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    Shannon Henry's The Download Live
    Discussion With Bob Nelson of Nelson & Co.

    Thursday, July 22, 1999 at 1 p.m.

    Shannon Henry Welcome to The Download Live. I'm your host, Shannon Henry. My guest was Bob Nelson, CEO of Nelson & Co.

    Nelson co-founded CrossMedia Networks Corp., which developed a service that uses speech recognition technology to let people hear and respond to text e-mail messages over the telephone. It had the potential to make it big with busy mobile professionals who don't want to lug around a lap top just to check e-mail or so his angel investor thought, at first. When the investor backed out, the company almost folded.

    Nelson has since moved on to establish a successful business and CrossMedia is surviving on its own, but the experience has left him with some unique wisdom.

    Nelson talked about how to decide whether to leave your job to start a company and the subsequent very high highs and very low lows of the technology start-up CEO.

    Transcript follows:


    Shannon Henry: Hello and welcome to Download Live. Thanks for joining us Bob!


    Shannon Henry: Bob, can you begin by telling us what it takes to start a company? Is a good idea enough? What kind of personality do you need?

    Bob Nelson: First you get the idea that is so powerful that you think it has to be a winner and you just have to make it happen and you discuss it with everyone you know. That is the first 1% of starting a business. Then you need the classic entrepreneur personality to take it the next 99%


    Arlington, Va.: "MyInBox" -- what a great idea. Do you have any other ones ideas that you hope to launch later on, or has building one product from scratch been enough for you?

    Bob Nelson: MyInBox was, and continues to be, a service that will ultimately change the way people connect to the internet -- by telephone - using their voice with replies coming by speech-to-text. That field will generate a large number of successful companies in the next 10 years and I look forward to being part of them. That said, for the near term it is time to recharge my batteries. ;-)


    Shannon Henry: What did you learn in the great funding search? Why did you decide to take angel instead of venture capital funding? Would you do the same thing again?

    Bob Nelson: The Washington area was home to just a handful of early stage venture capitalists when CrossMedia was founded in 1996 so angel investors were the logical funders at that time. Now, with the explosion of available capital and sources, it would optimal to start with more funding earlier which is becoming the norm.


    Shannon Henry: What's the classic entrepreneur personality?

    Bob Nelson: You should probably consult a psychologist for the textbook answer, but the attributes common to nearly all successful entrepreneurs are: extreme self assurance, a willingness to overcome all the nay sayers, unrelenting optimism, and an ability to get very smart people to join you in your mission.


    Shannon Henry: When a company is going through difficult financial times, what kind of responsibility does a CEO have for his staff? I know you helped your employees find jobs. What else did you do and how did you go about helping them move on?

    Bob Nelson: As when a company is building quickly, when "unbuilding" a company there are several constituencies to balance: investors, vendors, clients, and employees. As employees typically have the most on the line, they deserve a disproportionate share of management's attention. The fact that the Washington area has something like 1% unemployment in the technology sector provides what has been called a "safety network" for the employees of any startup. Consequently, CEO's of some of the hottest companies in the region were glad to take my calls and hire some incredibly talented employees in a hurry.


    Shannon Henry: There have been parts of your marketing of CrossMedia (your campaigning at venture fairs, for example)that seem almost political. How is Washington's technology culture affected by its political culture? And tell us about your past/future political experiences.

    Bob Nelson: One of the advantages of the Washington region is the exposure to individuals who by nature think of national and worldwide consistuencies. Politics is about managing constituencies and having 51% on election day. Start ups are about building constituencies and creating an ongoing dominance in your market.

    My background in political direct mail and target marketing has been a great help in building companies and developing networks. Being a co-chair of the recent George W. Bush high tech fundraiser in Northern Virginia, for instance, was valuable in both introducing the Governor to the local tech scene and in making sure that this region increases its stature at the national level.


    Philadelphia, PA: How much of your own capital did you put up for the venture? Were you risking everything you had?

    Bob Nelson: My dad always said you should not bet more than you can afford to lose. Like a lot of entrepreneurs, my contribution was in starting the company with no salary for the first year and living on a smaller salary after that than I could have otherwise made.


    Falls Church, VA: A couple of years ago, angel investors -at least Sand Hill Road investors- were willing to throw money at just about any company that had the word "Net" in its title. Has that changed recently? Have tech IPOs slowed?

    Bob Nelson: From my discussions with VCs, if anything, there is a wider range of companies being started and funded today as the range of opportunities created by the internet are starting to develop into broad categories. Instead of just Business-to-Consumer (B to C) there are now B to B (Commerce One, and Ariba), C to C (Ebay), and C to B (Priceline). Another change is that second generation net companies are being founded by wealthy alums of first generation successes and the model is 1) gather a great team, 2) get $5 - 10 million of funding, , then 3) write the plan, or don't even bother, just start the coding.


    Reston, Virginia: What is the current status of CrossMedia and this product in particular?

    Bob Nelson: Happily, CrossMedia's service to allow you to call an 800# to hear and reply to your email was recently listed by Internet Telephony magazine as one of the best telephone email services in the market and it is available for free trial at www.myinbox.net. The company itself is moving ahead nicely with the strong support of its vendor partners and investors.


    Tulsa, Ok: I'm a lawyer -commercial litigation in practice for a year, with a degree from a Top Ten law school- who is interested in starting his own on-line business. However, I, like most lawyers, have no hard business training or experience -i.e. analyzing a balance sheet, understanding basic financial information of a company, etc.-. As an interim step, I think working at a high tech company on the business side would be helpful to fill those skills I currently lack. Do you agree? If so, any thoughts about how a person with my background could jump to the high tech industry, i.e. what jobs I could credibly seek? Willing to relocate.

    Bob Nelson: Dear Tulsa: You are probably right to take a couple of steps in getting to your long term goal of starting a business . You could move first to the legal department of a major tech company in one of the two or three major tech centers in the country and, ideally, work on the legal side of their relationships with smaller high tech companies. From there you could move to a higher level job with a much smaller company where you could build your expertise in start up management, employee recruiting, and money raising. You don't have to jump immediately to a start up, you can do it with a five year plan and increase your likelihood of success.


    Arlington, Va.: Asking complete strangers to invest in your idea seems daunting. What was the most crushing rejection you got, and how did you bounce back?

    Bob Nelson: If you happen to have a background in sales, then rejection is never a problem, it just means you are one step closer to a "yes". A lot of the entrepreneurs I encounter do not find fundraising daunting, it is just a necessary step in order to achieve the larger goal of building a company. In fact, most entrepreneurs in their heart of hearts believe that they are doing you a favor by letting you invest in their company because they are going to make their investors rich. ;-)


    Potomac, MD: Mr. Nelson, I have in the past been involved with a number of start-ups from an early-stage, not as a "founder". I am currently evaluating a number of my own ideas to see if their is any business merit behind them. What is the best way to get "plugged in" to the entrepreneur community in the DC and other areas -Atlanta, SoCal, the Valley"?

    Bob Nelson: One of the best ways to determine if your idea is merely good, or if it is truly great, is to discuss it at length with people who have already been successful in other start ups in a related field. The tech regions are still new enough that they have the feel of small towns. With all of the networking gatherings that occur in the region with the local tech councils, venture groups, investor networks, and entrepreneur watering holes, it is possible to find numerous opportunities to hang with the crowd that has already been there and done that.


    Potomac, MD: In a related vein, what, in your opinion, what region of the country is most conducive to starting a new "hi-tech-internet" business, from the standpoint of availability of, and competition for, funding, cost of doing business, hype, and resource availability? How does the DC area compare with "the Valley", "the Alley", Boston, Atlanta, and Austin?

    Bob Nelson: A great plan for a huge market with the right team could get funding being based anywhere. One of the plusses of having so much money flowing into the venture capital industry is that regions that have fewer local VCs create companies with lower valuations which causes VCs from other areas to be willing to fly in.

    The Capitol StarWay (DC, SoMD, and NoVa) today has plenty of capital providers but, relative to Silicon Valley, has fewer cashed out entrepreneurs to fund, guide, or build the next generation of start ups. So, if you get in now, you can become part of the "virtuous cycle" that is getting under way here.


    Shannon Henry: That's it for today. Thanks for all your great questions and Bob, you were terrific. We'll be watching. Bye!


    © Copyright 1999 The Washington Post Company

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