Jun. 30–As he prepared to lay off 100 workers at Garden.com three years ago, Cliff Sharples swore he would never do another tech startup.<\/p>\n
“I said, ‘No way,’ ” says Sharples, a co-founder of the online garden products retailer, one of the first dot-com startups bred in Austin.<\/p>\n
But 2 1\/2 years after Garden.com ran out of money and shut down, Sharples, 39, and Garden.com co-founders Lisa Sharples, 37, and Jamie O’Neill, 41, are back at it. Their new software company, IronGrid Inc., has raised $1.4 million from Austin Ventures — quite an endorsement considering the venture capital firm lost money on its Garden.com investment.<\/p>\n
“There were a lot of ups and downs at Garden, but it was an amazing experience,” Lisa Sharples says. “We realized that trying to take a regular job after that experience would be pretty tough. That’s when we knew we wanted to do it again.”<\/p>\n
They aren’t alone. Several Austin entrepreneurs and executives who led Internet companies during the tech boom have gone back to work with new companies. They include:<\/p>\n
–Former Vignette Corp. executive Greg Peters, who resigned as chief executive a year ago, recently signed on as chief executive of software startup Zilliant Inc.<\/p>\n
–Don Hackett, former chief executive of the defunct Drkoop.com Inc., raised $10 million in May to build another health care services company, 1-800-Doctors Inc.<\/p>\n
–Dave Sikora, who led Austin startups including Ventix Systems Inc., Question Technologies Inc. and Powered Inc., is now chief executive of publicly held Pervasive Software Inc.<\/p>\n
Dozens of other midlevel executives whose companies flamed out in the tech downturn have landed similar roles in Austin’s new, albeit very small, group of startups.<\/p>\n
Rather than carrying a liability, many are finding that employers and venture capitalists appreciate their scar tissue. In fact, some investors think that one of the biggest benefits of the tech bust is the new crop of experienced Austin entrepreneurs able to lead new ventures.<\/p>\n
“We have a talent pool that’s been knocked around, and that’s a good thing: It is difficult to judge leadership during good times, (because) it is only during hard times one’s mettle is tested,” says Tom Meredith, the former Dell Computer Corp. chief financial officer who started the company’s venture capital unit before retiring in 2001.<\/p>\n
Meredith, who now invests in and advises Austin startups, likes to tell entrepreneurs: “It’s always about the jockey, not the horse.”<\/p>\n
The experience comes at a steep price to previous investors, who spent hundreds of millions in Central Texas bankrolling the on-the-job training. Garden.com, for example, raised $107 million, including $49.2 million in an initial public offering, during its five-year life.<\/p>\n
Despite their war chest and a widely praised management style, the founders were unable to keep Garden.com alive when investors ran out of patience with money-losing dot-coms. The company, out of cash and unable to raise more, was liquidated in January 2001.<\/p>\n
After the shutdown, the Sharpleses, who never sold their stock and therefore made no money from it, took a break, spending four months in Southeast Asia.<\/p>\n
“We spent the trip talking about what we wanted to do next,” Lisa Sharples says. “Did we want to stay in Austin? If so, what did we want to do?”<\/p>\n
They kept coming back to the software they had begun developing at Garden.com, which helped Java developers build applications more easily.<\/p>\n
“Putting together enterprise Java applications at Garden was a lot more complicated and a lot more expensive than it needed to be,” she says. “The more we talked about it, the more we felt like we had to do it.”<\/p>\n
Back at home, they reconnected with Austin Ventures general partner John Thornton, who had backed Garden.com. Austin Ventures never cashed out its stock either, meaning it also lost money on the deal.<\/p>\n
“They’re the nicest people I’ve ever lost all my money with,” Thornton jokes.<\/p>\n
Still, he was eager to work with them again.<\/p>\n
“We spent enough time with that team to know they are extraordinarily resourceful, entrepreneurial, and they deliver on commitments,” Thornton says. “That’s a characteristic you can really only test after having worked with someone. They do what they say they’re going to do.”<\/p>\n
Thornton says a deep network of entrepreneurs and executives is crucial for Austin Ventures. When folks such as the Sharpleses or Peters are ready to move on, Austin Ventures is there to fund their next deal or find a place for them at a company they already back.<\/p>\n
For example, Austin Ventures worked closely with Peters when it backed Vignette and turned to him again last month to lead Zilliant, which it has also invested in.<\/p>\n
As the Sharpleses began researching their new idea last fall, they kept Austin Ventures apprised of their plans.<\/p>\n
“We reconnected with a lot of old business contacts who were doing similar applications to what we did at Garden to see if, six months later, people were still feeling that pain,” says Lisa Sharples, who is vice president of marketing. “Then we began a dialogue with Java developers around the country.”<\/p>\n
In December, Austin Ventures provided $1.4 million to get IronGrid off the ground.<\/p>\n
The company has 10 workers and operates from discounted space in a back room of the McGarrah-Jessee advertising firm at 205 Brazos St.<\/p>\n
IronGrid has released two products, which allow developers to test performance of their applications early in the development cycle so they can fix problems. The tiny company is competing with big names in- cluding Borland Software Corp., but IronGrid thinks its lower price and its easier technology will set it apart with developers.<\/p>\n
The company is heeding what Cliff Sharples calls the biggest lesson from Garden.com — the importance of self-sufficiency.<\/p>\n
“I’ve learned that I can’t predict market cycles and fads, so I don’t want to be dependent on them,” says Cliff Sharples, who is chief executive. “The goal this time is to create a sustainable business model as quickly as I can.”<\/p>\n
Hackett also wants to avoid relying on the whims of the market as he builds 1-800-Doctors, which has raised $10 million from health care marketing company HealthSTAR Communications Inc.<\/p>\n
He led Austin-based Drkoop.com through a 1999 initial public offering that raised $84.4 million, but the company crashed when the Internet boom fizzled and the Nasdaq market plunged. Drkoop.com eventually went bankrupt.<\/p>\n
Like the Sharples, Hackett never sold any of the stock he held in the company, which was about 21 percent of the shares.<\/p>\n
“Everyone’s expectations were based on the hype, not the reality,” says Hackett, who remembers the moment he knew the old model for building Internet companies — raise lots of money, grow as fast as possible and worry about profitability later — was dead.<\/p>\n
“In early March 2000, I was making investor presentations, and in that one week, the entire attitude changed,” he says. “At the beginning of the week, the runway to profitability was 15 months. By the end of the week, it was down to three months.”<\/p>\n
At 1-800-Doctors, which offers a telephone and Internet service that connects patients with health care providers and services, growth will be slower paced.<\/p>\n
“This time there’s a different perspective of the balance sheet,” Hackett says of the company, which is based in Woodbridge, N.J., and is likely to have operations in Austin.<\/p>\n
“The key questions we ask as we expand are: Does it provide working capital? Is there profit in the bottom line?”<\/p>\n
Sikora led three Austin software startups before becoming chief executive of Pervasive Software Inc. last summer.<\/p>\n
He says entrepreneurs keep coming back for one reason: “There’s an inherent passion there. You have an idea, and you want to see that idea out there in the marketplace. It really doesn’t matter whether you have a success or you have a failure. You learn from it either way, and you apply it the next time around.”<\/p>\n
—–<\/p>\n
To see more of the Austin American-Statesman, or to subscribe to the newspaper, go to http:\/\/www.austin360.com<\/p>\n
(c) 2003, Austin American-Statesman, Texas. Distributed by Knight Ridder\/Tribune Business News.<\/p>\n
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