Just Managing: The Four-Year Overnight Success
There's a showbiz verity that it takes years to become an
overnight success. Indeed, instant success results from grueling
years of learning one's craft, putting up with the indignities of
small-time producers, growing an impossibly thick skin and creating
a boundless supply of optimism in the face of daunting challenges
and discouraging odds.
Dennis Deandre knows a bit about this struggle, but not because
his company has anything to do with the silver screen. Deandre founded
and runs a company named LoopNet, which today is the Internet's
largest commercial real estate marketplace. More than 90 percent
of listings for commercial property are available on LoopNet, which
also offers access to financing and other services. Top companies
in the realty industry, such as Grubb & Ellis, Marcus
and Millichap, and Trammell Crow, use the site, whose backers
include GE Capital and GMAC.
The robust activity on the site (LoopNet counts some 117,000 brokers
and agents as users) is a far cry from the simple site Deandre launched
in 1995. At that time, he was a commercial real estate broker trading
institutional-grade properties for Arroyo and Coates, when he got
the notion that this fragmented, highly personal market could be
better served online. Listing services online, he thought, would
bring everyone "into the loop," (hence the name) and create a more
efficient market for property listings.
Between the idea and the reality, of course, lies the shadow.
And herein, LoopNet is a classic tale of the art of bootstrapping.
Rather than focus his energies on seeking huge amounts of financing,
Deandre concentrated instead on securing customers and improving
Deandre based his entire strategy on one tenet: that market share
was the key metric for long-term success. "In certain Internet spaces,
such as the one that we are in, generating a critical mass takes
a certain amount of time because the exchanges are of no value until
someone starts to use them - and then they are of exponential value,"
The early days of LoopNet were not pretty. Starting with an $80,000
loan from a colleague, Deandre rented an executive suite in downtown
San Francisco, hired an engineer to produce the site, and began
cold calling corporations. He faced daunting challenges, among them
the fact that his engineer would occasionally scoot out of the country
for weeks at a time.
When Deandre burned through the initial loan money, he sold his
house. He liquidated all his assets. He even sold his car. All the
while, he was working insane hours, calling clients and convincing
them that his company was larger than it actually was (clever trick
#14: always say "we" instead of "I.").
Slowly, the site began to click. In April 1996, Deandre scored
his first client, the New York State Commercial Association of Realtors.
His next client came two months later. Soon, he could tell folks
that his was the largest commercial site on the Internet, which,
given the early days, wasn't a staggering claim. He took on small
infusions of capital. As the market proved viable, Deandre faced
competition from both Dow Jones and GE Capital. But over time, he
Today, LoopNet is one of the few Internet companies that owes
its success to the much-heralded power of increasing returns, the
theory that success accrues to the successful. While many would-be
players base their pitch for millions of VC dollars on the claim
that being the "first mover" in an industry insures a self-generating
dynamic of success, LoopNet actually has leveraged that idea into
a successful operating principle. The idea is that a player who
grabs the right share of land can become so fixed in the mind of
potential customers and clients that his fame and success attracts
more customers, and that success literally fuels ever-greater success.
The early investments generate increasing returns, since the real
work is in generating critical mass.
Deandre calls this a natural monopoly, a market in which "when
one company wins, it is to the benefit of the user." He argues that
having all the listings centralized on his site, which ultimately
has become the de facto standard, benefits users by freeing them
from sorting through a puzzling and fragmented array of listings.
All the while, the bulk of the site gives users more choices.
Reaching critical mass in the Internet industry doesn't, however,
equate to overnight success. LoopNet owes its position today to
the years Deandre spent cultivating customers, using his gradually
growing base of clients as collateral to build trust with potential
clients. It took about nine months to land his first clients and
two months for the second one. Today he signs up an organization
about every two weeks.
Today it seems that everybody wants to grow a blockbuster company
in the time it takes to download a song over a T1 connection. Yet
many excellent companies still run at a 28.8-baud rate.
Madame Curie once said, "chance favors the prepared mind." The
Internet analogy to that sentiment might be that success comes to
the companies that are ready to succeed. Targeting the right customers
with the right products and services isn't the right formula if
you aren't also doing it at the right time. And the best way to
ensure being in the right place at the right time is to be there
for the duration. Bootstrapping one's growth - and in the process
lengthening the time in which a company can hit its stride - is
a wise and time-honored recipe for success.
Read or print the Intro
and Chapter 1.
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Read the publisher's press
this book from Amazon.com.
the companies that Tom discusses in the book
Hear a recent lecture by Tom on the Startup Garden
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