Start-Up Kids Grow Up to Be Millionaires So Fast

Kulveer Taggar says he expected to wait a little longer before becoming a millionaire. His start-up company, Auctomatic, a Web-based helper that automates the chores of running auctions for power-sellers on eBay, was doing just fine. He was gathering customers, getting noticed and even about to land a second round of financing. Revenue was nonexistent, but what do you expect when you don't charge customers and don't run ads? It was all about building for the future.

Suddenly, though, the future happened -- or, depending on how you look at it, the future never got to happen.

A Canadian firm called Communicate.com approached the British-born Taggar and his partners about buying the start-up and hiring them to revamp the combined companies. (Communicate's business was making money from the traffic that came from owning prime domain names like Perfume.com.)

Instantly, the dreams of evolving the Auctomatic concept were supplanted by a chance to help out someone else's dream -- and become mildly rich in the process. Quite a temptation for someone like Taggar, who is only 24. The same goes for his partners Harjeet Taggar (his cousin) and Patrick Collison, who are 22 and 19, respectively.

The Auctomatic story is a parable of the Internet's start-up culture, where it's cheap to begin companies, possible to become a billionaire and fairly common to bail out as a millionaire -- all before you're barely old enough to shave. I met Kulveer and Harjeet last year when I was writing a story about Y Combinator, a company that auditions prospective start-ups around the world and relocates the winners to Silicon Valley for three months.

In exchange for subsistence funds, advice and access to the Valley's biggest investors, Y Combinator takes a small slice of equity. At the beginning of the odyssey, everybody gets a gray T-shirt that reads "Make something people want." If a company goes public or gets bought, its founders get a second, black T-shirt that says "I made something people want." By the time I finished my article, one company in the group -- Zenter, which made online-presentation software -- snagged black T-shirts after Google bought it in a multimillion-dollar deal. Other companies had secured funding from some of the best-known investors and venture-capital firms in the Valley.

Auctomatic's story was particularly compelling. Oxford grads Kulveer and Harjeet had pitched Y Combinator as a sort of a Craigslist for college kids, expanding a Web site they'd begun in England. They called the company Boso ("Buy Online Sell Online"), unaware of the clownish connotations that word would have in the States. After three weeks here, they changed not only their name but their entire business plan, gearing their efforts to the multibillion-dollar market of eBay sellers. They wound up their stay in Silicon Valley with funding from former Google executives Paul Buchheit and Chris Sacca.

Not long after, Y Combinator head Paul Graham met Collison, a teenage Irish code-wizard who was applying for the Y Combinator summer program in Cambridge, Mass. Graham sent Collison to the Auctomatic guys, and Collison, who'd left MIT during his freshman year, helped develop software that was winning the hearts of eBay sellers. Then, last fall, came the acquisition bid.

When Auctomatic began negotiating, it put its efforts for a second funding round on hold -- and just about ran out of money. Meanwhile, when word went out that Auctomatic was on the market, two other prospective buyers jumped in. Because of confidentiality agreements, they can't be named, but they can be described as among the top Internet companies in the world. Deeply competitive in the race to hire the smartest people, these fast-growing firms seemed to covet Auctomatic as much for its talent as its technology.

Oddly, one company that exhibited little interest in the Auctomatic technology and its creators was the most logical fit: eBay. One would think that the auction giant -- currently fixated on retaining disgruntled sellers -- would jump at the chance to score some technology that would make life easier for its customers. But eBay yawned at Auctomatic's feelers. It also declined to comment.

"It was a really tough choice," says Kulveer, but Auctomatic decided to go with Communicate, which on March 26 announced the $5 million purchase in conjunction with a name change and shift in strategy. As Live Current Media, the firm will try to build innovative e-commerce applications instead of just cashing in on its domain names. "Their software is a set of tools and technologies to help us fulfill our potential," says Live Current Chief Operating Officer Jonathan Ehrlich. "And the guys are amazing -- incredibly bright and so hungry."

Y Combinator's Graham wishes the Auctomatic team had held on longer; he says the most successful entrepreneurs are those who resist buyout offers and keep building their companies. But he understands the temptation.

"When you're that young and someone dangles all that money in front of you, it's hard to turn down," he says. Now he's going to order some black shirts for the newly minted Auctomatic millionaires.

Steven Levy, a senior editor at Newsweek, can be reached atsteven.levy@newsweek.com.