Lucrative Gab

ichat Entrepreneur Andrew Busey

ichat Entrepreneur Andrew Busey
photograph by Kenny Braun

Anyone who's ever been in a long-distance relationship knows how the miles separate -- not only hearts but money from wallets, spent on countless lengthy phone conversations, frequent airfare, and gas tank fill-ups. But when twenty-five-year-old Andrew Busey found himself in an across-the-miles romance, he developed a way to make it pay off in more than just an emotional sense. The chat room in which he met and courted his far-away sweetheart gave Busey the idea to create first-of-its-kind software allowing companies to set up chat rooms on their own Web sites. And though the aforementioned gal is no longer a part of his online life, ichat, the Austin-based company Busey founded in 1995, not only posted revenues of $1.5 million last year, but has just entered a relationship with Internet staples Netscape Communications and Yahoo!, Inc., partnerships which are predicted to make him quite a pretty penny.

The virtual conversation rooms set up by ichat have a home on their own website at, including an eclectic group of company-sponsored discussions ranging from Med Chat Live -- a modern medicine and healthcare chat -- to a dating chat, a gospel and Christian music chat, and a dialogue sponsored by local network K-EYE boasting opportunities for audiences with channel 42 anchors and other guest speakers. In development is a project for the website of The Lost World, the new sequel to Jurassic Park, where users will soon be able to set up chat rooms based on topics of interest such as books by Michael Crichton or dinosaurs in general. "I go in to find out as much as I can about a subject and I create a chat room where people can interact with others through text." Busey, whose biggest customers are newspapers, movie studios, and match-making services, says everybody involved comes out a winner. "It's a huge value to Universal for building their brand and promoting their movie, and..." he adds, speaking from experience "'s cool for consumers because it can be lonely searching the Net."

It's no big surprise that such a young entrepreneur is making his mark with an Internet-related product. After all, as for most of his generation, computers were part of Busey's life almost as early as he can remember, one of the factors to which he attributes ichat's current success. Less obviously, Busey was fortunate to grasp the mysteries of the stock market before his future competitors learned to budget their allowances, an initial understanding that put him ahead of other business-bound, twenty-something techies.

As Busey explains it, his father, who's in the "not really high-tech business of furniture," was in the middle of a leverage buyout of one of the furniture companies where he worked. Busey, who at the time was about 11 or 12 and just coming off a successful yard sale that made him $200, was asked to buy in. "Dad was like, `It's $2 a share, but you've got to hold for two years' -- two years is a long time when you're a kid, and it's a long time when you're in the Internet business, too," he adds. So in a compromise that left the elementary student some capital to pursue his then-current passion for archery, half of the dough was thrown into the black hole of the stock market. Two years later, the furniture company went public and the shares split. "So, now I have 100 shares that are trading at about $25 a share," says Busey. "I've got $2,500 from this thing that I put $100 into two years ago." This lucrative lesson also taught Busey about "the appreciation of equity," a precept he has worked to propagate in his own company. "ichat has a very strong policy that everyone who is a full-time employee is also a part owner," he explains, which is why it's not uncommon to find some of the ichat's now 60 employees burning the midnight oil alongside the boss himself.

Before he was even out of junior high, the whiz kid hooked himself up to his first modem and a passion for the Internet quickly ensued. Not even Busey could predict his eventual profit from the hours and hours spent with the new medium -- an expenditure Busey realizes could have gone either way. He cites Dream On, the HBO sitcom revolving around boyhood recollections of television, as an example. "This kid grew up watching TV all the time; [just like the Internet is now] it was the latest greatest technology. There's not much career value in being exposed to TV." But luckily, his early affinity for the Internet would end up paying off in a big way. With more business sense under his belt than most kids entering college, Andrew Busey began his career training at Duke University with courses in marketing and computer science, later working as an IBM collegiate sales representative. He also spent a stint at Microcom as a product manager developing an anti-virus software for Windows. After devoting a lot of hours to the project (and without gaining any equity in the company), Microcom was sold and purchased by another company that had decided to go with Mac software instead. Busey was left with one option, begin back at ground zero on an unfamiliar format, or leave the company. He left for Champaign, Illinois, and the girl from the chat-room. And it was about this time he began creating a loose business plan for what would some day become ichat. "I decided, I was going to start a company," says Busey. "It was going to be an online service where people could talk to each other."

After exhausting all of his recent earnings (Busey had accumulated a lot of money for a college kid... "but not anywhere near as much as anyone here at ichat," he says) and having run out of energy, the young entrepreneur decided to give in and try to sell his idea. "Sometimes it's easier to give your idea up to someone else who might make it excel, than it is to set it all aside." The last company he approached, Spyglass, was also interested in Internet technology, but they had something else in mind -- the first web browser -- and Busey signed on to help with that project instead.

"I did pretty much the same thing that I had done before with the anti-virus stuff -- I designed the product, I worked on the marketing side of things," Busey explains. And when the Internet exploded, Spyglass went along with it. Unfortunately the company then made a move that would sink them forever, leaving their competitors destined for worldwide attention. Spyglass had decided to sell their browsers to companies who would affix their own name to the browser. Busey is quick to add, "and of course, no one knows who Spyglass is but everyone knows Netscape."

At the time, Busey wasn't necessarily against Spyglass' dooming decision; what he was against was the way the profits were being dispersed. "Basically, there were like three or four people [myself included] who created this entire product that made Spyglass wildly successful and I wasn't compensated substantially for it... there is something wrong with that." Before long, Busey packed his bags for Austin.

Right about the time Netscape came out with the plug-in technology that would allow other programs to be integrated into their already-popular browser, Busey met Hank Weghorst -- now Vice President of Development at ichat -- and together the two of them started a consulting company. It was soon after that Busey went out and bought a server technology, and ichat was formed in 1995. "The plug-in technology gave us the chance to integrate chat with the web, which is the crux of how we got to where we are."

As their first year came to a close, ichat had seen revenues of $15,000 and was left with a two-person staff and a few outside consultants. But their meager start became the foundation for a company that has grown -- not unlike the computer industry itself -- at an incredible rate. Now ichat is working on an Internet paging application that would automatically send users customized information from favorite websites as they are updated, while the company continues to expand into different areas of chat. A threaded-discussion group software among other new developments will enhance the program's properties.

But Busey doesn't see text-based chat rooms changing very much. "It's a human factor," he says. "You can only process so many incoming video screens, but you can chat -- through text -- with a bunch of people very simply." Both Yahoo! and Netscape would seem to agree with his modest approach, as the two companies have given up development of their own chat software to endorse ichat -- a wise move considering that chat is said to generate around 50% of the total revenue for commercial online services.

As reported in Advertising Age, analysts at Montgomery Securities expect that by the year 2000, chat will generate about 7.9 billion hours of online use, which could mean a potential $1 billion in advertising revenue. ichat itself is expected to triple its 1996 revenues in the coming year, and with possibilities like that looming, Busey has proven wise enough to know that sometimes it's better not to go it alone. In a move that some might question, but is hardly a rarity in the world of young creative types big on ideas but maybe a little short on hardcore business know how, he has replaced himself as CEO of ichat with Harvard business school graduate Mark Sauls.

Where the idea might be important, Sauls has a greater insight into the bigger picture. He maintains that good ideas are a dime a dozen, but it's the execution of those ideas that count. This is a business philosophy Busey now readily agrees with, realizing that he needs to keep a leg up to remain succesful. After all, his major competition is not far behind him, probably sitting in a high school trig class somewhere. "Kids that are coming out of high school or college probably know more about computers than I do because they are exposed to them at an earlier age," Busey says, seeing himself at a disadvantage most of us would deem laughably insignificant. "I probably didn't even see a computer until the third grade."

A note to readers: Bold and uncensored, The Austin Chronicle has been Austin’s independent news source for over 40 years, expressing the community’s political and environmental concerns and supporting its active cultural scene. Now more than ever, we need your support to continue supplying Austin with independent, free press. If real news is important to you, please consider making a donation of $5, $10 or whatever you can afford, to help keep our journalism on stands.

Support the Chronicle  

One click gets you all the newsletters listed below

Breaking news, arts coverage, and daily events

Keep up with happenings around town

Kevin Curtin's bimonthly cannabis musings

Austin's queerest news and events

All questions answered (satisfaction not guaranteed)

Information is power. Support the free press, so we can support Austin.   Support the Chronicle