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To Grow What No One Has Grown Before

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By Ellen McCarthy
Thursday, April 14, 2005

Rob McGovern , founder of the online job site CareerBuilder.com , is an entrepreneur at his core. But last June, his job title became "venture partner." For months, McGovern holed up in the Reston office of New Enterprise Associates , looking at business plans, meeting with start-up executives and deliberating the merits of seemingly far-fetched technology schemes.

Ultimately, it was too far removed from the action, so McGovern quietly this spring started a company called Mkt10 , also part of the online job search industry. In doing so, he became the latest in a string of local entrepreneurs who used the investing world as a docking station before diving back into start-up life. Their return to the game is driven partly by entrepreneurial obsession, of course, but they're also seeing solid business opportunities in the tech market.

Some, like McGovern, are pushing their old lines of work forward, while some others are branching into entirely new industries or trying to cash in on the boom in government and security spending. Most say it was only a matter of time before they caught their breath and got back in the game.

In November, Steve Case , former chairman of America Online Inc. , for instance, bought a majority stake in Exclusive Resorts LLC, a luxury travel company with hundreds of mansions in exotic locations. This month, he announced he was wrapping the firm into a new initiative called Revolution that will own companies in the health care and resort hospitality industries. He has not disclosed all the details of the $500 million venture, but has said the goal is to make the health care industry more efficient and consumer-focused.

After selling Proxicom Inc. , a Web services firm, in 2001 for about $450 million, Raul J. Fernandez switched to the other side of the aisle and invested in several tech companies around town. He took a special interest in Reston-based ObjectVideo Inc. , and signed on as the surveillance technology firm's chairman in November 2003. Three months later, he took the reins full time as ObjectVideo's chief executive.

Charlie Thomas experienced the best and worst of start-up life during the nine years he led his first company, Net2000. He worked 100 hours a week throughout most of those years, so after it was sold in early 2002, Thomas said, he needed to do something less time-consuming. A few months after the sale, he co-founded Claris Capital LLC , a Vienna investment bank. But last month, he signed on as chief executive of NISCO , a Reston data analysis software firm for which he had been a director and shareholder.

"It was ideal to sit back and survey the landscape -- earn a good income, but also expand my network and meet a lot of companies," he said. "But once you become an entrepreneur, you have it inside you. Nothing makes me want to wake up in the morning more than growing a company."

McGovern won't reveal all the details of his new venture just yet, but says Mkt10 will have an official launch this summer. Spending time as an investor clearly paid off in one respect -- Mkt10 has already landed a $7 million round of funding led by his old colleagues at New Enterprise Associates.

"If you sit on the investing side, you understand the motivation of the investors -- what they are looking for," said Peter Barris , NEA's managing general partner. "You learn what makes [investors] tick, what makes some start-ups succeed and some fail."

Three days before April 15, a dozen low-income workers sat patiently in the waiting room at the East River Family Strengthening Center while volunteers in the surrounding offices clicked away on high-speed computers, using modern software to file the workers' tax returns through the Web.

The center's resources might pale in comparison to the setup at H&R Block, but the technology running at East River and five other sites around the District has already helped 850 people who earn less than $35,0000 annually claim $1.3 million in tax refunds.

The program is operated by the D.C. Cash Campaign , a collaboration of national foundations, local community development centers and NPower Greater DC Region , an organization focused on helping nonprofits use technology.

NPower, originally called Technology Works for Good, was founded in 1999 with funding from the AOL Foundation, Microsoft Corp. and others. The goal is to provide inexpensive technology services to the nonprofit sector, which often does not have the money or expertise to use high-tech equipment as effectively as corporations.

Some of the tax-preparation sites slated to be used by D.C. Cash were still using dial-up Internet connections, for instance, and others had outdated computers that couldn't handle the tax-filing software provided by the Internal Revenue Service. NPower's task was to assess the needs of each site, find cost-effective but functional technology and train each of the volunteers on the online filing system. And during the past few months, one of NPower's staffers has been on call at all times, in case there is a technical glitch at one of the sites.

"It's not about the technology, it's about what the technology can do," said Julie Chapman , president of NPower DC. "The technology should be like having the lights on -- it shouldn't be something you have to worry about."

Overheard:

"Jack [Biddle] and I laugh that everything is for sale at the right price, but it's one of those rare times when we don't have anything that looks terminal [and has to be sold]. So we're actually getting some sleep at night," said E. Rogers Novak Jr. , co-founder of Novak Biddle Venture Partners . The Bethesda venture capital firm, which held its annual meeting for limited partners on Tuesday, has had several big wins in the last year, including Matrics Inc. , a Rockville radio frequency identification firm that was acquired for $230 million; N.E.W. Customer Service Cos., a Dulles warranty firm that was recapitalized at $370 million; and Blackboard Inc . and InPhonic Inc. , two District firms that held initial public offerings.

Ellen McCarthy writes about the local tech scene every Thursday. Her e-mail address ismccarthye@washpost.com.


© 2005 The Washington Post Company

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