Discussion With Ari Jacoby of Newsletters.com Thursday, August 5, 1999 at 1 p.m.
Welcome to The Download – Live. I'm your host, Shannon Henry. My guest today will be Ari Jacoby, CEO of Newsletters.com.
College Park-based Newsletters.com is an online clearinghouse for investment newsletters. People visit the site, see ads for different letters and subscribe online for electronic or paper delivery. The Internet may not seem like a logical place for the publications, whose owners are not known for technology savvy but are famous for their fear of copyright infringement.
The operation got major validation last year when the company attracted its first money from "angels," private investors who seek out infant companies. Putting up funds were two of the best-known such cherubim in Washington, both of whom made their money from cashing out of pioneering firms Digex Group founder Doug Humpfrey and Jeff Osborn, one of the original vice presidents at UUNet Technologies Inc.
"Their chutzpah is the ultimate thing," says Humphrey. And the team is getting more serious about schmoozing: earlier this year Jacoby became the youngest member of the posh food hall the Tower Club in Tyson's Corner at age 23.
"It's been helpful in raising venture funding," he says.
Jacoby talked about how to surround yourself with big names and influential people to help you open doors.
Shannon Henry: Hi Ari, welcome to the show. Can you start by telling us how you got the idea to start Newsletters.com? What exactly does the company do?
Ari Jacoby: Newsletters.com is an online retailer focusing exclusively on expert information products such as newsletters and special reports for consumers and businesspeople. We are revolutionizing the extremely fragmented newsletter industry by creating new opportunities for web sites and publishers alike.
Ari Jacoby: Great question! We are "under 30" :) Investors are interested in enthusiasm and capabilities--age is not necessarily a limiting factor if you really know your industry
Shannon Henry: When you first called me you immediately got my attention by saying Doug Humphrey and Jeff Osborne were your angels. Since then, Doug's said you have great "chutzpah." How did you get such well-known Internet pioneers to fund your first start-up?
Ari Jacoby: Two great stories! Doug met us prior to a PIN breakfast, listened to our pitch and absolutely hated it! He offered his help and we were (and still are grateful) We met Jeff through another advisor, Barry Unger. Jeff took a liking to us, and we had a check within 3 days! These guys aren't "content" guys, per se, but they are true entrepreneurs, and worth their weight in gold!
Arlington, VA: I am a Junior Software developer now, but I would like to start my own firm in a few years. What is the best approach for me to meet and learn from people who are already entrepreneurs?
Ari Jacoby: I would suggest joining the Netpreneur group, which has really been great to us. Mario Marino has done fabulous things for this area in terms of networking events, and I have found them to be breeding grounds for finding other entrepreneurs. Good luck!
Shannon Henry: What are the keys to choosing a board of directors? Who did you look for and how much do you pay these people?
Ari Jacoby: Our board of directors consists of both investors and media folks. Guys like Doug Humphrey and Jeff Osborn have a stake in our future as investors. recently, we have begun to add very well known and influential people to our board of directors and to our board of advisors. Typically, these people get options in lieu of cash, which is way too precious right now!
Shannon Henry: How did your appearance on "The Money Hunt" go?
Ari Jacoby: MoneyHunt was really fun! The great news is that I won! The mentor was the VP of strategic planning at Excite/@Home. We have spoken since and he has been great to us. We talked about newsletters.com moving into new markets, like health. Overall, I got great advice!
Silver Spring, MD: Ari: As a current 'almost-graduating' undergraduate student trying to start my own online company, how would typical investors view such a scenario as far as their venture capital goes?
Ari Jacoby: We started newsletters.com after graduation, so that we could devote our full attention to it. Investors respond well to commitment--drive, passion, and perserverence are great, but dedication is a must. Choose one or the other if you can.
Ari Jacoby: The Internet economy, in my mind, is really about two things: improving peoples lives and bettering their careers, and making lots of money doing it! Making money is important to investors, and we are working hard to steadily increase the value of our offerings. Truthfully, the expert information providers that we bring to the table consistently help our customers, and we are really proud of that. We can't wait to bring experts together in health, law, HR, women's issues and so on.
Shannon Henry: How did you become such a consummate networker at such a young age? Are you just naturally tenacious? And how did you even know which people could open the right doors for you?
Ari Jacoby: I have been guilty of being "over aggressive" on occasion :) In truth, that's really how I live my life--I love anything that is extremely high energy and hard-hitting. The good news is that for all of my faults, no one ever has anything bad to say about being relentless! We carefully sought after entrepreneurs who have consistently made a difference, and we found several. I haven't mentioned Steve walker yet--their group is outstanding, especially with HR issues.
Pasadena, MD: I read a lot about you in news and magazines are you hiring right now?
Ari Jacoby: We are always hiring Feel free to send your resumes! We'll never stop hiring, as we are growing very quickly. It's very tough to find great people to work with, and we are lucky that we have found some real gems!
Gaithersburg,MD: Did you ever consider going to venture funds? why? why not? What did you have to offer the angels? how did you know what to offer?
Ari Jacoby: We are working with Institutional venture funds right now. We are working on a significant round of financing which will allow us to tackle health care, law, HR, and many other categories in the same way we built our personal finance category.
Ari Jacoby: Investors typically require an executive summary before deciding whether or not to proceed--good luck!
Philadelphia, PA: What are your greatest challenges and successes to date?
Ari Jacoby: There are so many challenges that we have battled from day one. We have been building a talented and experienced management team, which was recently bolstered by the addition of Anne Holland as our EVP of Marketing. Finding great people is always tough, and we are always in the market! Post financing, we will work hard to quickly move into other major expert information categories, and that will be a challenge. We are acquiring expert sources now, and cutting deals with huge web sites, but nothing is ever fast enough on the web! We have had early success in surrounding ourselves with terrific advisors--Mike Lincoln at Cooley is one, a certain Washington Post executive is another. My dad, Paul Jacoby has been great to us, as well. My legal bills would be sky high if not for his contract work! We've been very fortunate indeed.
Ari Jacoby: We are located just outside Washington DC, close to the University of Maryland-College Park, Elie's Alma Mater. We have great space, and it is affordable. Try not to "leave the nest" too soon though--it can get really pricey. As we grow and prepare to move in the next few months, we are finding that it only it's more expensive!
Shannon Henry: What's the best piece of advice you've received so far?
Ari Jacoby: Jeff Osborn always says "the bulls win, and the bears win, but the pigs get slaughtered" What he means is that the company should be shared with the employees that strengthen it--We have an options program that rewards employees for their contributions. We aren't afraid to give equity to people that really help us, and we've learned valuable lessons in this regard.
Northern Virginia: What skills do you look for in potential employees? Do you require that your potentials have a "technical" background? And...what is the average salary of your hires?
Ari Jacoby: We hire for a number of different positions. Business development people need to be rock stars when it comes to deal making, but they don't have to know how our network is run! Our customer service staff may never cut a deal with a portal or major web site, but they treat our customers with kindness and respect, which is the only real skill set we expect from them.
Bethesda, Maryland: Hi, Ari: Young companies usually need a lot of ongoing legal help, which is always expensive. How do you deal with this? Do you have both inside and outside counsel?
Ari Jacoby: We use Cooley Godward for our ongoing legal needs. Mike Lincoln, our attorney, is the best! He has been through thick and thin with us, and treats us very well. For internal matters, policies and procedures, and contract work, we rely heavily on our general counsel, Paul Jacoby
Shannon Henry: You've mentioned some of the players who have helped you out. Who's on your list to meet next? If you could have dinner with any 3 people tonight who would they be?
Ari Jacoby: We are working on investment terms with a few very well known and respected Internet and media types who I can't disclose now. I would have to say Mark Walsh at Vertical Net, Bo Peabody at Lycos/Tripod, and Tim Draper at DFJ. Why not shoot for the stars, right? :)
Silver Spring, MD:
Ari Jacoby: Jake Winebaum at ecompanies suggested that the Internet is only really 20% invested, and I agree. Markets ebb and flow, but great ideas and more importantly great execution wins in the long-run. There are a ton of naysayers who think that "the Internet bubble will burst" any day now--but I disagree. E-commerce is really only in its formative stages!
Pasadena, MD: You have raised funds from some of the most respected Internet pioneers in the area, congratulations. Do you plan to continue raising money from 'angels' or do you see an institutional round of financing in the future? If so, when can I BUY SHARES? :-
Ari Jacoby: An institutional round is in the works and hopefully, if nothing stalls the process, will be done soon. The only time you might be able to buy shares is at an IPO, which is not in our 12 month plan. Keep watching us as we grow! Thanks!
And let us know too what you think about the tech stock slide--has the bubble really burst? Is that good or bad for your business, which isn't traded publicly?
Market conditions most certainly affect private equity concerns. VC's exit by selling their companies or by taking them public. Bad markets prohibit the latter, which can chill the process of raising private equity. Thankfully, this has not been an issue for us! What's great is that companies like Jupiter are going public soon, and Hoovers just came with great applause. We all play in the same sandbox (it's a really big sandbox, which helps us tremendously
Thanks everyone for joining us, and to Ari for your great insight into the networked world!! Bye!
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