Whiz Biz Kids
Calvin Carter was a success story, no doubt about it. He'd started his Web development company in his room in the early '90s at Southern Methodist University and grown it to 55 employees. The quiet kid from Florida who liked solitary pursuits (he missed the ocean, deep-sea fishing, sand) had dropped into the back-slapping, money-loving, it's-all-about-who-ya-know-kid capital of Texas and created his own business. He was his own boss, answering to no one.
But now, he was sick of it. At the height of his success, when he was building Web sites for high-profile clients such as the Texas Rangers and Dallas Stars, he realized he was no good at this. Like so many entrepreneurs, he was great at starting a business. When everything looked hopeless--not enough money, too few clients, then too many clients, how to pay for insurance, where are we going to office, the investors are antsy--he could calm the roil. But when things got really good, Carter was no longer the man for the job. The company needed a manager. He wasn't a manager. He was an entrepreneur. He didn't dream of running companies. He had an itch to create them. He had, as they call it, "the bug."
"I just wanted out," he says, remembering the final straw. "For the umpteenth time, an employee had come to me and tried to 'bigger-better' me. You know, 'Hey, these folks across the street are going to pay me $5,000 more, and I'm starting there tomorrow, so thanks for giving me my start and training me and believing in me. The dream was fun. See ya.' I just said, 'You know, I don't need this anymore.'"
So he sold his business, cashed out, tried to kill the bug. He wandered into different consulting jobs, explored new fields, kicked the tires in new cities. Then he realized you can't kill the bug. You're born with the bug. You nurture it. You feed it. It's your living.
He needed to start more businesses. Not just one. Several. He was a freak like that. So he thought. Until he met up with several dozen others like him in Dallas. Until he realized that there are others who do this for the same reasons he does. Not just because they chafe at the corporate culture, which they do. Not just because if your business hits, really does well, you'll set yourself up for a faster retirement than a 401(k) and 4 percent annual raises will ever allow. Because inevitably they all fell into this as their first or, at worst, second jobs, and once you work for yourself, you can't ever go back. When you've driven the bus, you realize you never want to be a passenger again. It's too fun taking corners at 60 miles per.
So, you start more businesses. Any business. Doesn't matter which one. The point isn't what they are. It's what you are. You're an entrepreneur. So you may, like Carter, have a diverse portfolio: Right now, it includes a Web development company (not the same one--this one has only a handful of employees), real estate, small-biz consulting and being president of the Young Entrepreneurs Organization local chapter.
It's not as though starting a business is complicated. But there are rules, ones you don't learn while getting your MBA. Carter and the 135 other entrepreneurs in YEO learn the simple little secrets to starting businesses through trial and error. Things like: 1) Don't spend money you don't have to; 2) start it sooner rather than later; and 3) business plans are, largely, crap. No one knows for sure what will work, so get it up, get it going, find out what customers really want. So what if you fail? You don't fear failure, because odds are you'll fail, so you may as well fail fast. You can always start something else. Just do it.
The members of YEO in Dallas (to join, you must be under 40, and the business you founded or co-founded must have $1 million annual revenue--and don't fake it, because they're vigorous about scanning your books) are a personification of this principle. Like Carter, they cut against the stereotype of the young entrepreneur--the cheesy flimflam salesman who lies about how much money he or she needs to start a business or how much profit it makes. The well-known Dallas "thousandaire millionaire" who racks up debt to get the right car, clothes and Uptown pad. The person who, as the old entrepreneur joke goes, believes in the motto "fake it until you make it."
No, these Dallas entrepreneurs are hardworking, very smart, surprisingly humble. Damn them.
More important, they seem to be the epitome of Dallas. More so than the billionaires who buy sports teams and long for boldface mention in the society columns, the folks in YEO Dallas at once live the Dallas dream and create it: Look forward, dress sharp, network, bust ass and factor your receivables. From this, good things will come.
"We do make up that unseen economic engine of Dallas," says Carter, who grew up in Florida and has traveled the world. "Business here is passionate. The people in Dallas are totally engaged in what they do. They take it seriously. In some other places, you're weird for being young and taking it that way. In YEO, in Dallas, you're not weird. You resonate."
This is how you start a business in Dallas: over coffee at Starbucks.
Carter pulls his Lexus SUV into a spot in front of the store and grabs his briefcase, Apple titanium laptop and Treo 600 phone/PDA/lifeline. These are the tools of an entrepreneur like Carter, 33, who sells or starts or runs or consults for small businesses every day. Always on call, always reachable, wired and ready. He and seemingly every laptop-carrying employee in Big D like doing business at these coffee shops. The stores are quiet, omnipresent and, most important, they have wi-fi.
While he's waiting for his 3 p.m. appointment, Carter--and the four other people in this Starbucks with laptops--can check their e-mail or browse the Web. When he's in a hurry, Carter has been known to pull into a Starbucks parking space close enough to penetrate the store's wireless network, pull out his laptop, download or send important messages and speed away. For the wi-fi entrepreneur, lattes are the least important item on the menu.
This is our second Starbucks meeting in Carter's whirlwind day. Many of the discussions are off the record, as Carter shares proprietary information about his core businesses. His many interests are why we've already sat in on a high-powered networking breakfast, discussed a partnership with a real estate agent, toured a Preston Hollow property under reconstruction, had a working lunch to discuss health-care costs for YEO members' companies and previewed a new client's Web site launch.
His portfolio and résumé mean he's constantly giving or receiving sensitive information. Which is why when his future business partner arrives to discuss the new venture they want to launch, Carter assures him that this paper won't divulge any secrets. But to hell with that. This is the Dallas Observer. Divulging is our raison d'être. So let's just come out and say it: The new business Carter and his partner are about to launch involves a little something called "the Internet."
"Here's our dilemma," Carter tells Derek Wilson, CEO of NeoSpire (an enterprise that has nothing to do with the company they're trying to start) and a fellow YEO member. He tells Wilson that the core problem, if not addressed, could cause visitors to their new business' site to be transferred to another site when they purchase their products--meaning customers will have to make an effort to return to the URL if they want to buy more items. They can fix this, meaning multiple purchases of their products can be made on their site, but the solution will take at least $2,000 and delay the launch two weeks or more.
Now comes the test: Which decision do you make? Of course, you take the extra time, spend the money and make it right. Right?
"Let's just launch it," Wilson says, "and see what happens. Then we'll go from there."
Again, just do it.
If you have an idea, make it happen. No matter the risk. No matter the odds. It's a risky, usually depressing way to spend your days. (One reason so many entrepreneurs are always-smiling rah-rah types--if they weren't, they'd split their skulls with a ball peen about once a month.)
Sounds easy. But you gotta have an idea. Let's take an example: Gabriel Goncalves.
Goncalves--born in Sao Paulo, Brazil, got his green card in 1993 and a week later started his first business--was working on his second enterprise a few years ago, an IT company that had clients all over the country. (Having multiple companies is not unusual for an entrepreneur. They are usually better at starting companies than running them once they achieve a certain level of success. Often, they sell them and start over.) Goncalves was having a hard time finding and keeping good IT technicians. So he turned to YEO, which put him in touch with a consultant specializing in the relatively new field of industrial psychology. Loosely, this is the science of analyzing a company's "top performers," finding which character traits lead to their success and then constructing tests that allow an employer to find people with the same qualities.
"The results were amazing," Goncalves says. "We dramatically reduced turnover and hired better people."
It wasn't until he talked to his managers that he realized there was a problem. They didn't like the consultant. They didn't understand his method; they felt they had too little say in the hiring process. The entrepreneurial light went off: Goncalves realized that if he could develop unique software for each client that not only determined which were the best candidates to hire but also was understood by top management, he could tap into an undiscovered market. From that would flow black gold, Texas tea.
He sold his business and set out to learn all he could about industrial psychology. He discovered that two of the best programs in the country were in Texas at Rice University and Texas A&M. He cold-called the heads of both departments, drove to meet each of them with little money left and only his idea for a company. He all but begged them to help create his software. They agreed. Now, PeopleAnswers, the company he created, counts Quicken Loans, Neiman Marcus, Michael's and Texas Instruments as clients.
It all starts with the idea. But for those next steps, Goncalves says, you need help.
"Almost none of this would have happened without help from YEO," he says. For him and others in the group, they talk about YEO as its own mystical being, describing it like Obi-Wan described The Force: It binds them, protects them, makes them whole.
YEO began 17 years ago and has grown into one of the most powerful such peer groups in the country. Powerful to members because they make so many resources available to help grow and start businesses. Powerful to outsiders because all governments try hard to get entrepreneurs to create jobs and pump life into dead areas; Mayor Laura Miller is meeting with the group early next year to pitch downtown investment.
The Dallas chapter was founded in 1993 and consists of a group of companies with combined sales of more than $1.3 billion. They are part of the "O" network of peer groups, which also includes World Entrepreneurs Organization (where members "graduate" once they turn 40), YPO and WPO (for company presidents), and CEO, a "graduate" organization after YEO that is invite-only.
That's the boilerplate, the press release. But what is it about this group that has caused membership in Dallas (the second-largest chapter in the world, behind only New York) to nearly double in size the past four years? For most, the answer is "forums." A forum is an entrepreneur's subgroup. A forum is eight to 12 members, each in non-competing industries, who act like an unofficial board of directors. Forum meets once a month, and there is a strict no-soliciting policy. (This holds true for all YEO events; no one is hitting up another owner for business or funding during meetings, although if they decide on their own to do business together, no problem.) It's confidential and follows a strict format. One member's company is highlighted, and everyone receives financials for that company to look at. The owner discusses "wins" and "losses," concerns and challenges, fears and hopes.
"At first, I thought, 'OK, what is this guy who owns an air-conditioning company going to tell me about retail at the airport?'" says Gina Puente-Brancato, who owns La Bodega Winery at DFW Airport (Terminal A, Gate 15) and several other airport retail properties. "But we all have the same problems we have to face together. I did a presentation to my group after 9-11, which obviously affected our business at the airport. We all cut our salary off for several months. And I was a little depressed. But they assured me that I was doing the right thing and we would come out of it. And we did."
Because the room is inevitably filled with aggressive, cocksure types, they are forbidden from pointing fingers and telling the presenter, who is putting his or her figurative cojones on the table, exactly where and how he or she is doing it wrong. Any suggestions offered are anecdotal: the "when I had a similar problem, here's how I handled it" school of advice, rather than the "oh, yeah, well, if you're so damn smart..." model favored by Donald Trump and most journalists.
One entrepreneur of 10-plus years in Dallas says, however, that the arrogance and bluster of YEO members keeps him from joining. (That and the dues, about two grand a year for both local and international fees.) Yes, the contacts seem great, and it's surprisingly integrated, he says. Nevertheless, it often seemed to him a weird amalgam of a student council meeting and well-dressed frat. "You've got to understand how much bullshit goes on in groups like that," he says, asking that he not be identified because he still does business with members. "People lying about how much they make, about what they can deliver. Maybe it works for some people. But I just saw it as a big circle jerk."
Most of the YEOers I spoke with wince at this description, saying it's just one of many unfair stereotypes of the young Dallas go-go entrepreneur. (The one they laugh at the most is the "they're all rich kids" notion. Some come from money, and some have made themselves a nice wad, but even the young fête-setters you've been reading about for years--for example, Brady and Brandt Wood, who started several Deep Ellum and downtown businesses--have had the same cash-flow concerns in recent years of any small-business owner, and they've had to work hard to overcome them.)
It would be ridiculous to say that there aren't seeds of truth in some of the stereotypes. Occasionally, when surrounded by a group of them, you catch a strong whiff of hairspray and pretension. A schmear of fakery, a fat wedge of cheese, a healthy slice of b.s. There are times when you look around the room and realize that everyone's tie dimple is too perfect and the toothy smiles could easily be brought to you by Crest. Or Botox. "The douche factor is there, but way overrated," says a YEOer. "I thought these folks would be jerks. They're not, for the most part. They're sincere and helpful."
It's just as accurate to say that some of the ridicule these people endure is rooted in jealousy. After all, who doesn't dream of running her own company, of telling The Man where, when and in what fashion he can take his job and shove it? "We're young and dynamic," says Trey Cox, who also heads up Dallas Roundtable, a networking and sales lead group that strives for "one degree of separation" between its members and Dallas-Fort Worth leaders in business, politics and the community. (Cox isn't a member of YEO, because he didn't found his firm; he's a partner in it. But his quote is relevant, and his tie dimple was spot-on.) "But we're intensely focused on [all young businessmen] helping each other."
To further counter charges that Dallas entrepreneurs are a clubby cartel of suits--"It's not a billionaire boy's club with a secret handshake," Carter says--YEOers point to several aspects of the organization, locally and nationally, that help members with their business and their personal life. IOS, for example, puts entrepreneurs in touch with experts in the field when they have business problems. Or personal problems. Like when one member's father had to undergo a unique type of heart surgery. He put in a request to find out more information about it. The next day, Dr. Denton Cooley, founder of the Texas Heart Institute and the man who performed the first successful human heart transplant, called to talk his father through the procedure.
Perhaps not surprisingly, members also act as personal career counselors. Talk to a dozen members in YEO, and they all say that the biggest surprise is the lasting friendships they've made. "At first, I thought YEO was about business learning," says Howard Getson, who endured the forced sale of his business, a divorce and his father's death, all in 1999. He says YEO was crucial to his survival and willingness to start over, to get back on the horse. "But it's about life learning. It's easier to see things in other people than it is to see those problems or solutions in yourself."
"You never consider the depths of friendships you get out of something like that," says Adrienne Beam, who runs her own Web development company, Insite Interactive. "But there are things that you go through that only another entrepreneur can understand."
This is how you start a business in Dallas. You defeat fear and greed.
Getson knew these were his enemies when he started his software company in the late '90s. He was successful but frustrated. He felt that his company made excellent software but that his clients didn't use it properly.
Then, his investors told him to sell his company. They feared the tech bubble would soon burst and that Getson's company had peaked in value. Getson vehemently disagreed. Of course, he was wrong.
This highlighted something to the admittedly then-arrogant entrepreneur: It's hard for humans to analyze many business decisions. Their own greed and fear get in insight's way.
So then he decided he'd start a business in which he was able to develop software for himself. No longer would people misuse his ones and zeros. Using fuzzy logic and neural network programs--artificial intelligence, in other words--he developed a program that would evaluate when to buy and sell futures contracts in the commodities market.
For anyone who's seen the last 20 minutes of Trading Places, you know the commodities market is volatile. And when Getson saw that his software wasn't working like he'd hoped, he asked other entrepreneurs in YEO to evaluate his company. "To help me with my blind spots," he says. They made several suggestions, which led him back to what he already knew: He had to eliminate the human being from making the trading decisions. Errors in data or programming could be fixed, but a person's central flaw never changes.
"The market is real good at punishing ego," Getson says. "Traders like to be right, hate being wrong. So they tend to sell winners too quickly and hold their losers too long. Now we no longer have humans making trading decisions. We have humans making algorithmic decisions." His company's performance since this switch, which was aided by the advice of other entrepreneurs, has been "remarkable," Getson says.
"Most entrepreneurs are very giving of themselves," Carter says. Says Sean Magennis, another YEOer, "In Dallas, you can get a meeting with anyone in one phone call. That's not true in other cities. Here, they want to help you succeed. They know that your success helps everyone. The pie is big enough for everyone to have a slice."
Goncalves buttresses this point with an anecdote. He was trying to decide in which city to open his company's first satellite office. Through YEO, he sought advice from someone with experience in making these decisions. The CEO's advice surprised Goncalves. "He told me that you always screw up the first satellite office. So just make it somewhere close, somewhere cheap to fly to. And he was right. I chose Houston instead of Atlanta, and it was screwed up, but his advice helped me immensely."
And if the "paying it back" concept is indicative of entrepreneurs, this spirit of giving in all biz industries is uniquely Dallas. In Fort Worth, business is still oligarchic, albeit with Stetsons and cowboy boots. In Austin, the communal business ethos is one of sharing in the city's environmental and ecological development. As a big-time Dallas commercial developer who does work in Austin once put it to me, "In Austin, you have to get city approval to move a bush. In Dallas, they just ask you how many jobs the deal will bring and tell you to start killing trees." While the latter attitude may one day send us all to a tidy spot in hell, it makes for damn good business.
It also contributes to "the flypaper effect" Dallas has on entrepreneurs. Not long after launch, they often find that the idea of the small-business owner as lone wolf is largely fictional. The officers of your company end up being other entrepreneurs. Dallas, with its hub airport and huge pulsing pockets of young people wanting to start businesses, draws others to the city of incorporated dreams. Remember, the pie is plenty big.
Even after they grow up and move on to new ventures (or take their company in new directions), they do so in Dallas. Jeff Sinelli (started Genghis Grill, now runs Which Wich sandwich shop downtown), Tony Hartl (Planet Tan) and local WEO President Jeffrey Yarbrough (restaurateur who just started his own marketing and PR company, Big Ink PR and Marketing) are examples.
"I am a serial entrepreneur," Yarbrough says, noting that, after he and his wife had triplets, his WEO forum brought his family dinner every night for six months. "The business benefits of staying [with YEO and now WEO] range from my exit from Deep Ellum and the nightclub business to starting my new company. Now, we have different issues in life and business than young entrepreneurs. Starting second or third companies, exit strategies from our companies, raising children, elderly care of our parents. And just because I have experience and contacts, I can always be better."
This is how you start a business in Dallas. You office in a storage room.
First, you have to be so disgusted with your current gig that the storage room sounds inviting. That's where Adrienne Beam was in the mid-'90s. She had a marketing and PR background and was using that to help her in her work (for a company that no longer exists) handling investor relations for a client. She pushed the client to put online much of the material it offered investors. She realized that what she was doing would be useful to other companies: helping them do their marketing, PR and investor relations online.
For three years, she pushed her bosses to expand their efforts to match her vision. They told her that they were doing just fine, thank you, young lady, please go back to work. Finally, she'd had enough. She told this to Calvin Carter, whom she'd met through his Web development company. Carter asked her to go to work for him. Beam said no. Said she wanted to run her own company. Carter said, well, why don't you? You can use my storage closet, and I'll even invest in 10 percent of the biz. Insite Interactive was born. Two weeks later, Beam had her first client. Seven years later, her small company offices in a high-rise off Preston Road and the Dallas North Tollway and does $1.5 million in revenue with her small staff.
Early success didn't prepare her for surviving the tech crash of 2001 and 2002. For that, Beam turned to her colleagues at YEO. They were always supportive, she says, but also very honest. When you struggle, you become humble, and the organization is very good at offering solutions to get you through the tough times and a sense of perspective when biz is soaring. She says it has helped keep her on an even keel throughout her company's ups and downs.
"One thing I love about YEO is we call each other to the table...Some people have a problem with the 'let me tell you how wonderful I am' syndrome. They're used to pitching their business to investors or partners, and we see through that. We all struggle. We get through to most of them and convince them that it's OK to talk about fears and failures."
Most surprising--to this observer, anyway--was the diversity of the membership. There were many female, Hispanic and foreign-born members locally. There is international diversity as well. YEOers often speak of the group's global presence; two "universities," or international retreats, are held every year. (They've been held everywhere from L.A. to Hong Kong. The next university is in Dubai.) Getson, who has visited chapters all around the world when on YEO's international board, is going to India next year to do the same. One of the fastest-growing chapters is in Russia.
Sean and Maria Magennis, both YEO Dallas members, are a testament to the group's global reach. Sean, who started his first business in Toronto, opened YEO's Moscow chapter. Maria was the first female president of YEO International and opened the Mexico City chapter in 1992, the first international chapter outside of Canada. They met at a university retreat in Chicago in 1995, and again in Boston in 1997. By September, Sean flew to Mexico City, and a romance was born. He flew to Mexico City five days a month; she flew to Toronto five days a month. Oh, and he opened a business in Mexico City. And she ran it.
When they married and it was time to pick a halfway point to settle down, they handled the chore like the professionals they are. They looked at Atlanta, Los Angeles, San Diego, Chicago. They settled on Dallas.
"There were lots of reasons, including the airport," Sean says, "but a big reason was that Dallas understands and appreciates business. That's not true in most places. You'd think it is, but trust me, it's not."
This is how you start a business in Dallas. You hang out with entrepreneurs.
At the Starbucks meeting between Carter and Wilson, they make several decisions on how to proceed with their new Internet venture. Then the conversation veers to blah blah blah territory. How's the family?, etc. But even here, they're always looking for the first step: a great idea.
A story is told about a guy who wants to write a book. It's mentioned that this guy has done a radio show before. The state of talk radio is discussed. Before you know it, Carter (who doesn't drink coffee--who needs caffeine?) is wired again.
"We should have a YEO radio show."
And he's off. How would you make it work? Would it be local? Would it be national? You could take calls from people who want to start businesses, give them advice, plug partners, mentor young crazy people before they get sucked into the corporate maw. Who would host it, could you sell sponsorships, would you make money, what about satellite radio, anyone know someone at KLIF?
This is natural for Carter. It's what he does. Gets an idea, just does it. At the very least, just tries it. Doesn't matter if he doesn't have the money. ("Ain't no one getting rich here. Not yet," he says, laughing.) Doesn't matter that everyone thinks they'll fail and they often do. Missions impossible are merely challenges. Or, as Getson says, successful entrepreneurs "are sociopaths who use their power for good rather than evil."
That doesn't mean they're calm about this process, or even rational. Some love the adrenaline of starting the business, so they're constantly searching for the Next Big Thing to launch, rarely completing any deal. These folks, "deal junkies," spend too much time analyzing the market and trying to raise capital to ever get around to the boring, day-to-day monotony of running a steadily growing enterprise.
Those who do it the right way in the beginning aren't immune from stress. As their company grows, they find that the skill set that helped them launch the company and take it to its first million or first $5 million isn't going to get them to their first $10 million.
Like Carter. He's a start-up junkie by trade. Personally, though, he's just someone who's trying to figure out what he does well. They call it discovering their "unique ability." Not the thing they're good at. Not the thing they're passionate about. But that one thing that they're both good at and passionate about. That's what keeps them successful, even if their many businesses don't seem to have an organizing principle. It's the thing they all center on and spin around.
"There's a company, Honda, that makes cars and motorcycles and lawn mowers and vacuum cleaners," a YEOer explains. "That seems random until you realize that what Honda does is make the best motors in the world. Then it makes sense. That's their unique ability. And everything flows from that."
"I'm still trying to find what inspires me," Carter says, smiling. "I think I'm inspired by inspiration. Does that make sense?"
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