Adrian: Can you tell us a bit about yourself?
Scott: I’m just some guy that loves online direct marketing. I was born and raised in the Bay area, so I was lucky enough to grow up around technology. I’m 38, so I’m an old timer in online direct marketing, and surrounded by a bunch of young guys that are much, much smarter than me. I have a four-year-old girl, who means everything to me. I’m a huge mixed martial arts fan and have studied ju jujitsu for 7 years. So I’m probably the best looking and toughest guy online.
Adrian: Do you find martial arts helps you in business at all?
Scott: Oh, totally. The group of people that do ju jujitsu are far nicer than people in business. I think getting choked out and beaten on just calms me down. Is that weird? Because I think anyone that sits and does this for 12, 15 hours a day like I do, needs to have an outlet to turn it off, because if you don’t, I think you go a bit crazy.
Adrian: So how did you start out in the bay area?
Scott: I started my career up here with a company called Genuity, which was one of the first Internet data center companies in the US. I sold co-location space, rack space in premium; Class A data centers, as well as bandwidth. It was just great because at that time you literally just pulled a pen and paper out and you just took orders. I would sell T-3s to Netscape, to Excite, to Yahoo, to McAfee. I co-located the original servers Mail 411 and Flycast. I was really, really super fortunate to be around this industry as it really took off and really hit the ground running. No time for training, just start selling. And then every company I’ve been with, since I began in the valley, has gotten acquired. Genuity got bought by GTE Internet Working. Remarq, got sold to Critical Path for 400 million dollars, before Critical Path had its problems. The next company I helped start was Netflip (later named MetaReward), got sold to Experian. I think I’m a pretty lucky guy.
Adrian: Do you have any interesting stories about bay area companies?
Scott: During the .com craze, I was lucky enough to be around some pretty interesting guys. One guy I got to know was Jeff Skoll, the co-founder of Ebay. During the formation of eBay, it was really three partners. The way Jeff describes it, they were sitting around a table kind of negotiating equity in the company, and Pierre said, “Okay, listen. It’s kind of my idea. I kind of shepherded it. I feel as though that kind of gives me the right to a little bit more. What if I take 40% and leave you guys 30% each”. And Jeff said it took him about a millisecond to say, “Yes, no problem. I’m in.” And as he says, the Sun engineer guy goes, “Well, you know I got a really great job at Sun. I’m making 150 thousand dollars a year now. I’m not really sure that I’m buying into this whole thing. It’s a little bit risky. I think I’m going to pass.”
Adrian: How have your friendships with those guys changed?
Scott: It’s actually kind of hard to stay friends with them because our schedules are so different and because their reality changes so much. To give you an example, we were at my friend Bill’s house. We were up late one night playing poker. I think I was working, I think I had just started with NetFlip, and we were all up playing poker, Jeff, Bill, and a bunch of other really loaded guys, and it’s Sunday night and…
Adrian: So it’s like a 100 thousand dollars a hand?
Scott: What’s funny was the hands were nothing. But I got to get up to go to work and Jeff says, “Hey, you guys want to go to Vegas right now? I got my plane all fueled up. We’ll take a limo down, we’ll head off to Vegas right now. We’ll probably get in around two in the morning and we’ll gamble and stay there the week or something.” So everyone was, “Oh, yeah, yeah.” And I’m like the only guy in the room going, “Do any of you guys work? Like I actually have to work.” it’s a weird thing, it’s hard to hang out with people like that, because you either got to have a lot of money or you got nothing going on.
Adrian: So you didn’t go to Vegas with them?
Scott: No. I’m like, “Guys, I got to work, man. Like I actually have a job.”
Adrian: I can imagine. So what did you do next?
Scott: I joined Ken Chan to help him start a company YourFreeDVD’s, later called NetBlue. We raised 20 million dollars in financing. We hired a management team. And about eight months ago, nine months ago, we left. NextInternet.com is really our project now. We wanted to build a platform by which we could get talented people together and build companies that we believe in, and create an environment which allowed them to pursue ideas of great companies. We wanted to separate the platform from the asset. This industry is kind of violent and moves pretty quick and littered with a bunch of smart, bright guys that, if you give them half a chance they’ll eat your lunch. We want to do better.
Adrian: So then to ask kind of a reverse question, it seems like what you did at NetBlue has influenced what you’re doing now. Are you glad you took that 20 million dollars in funding?
Scott: I’m eternally grateful that we raised money. I mean, I drive a nice car. How can you not like that? We also used some of this money to start Next Internet. So am I grateful? Of course I’m grateful. Does taking money from venture companies come with a big price? Sure it does. And it’s not just the things you think about, it’s a whole set of issues that dictate the direction of a company. So I mean it’s…I guess there’s good and bad in everything. I’m very happy I went through the process and we did it. On the other hand, part of the reason that we’re doing Next Internet now is, we think there’s a better way to do it.
Adrian: What do you say that the thing that you were going to do differently as an angel/VC, compared to how the investment that was made in Net Blue?
Scott: A couple of really key differences. One, it’s Ken and my other partner’s money. I don’t want to over simplify what that means, but it means a whole heck of a lot. I care very intimately about how every single penny gets spent here. And not in a weird way, not in an overly bearing way, but a part of me is actually invested in every single company that we do, like a part of my money. So it’s something that keeps you up at night.
Adrian: Can that be a disadvantage though? I mean, if a guy’s working with you and he’s got to spend a bunch of your money, could cause you to micro manage, for example?
Scott: We have to be really careful about that, but we keep it under control. We are pretty normal guys.
Adrian: So can you tell us about some of your companies?
Scott: Well, we just started working With Brett Cravatt after he decided to leave Vendare. Brett’s been around for a long time, but he’s still not as old or good looking as I am. Brett was a massive contributor to the success of Vendare. We look for guys like that that a) we know; b) are extremely capable; and, c) we feel very good about the long-term prospects. Brett knows how to make money. And it doesn’t necessarily have to be our idea at that point, or even our DNA. It can be his DNA. All we wanted to do was make it easy for Brett to start a company, and hopefully we’ve done that.
Adrian: And how are they doing?
Scott: Really well. I mean they’ll turn a profit in the first month, and they are moving very very quickly.
Adrian: So what are your other investments?
Scott: Another company is called Webjuice.com. Webjuice will become the preeminent ad network for email. We provide unique solutions for advertisers looking for more customers, and publishers who want to make more money from their data.
Adrian: Whats next?
Scott: The second company is a company called Winzy.com. We fundamentally believe there will continue to be a long and protracted war between the three Internet giants, Yahoo, MSN and Google, for search. We also believe in a lot of direct marketing viral techniques and so we’ve really built a friendly consumer product. We just launched it at Ad Tech. It’s really in its alpha stage. We think there is a big market for creating really friendly consumer front ends that get consumers to use that particular brand of search by using a lot of different viral techniques. So on its face it seems relatively simple. You use Winzy to search and win. I think the search advertising marketplace is much more mature than the traditional CPA networks. They got whatever, Google a 100 thousand advertisers, those are the types. So we’re out sourcing the ad portion of it to those guys because they just clearly do a much better job than we do. And also are planning to add a desktop component to it as well.
Adrian: Nice. What’s the next company?
Scott: Company three is an affiliate network called NextClickMedia.com, where we’re focusing on really building an affiliate network centered around e-commerce. There’s so many affiliate networks out there, we’re really trying to differentiate it by building an ecommerce/lead generation platform. Off the ground, eight very talented people headed by a really brilliant guy. And the last one is a dating site, more of a lifestyle site, that we think we’re going to do a free dating site.
Adrian: Is that like PlentyofFish.com?
Scott: Yes that’s the fifth one, and then we just invested in two super smart girls who are in online fashion. Really for us the best advice we got was focus. Ken Chan, my partner, is a real visionary guy. He’s got 200 ideas of how to make money online. So the biggest focus for us is just do a couple of things and do them exceedingly well. And we don’t want to make 50 companies – we want to build a few, great companies.
Adrian: Interesting. So I have a question about the strategies you’re using. Is what you’re doing similar to what Think Partnership is doing? Is it similar to what Idealab is doing? Is it similar to what Warren Buffet is doing? Or is it just what you’re doing?
Scott: I love what the Think Partnership guys are doing. They just bought my friend Brady’s company, Ileadmedia. They’re clearly making bets in the space because they see a huge opportunity. We see the same opportunity. I don’t like being compared to the Idealab thing because their fund was so huge, they were investing in hundreds of different things, it was so removed from the entrepreneurs actually doing the work.
Adrian: So you’re more of an angel investor than a VC investor?
Scott: Yeah, but one that sits in the desk next to you helping you out.
Adrian: At what level do you bring in an angel investor like DFJ or Kleiner Perkins?
Scott: We don’t think past these six companies. It’s just these companies and we’re going to see what we can do with what we have. Also, it’s guys in the space that we know and we feel comfortable with. If I haven’t had drinks with you and I hadn’t gotten drunk with you at Ad Tech somewhere, I probably wouldn’t be very comfortable doing business with you. Look, we started in bedrooms, on plastic desks, where no one cared, and we didn’t have any money, and everyone wants you to fail, and you know you’re two guys trying to make it in this world. We’ve also been down the venture road, where we understand the positives and negatives of taking venture money. We’ve been there and done that. All done it in the course of five or six years, in a space that we love so much. So I would say, if you want a great place to work and you want a different way of doing things? Talk to us, because we can offer that to people. I mean we hire great people and we give them a place they can call home.
Adrian: So for example, readers that are reading this that are interested in a job with you, they are the ones that should contact you?
Scott: Yeah, totally. Call me, I’ll talk to anyone. We want to find intelligent, bright, motivated people that believe in the way that we’re doing things, that are passionate, that share a love for the space that can benefit from things that we’ve gone through. If you are as good looking as I am, that helps also. I think we’re trying to create a better culture that keeps the money in the space.
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