Every Company Needs a Good Map

When I started my first company, I had no idea of what I was getting into. I did not even know how to run a company. I was just this Caltech PhD candidate with an idea and a few customers. Early on, I got great input and expanded the offering online. Since this was 1994, there were very few people online. We were all sort of making it up as we went along. My idea was to help private and academic researchers find the products they needed at the best price. The term "best" is subjective to be sure.

The first idea, just list the items and have advertising around the edges. This was not well received at that time. Everyone felt that there would be conflict of interest issues. People were not used to seeing capitalism on the Internet. I was labeled a heretic and worse, a profiteer! Not even the suppliers liked the idea. Contrast this with today's Internet full of free sites supported by ads from Google and other sources. The next idea was to try to create an exchange where a percentage of the purchase would be the cost of participation.

In 1995, I met a high-wealth individual, Alan S., who took on this fledgling enterprise as a pet project. He helped me write a business plan. He worked with me on raising money and even taught me a thing or two about the right way to present myself - get rid of the smoking yellow Volkswagen bug. There is a limit to how poor you can appear before you look desperate. I had not yet graduated from Caltech so money was a problem for me.

In 1996, we incorporated. I think it was January 2nd. It wasn't until July that we had offices but things were starting to roll. We had some online software and about 10,000 products listed. There were very few functions and the whole thing ran on a Microsoft Access database backend. It was slow and not very pretty. We let individuals use the system free to get some traffic. For the average scientist it worked and that was the most important thing at that time. We had added a method to place orders. People would select the items and then it would print out an order at our office that we then sent by FAX to the suppliers. Most were not able to take orders via the Internet and we were not going to get EDI.

In October of 1996, Chiron, one of the big 4 biotech firms, called to ask about using our service. This meant they would be our first customer. We were in over our heads but you have to give it your best shot. We were assigned to an inside person to work with us on the integration. We probably should have aimed for a smaller project or launch but they were in charge. It helped to have more leverage with suppliers. We were getting data on 10,000's of products. Our system could not scale with it. We switched to MS SQL in the middle of the project but not without some headaches.

When we had to go dark for a few days, we lost our internal person at Chiron. He decided to go live in a commune in Vietnam. At the same time, Chiron upper-management decided to implement SAP for their internal systems. We not only got pushed aside we were out the door. It might have happened anyway.

I'm not sure, but I think the loss was worse than not having tried. We did learn a lot, but competitors who had now begun to appear used the bad news against us. Suppliers started to doubt our ability to deliver and we had a rather sad holiday season. It took a while, but we got back in the game. We found other customers and we worked with implementation teams or we did not do take the job.

The moral of this story is that sometimes the best early customers are the small ones. Their demands will be easier to meet and you can build on the success. It is very tempting to go for the homerun early on. That only works if you are already a homerun hitter. It is better to swing for the single and get on base to start with. Later on, or if you happen to really connect, the homeruns can come because you are still in the game.

Still, if it happened again today, I'd still go for it with everything I could muster. That is what Modern Magellans do. I would just try to make sure that expectations were reasonable. I would probably not make such a public spectacle and I would try to make them invest in the project in a way that they are sure to work for its success. You need inside people who have something to lose if the project fails and a lot to gain if it is successful. You have everything to gain and not much to lose in that situation.