scrapbook” seemed too rough. “Electronic showroom” too cold. We needed something personal, something that acknowledged the importance people attached to these decisions. What about “portfolio”? Home portfolio?
We ran to the computer and pulled up the Internet to see if the domain name was already taken. When we had started working this dream, almost every domain name had been available. Now even the most obscure names were being snatched up.
We waited impatiently for the answer, maybe a full minute.
It was available!
So there it was. Home Portfolio. It would help consumers find and save the products they wanted, and help manufacturers get deeper information, instantly, to people who wanted it. We shoved the words together to leave no doubt about the Web address.
[Harvard Business School professor Len Schlesinger] took us to lunch at the B-school faculty club. He sat us down at a table overlooking the Charles River and fixed his blazing eyes on us.
“Fellas, it’s time to come to Jesus,” he said. And he proceeded to lay out story after story of young companies that had lost their way, been blinded by distractions, failed to focus on the right questions. “Here’s the question for you,” he said, locking eyes on us hard.
“How will you really and truly make money? Don’t give me all the big-picture stuff. Just tell me this: What is the little engine at the heart of [HomePortfolio.com] that will go and go and go and make the money?
“I believe it’s in there,” he said. “You go figure out what it is. Right now. It’s time. And you’ll be fine.”
It was early morning, after another late, fevered night. The elevator to our fifth-floor office in the church was dead slow. The slowest I had ever ridden. And when the door finally creaked open, it opened straight into our office. No vestibule, no reception desk. Just boom, smack into the middle of the office.
And there was Rolly, already pacing and whirling in mad-scientist mode, hair pushed high off his forehead, looking like Mozart after a wild night of composing. He had taken [the most recent version of the business plan] and marked it up until after midnight, then he’d driven home and marked it up some more. Now he was striding under the big old industrial-style skylight in the center of the room and waving the plan and bellowing.
“This is so rinky-dink!”
He had been devouring Geoffrey Moore’s Crossing the Chasm, the bible of high-tech marketing. We took Moore’s “elevator test”: Could we explain our product in the time it takes to ride up in an elevator? No.
So we dived in again on our product description and the plan, boiling everything down and down to its essentials. We slashed and burned and cheered when we threw out entire passages. And something far cleaner began to emerge from the rubble.
HomePortfolio, we said, would not be a mere catalog but a system for finding, selecting, and learning how and where to buy — maybe online and maybe not — the world’s best home-design products. It would be a service for finding everything consumers choose visually for the home, from windows and wallpaper to faucets and fixtures and furnishings. We would show all the best products on the market, independently chosen by our own editors. And when consumers found products they were interested in, we would let them save those products to their own online portfolios. They could then ask sponsoring manufacturers for more information electronically and receive it instantly online.
Simple, we said. Shopping. Shopping for the complex “considered purchases” that outfitting a home requires. This was the little ring through which everything would flow. Other features? Sure, we had imagined plenty. But first we would nail this. It was ambitious enough.
And we wrote our elevator pitch:
“For consumers and trade professionals, HomePortfolio is the first online guide to premium-tier home-design products. It’s the fastest, easiest way to find the products people want for their homes.
“For manufacturers, HomePortfolio is a new direct-marketing channel. It helps them reach and prequalify sales prospects online.”
And the little moneymaking machine at the center of it all? We would charge manufacturers for helping them deliver deeper product and purchasing information to consumers and professionals at exactly the moment they wanted it. If they made a great product, we would show it and describe it at no charge. But if they wanted to be able to offer deeper information, instantly, within HomePortfolio, they would pay for that new marketing channel.
We would offer a brand-new way to get their product information to people who wanted it, at precisely the moment they wanted it, at a fraction of their current costs of fulfilling requests for information.
There was our value-add.
And we believed manufacturers would pay gladly. Paper-and-ink brochures were punishingly expensive to produce and mail out, and difficult to keep in stock and up-to-date. Individual company Web sites were hell to surf one by one, presenting consumers with a cacophony of different voices and formats, when consumers could find them at all.
The people we surveyed tried going from company site to company site, and they hated it. HomePortfolio would give them a one-stop destination on the Web for finding the products they wanted. We would focus on premium-tier products only, because those were the most difficult to find and learn about in the physical world. And when the market was ready to move to online ordering, we would be ready, too. Manufacturers could fulfill orders directly or through their local retailers. Either way, we would take the order. Everybody would win.
This excerpt is adapted from The Leap: A Memoir of Love and Madness in the Internet Gold Rush, by Tom Ashbrook, published by Houghton Mifflin Co. Copyright Â© 2000 by the author.
Face to Face
In 1996, at age 40, Tom Ashbrook quit his job at the Boston Globe and joined two partners, Rolly Rouse and Shawn Becker, in launching a Web start-up. The move was a stunner: Ashbrook, a brilliant foreign correspondent and respected editor, had no business background or Internet experience. With three children, he and his wife, Danielle, had no money to spare. In his new book, The Leap (Houghton Mifflin, 2000), Ashbrook describes his bumpy, breathless trip from old-media journalist to new-media entrepreneur.
Now publisher of HomePortfolio.com, a home-design marketplace, Ashbrook talks with Inc. Technology senior writer Anne Stuart about what he’s gained from his gamble — and what he nearly lost.
Inc.: Your book is subtitled A Memoir of Love and Madness in the Internet Gold Rush. Talk about the madness part.
Ashbrook: The Web was so exciting, it opened up vistas so enormous, that it made a lot of people a little bit crazy. There was this sense of tremendous urgency in the air at every moment: The go, go, go. You’ve got to jump on it. You’ve got to do it now. This won’t last forever, this magic moment. And while that was absolutely wonderful in many dimensions, it also got into people’s skulls in a way that made them frenetic, made them hyperfocused. It made me kind of lose track of everything else for a while. Everything else was suddenly on the back burner. My wife. My family. Every other interest I had. I could barely find time to walk the dog.
In many ways, it was a good madness — though I think you can only do it so many times in a single life and survive. So when I sat down to put the title on the book and looked back on it, I thought, “Wow, that really was madness. It was a wonderful madness, but it was a madness.”
Inc.: What about the love part?
Ashbrook: What I was really thinking about there was my relationship with Danielle. The Internet gold rush has been a kind of tsunami that has caught people up, not just when they’re kids, which is what you read about a lot, but people in the middle of their lives, who have wives and children. I got so completely engrossed in this that sometimes Danielle didn’t even know what I was talking about anymore.
It turned out to be a wilder ride than I ever expected. It took our resources down to zero — and below zero. It threw a bomb into our family life. And we kind of had to get to know each other all over again in this crazy arena. We had to decide actively — not just passively, but actively — that we were going to hang together through all this chaos and make it out the other side.
Inc.: What was your lowest moment?
Ashbrook: The boat hit the bottom of the river a bunch of times. There were times when we were so broke here at the business, we didn’t know how we were going to keep the lights on. There were times we were so broke at home we were canceling guitar lessons; the kids needed new clothes, and they weren’t getting them.
The toughest time was probably in January 1998, just before everything turned around. My partner Rolly Rouse and I had gone a year without salaries already, and we were sucking blood from our wrists to survive. And I could see in Danielle’s eyes that she just didn’t believe in the HomePortfolio.com concept at all. I had really asked her to take more on faith than I had any right to long before that point. But when I felt that last snap of belief on her part, it got really lonely.
Fortunately, within a few weeks of that super-low point, we had our first sales. We had the Holy Grail, the proof of concept that the venture-capital folks all wanted to see. Things began to turn around like crazy very quickly. But that midnight hour of doubt was really the hardest.
Inc.: And the high point?
Ashbrook: It really began to come true and happen and materialize when we were out in the suburbs of Chicago in January 1998 [courting faucet manufacturer Grohe America]. We had flown out there on the last nickels we had. We had rented the tiniest car in the parking lot. We had driven out there through this terrible blizzard. When that meeting was over, we just stood in the parking lot, with slush in our shoes, practically in tears, because we knew that we had made it over the divide. [Grohe America agreed to a $27,000 contract, becoming HomePortfolio.com's first customer.]
Inc.: What turned it around? What were the ingredients that made investors and manufacturers say, “Yes, we want to give you money”?
Ashbrook: Lots of things contributed. One was just the passage of time. We raised our first $500,000 in the late summer of 1996 [in addition to $100,000 received earlier from family and friends]. We didn’t know it, but that was actually sort of one minute to midnight. It was at the very tail end of the first Internet-investment euphoria. We weren’t plugged in enough to really be aware of that. In some dimensions, neither were our investors.
It took more than a leap of faith for foreign correspondent Tom Ashbrook to leave a successful career behind for the unknown world of the Web. It took an obsession.
So we got our first funding just as everything was collapsing. We thought we were going to march out and within a matter of months, we’d have another million. And, of course, it took a lot longer.
It’s hard to remember now how foreign a lot of this seemed in those days. In 1996, the notions of what people would use the Web for were far more constricted than they are today. And the home-design industry, as enormous as it is, seems so physical and so bulky and so dominated by guys with tool belts. Lots of investors just couldn’t see how that would ever work on the Web.
It turned around when people saw Internet users and industry participants voting with their feet. The HomePortfolio.com Web site went up in January 1998 and instantly got lots of attention out in the world. Before that, people had to schlepp around from showroom to showroom, not knowing where they were going, not knowing what products were available. The manufacturers, when they finally woke up to the fact that this technology was coming to them as well, began putting their hands up. One by one, they were signing those checks to become part of our world, part of our system. When that happens, venture capitalists pay attention in a hurry.
Inc.: Coming from an editorial background, you must attach particular importance to the site’s editorial content, to its integrity and credibility.
Ashbrook: In the Web era, integrity and trust actually become far more important than they ever were before, because you can put anything on the Web. You can suggest anything. You can pretend anything. That means that users have to feel a profound level of trust, or it’s just a lot of illusion and pretense.
This is especially true for any kind of marketplace. When people come to a marketplace, they want to feel they’re not being steered, that they’re not being sold something in a prejudiced way that blinds them to some other opportunities they might prefer. They need to feel a really straight-up sensibility behind the site. That has been absolutely core to our mission from the beginning. On the Web, if you lose your credibility, if you let your integrity slip away, what do you have? Just digital fluff.
Inc.: Looking back, is there anything you’d do differently?
Ashbrook: I would hope I could be a little less frenzied in the process. I don’t know if it’s possible. Maybe that kind of obsessive devotion to an effort is part and parcel of starting something so new, so unprecedented. But in an ideal world, if I were doing it again, I’d keep my humanity and warmth factor notched up a little higher.
Inc.: Do you ever miss your globe-trotting journalism career?
Ashbrook: I miss it in the abstract. Sometimes. But this has been so consuming that I haven’t had the time or the bandwidth — to use that ubiquitous new word — to actively miss it in a visceral way. As a reporter, I had walked out of Tibet; I had slogged through Somalia; I had seen all the kind of blood-and-thunder stuff. But getting to know Silicon Valley was a pretty exotic, exciting kind of new world, too: Getting to know the worlds of high finance. Getting to know the players in this industry. It’s all stretched my sense of where intrigue and adventure lie. You never want to give up pieces of your life. It would be nice to have both. But the main thing is to be engaged. And I am very engaged.
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