 ichat Entrepreneur Andrew Busey |
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 http://www.ichat.com, 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 “…it’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.”
This article appears in February 21 • 1997 and February 21 • 1997 (Cover).