Gen Xers, once flattened by early failures, rebound.

You bet you are.

Welcome to a world where failure—though not exactly encouraged—is more than tolerated. "Today's Gen Xers follow a pattern," says Kevin Compton, a general partner with the venture capital firm Kleiner Perkins Caufield & Byers in Menlo Park, California. "Graduate, start a company, fail, and take a job with an established firm—all the while preparing for another startup. These kids wear their failures as badges of courage." Fact is, an early failure can spruce up a résumé.

Here's why:

Last year's failure is ancient history. Talking about a past failure is like saying the South lost the Civil War: Who cares anymore? Just five years ago, practically no one even knew there was such a thing as the World Wide Web.

Any experience is better than none... Success in the technology industry and elsewhere requires cutting-edge perspectives that only a few people, most of them very young, can provide. "The speed of change is so rapid that the pool of experienced people can't keep up with demand," says Mark Kvamme, the chairman and CEO of CKS Group, and one of the four Gen Xers profiled on the following pages who came back from failed ventures to succeed before their 35th birthdays. "Anyone with experience is welcome, whether they've failed or not."

...and failure is better than most experience. "I call my failure my M.B.A.," adds Kvamme.
Failure is to be expected. When you back Gen Xers, you have to figure they'll make a few mistakes. When they do, you figure they're less likely to make them the next time. "I like a situation where I can benefit from the mistakes a guy's made with someone else's money," says Compton.
There's lots more money where the first batch came from. A failed startup might lose $2 million or so. But a successful one can go public and make 30 times that amount for its early backers.

Reason enough to try, try again.

ANDREW BUSEY
FOUNDER AND CHIEF TECHNICAL OFFICER, ICHAT

At 23 he was scorned by venture capitalists.
Took a job so he could eat.
"I'M ONLY 26, BUT I FEEL LIKE I'M 35," says Andrew Busey, whose company's corporate backgrounder lists him as "an Internet industry veteran." Explains Busey, "I like to say that I've grown in Net years."

Since 1991 Busey has founded three technology companies, worked for two others, written a successful book, and coauthored another. His current incarnation: founder and chief technical officer of 22-month-old Ichat. The Austin, Texas, company has more than 65 employees and is the leading provider of interactive, real-time chat communication products to Web users and corporate intranets.

Busey's goal is to make chat as big on the Web as it is on commercial online services such as America Online, where 70% of its 8 million subscribers use chat rooms. His firm also wants to better incorporate chat into intranets, allowing employees within a given corporation to communicate more effectively. The company's current customers include Yahoo!, Time Warner, and AT&T. "The chat market is probably large enough to support two or three companies, but Ichat will be the leader," claims Tom Winter, an Austin, Texas, venture capitalist whose firm, Onset Ventures, has provided $2.4 million in funds for the company.

Busey's first stab at building an empire was even more audacious. After four years studying computer science and marketing at Duke University and working as a product manager at Microcom, a remote network access provider, he launched his own company, Objective Communications. His aim: to develop a three-dimensional online service that would reside on the Internet—a bold notion today, and downright daring in 1993.

Trouble was, no one wanted to back him. Busey approached a dozen venture capitalists and technology companies in search of $100,000 in seed money. "They all said the Net was going nowhere—and anyway I'd be crushed by AOL and CompuServe," he recalls.

Busey's response was to run full-page ads in Wired magazine, which attracted 25,000 inquiries from would-be users of the nonexistent service. After spending $30,000 that he'd saved from his job at Microcom, Busey went shopping for more funds at software companies. No luck, but in April 1994 he took a job in Champaign, Illinois, at Spyglass, a company that makes data visualization tools. "I was almost broke, and my desire to eat won out over my desire to start a company at that particular moment," he says.

That was the end of Objective Communications—and the beginning of Ichat. At Spyglass, as a product manager, Busey helped develop the first commercial version of the pioneering Web browser Mosaic. "The experience was just like a startup," he observes. "I felt like I was inside a tornado. So when I started Ichat, I expected and anticipated some chaos to occur once the company started to grow rapidly."

When Spyglass moved its headquarters to Naperville, Illinois, in the fall of 1994, Busey stayed in Champaign and worked on two books, including his successful Secrets of the MUD Wizard (about word-based virtual reality programs). He also formed a small software development company, where he gained experience developing other companies' chat-related applications.

BY 1995 BUSEY WAS READY—and this time, so was the market. People were taking the Internet seriously. Chat had become a huge component of the commercial online services, and new technology made it possible to integrate chat into a Web page. Venture capitalists took Busey seriously because of his books and his work on Mosaic.

Family and friends provided the first $25,000. John Hime, an Austin, Texas, venture capitalist, kicked in $50,000 in November 1995. Then Tom Winter wrote a $100,000 check one month later and invested an additional $650,000 two months after that. Winter worked with Busey to develop a business model and hire a CEO. Total startup costs from inception to first shipment were $600,000, which left $225,000 to spare.

Since then, investors have put up another $4 million or so. The firm began to show "substantial" revenues in the third quarter of 1996, and Busey thinks it could turn a profit this year.

Why did he fail the first time? Busey figures he backed the wrong technology. "I think that was an indication of my age," says the old hand, who turned 26 in April. "I thought 3D was really cool, but I didn't think about what the market wanted."

No matter. He never doubted that he'd be back to try again. "Everything I did during the past three years was aimed at building credentials and credibility so that I could start another company," he says. "Working at Spyglass, writing the books, and developing software was all part of that."
Busey dismisses the notion that Generation Xers as a group are more resilient than their forebears: After all, he notes, entrepreneurs always have dealt well with failure. The difference may be in the speed with which he and his peers react to setbacks. "I've been using computers since third grade, and I've had a modem since the eighth grade," he says. "I'm used to communicating and getting things done quickly and efficiently. I don't call myself Generation X—I'm Generation Now."

BRYN KAUFMAN
PRESIDENT
COMPUTER MARKET PLACE

At 25 he had to cut his staff from 12 to 2.
Thought about taking vodka in lieu of cash.
BY HIS 26TH BIRTHDAY Bryn Kaufman had endured business flops in two hemispheres—one in Cherry Hill, New Jersey; the second in Moscow. As recently as 1992 he considered giving up and taking a job on Wall Street.

That was before he decided to hitch his company's fortunes to the Internet—a decision he made last summer. The results are so promising that Kaufman already is talking to investment bankers about an eventual initial public offering for Computer Market Place, which is located in Broomall, Pennsylvania, near Philadelphia, and which generated $6.2 million in revenues last year. "I see the Internet the way Sam Walton saw discount stores when he started in 1962," says Kaufman, now 31. "It has unimaginable potential as a selling tool."

Computer Market Place began in 1985 when Kaufman started selling computer accessories out of his parents' home. His father coughed up $1,800 so his son could build an IBM clone, the Ultra. Young Kaufman managed to sell several of the machines to colleges and universities in Pennsylvania. By 1991 Computer Market Place's annual sales of computer and brand-name software and hardware had reached $1.7 million.

But Kaufman had bigger plans. The next step: He opened a retail store—and got clobbered by CompUSA and Circuit City. He lost money during each of the 10 months the store lasted and shut it down in August 1992, for a total loss of around $100,000.

Undaunted, Kaufman undertook to supply two computer stores, one in Russia, the other in Armenia. The stores, which opened in December 1991, were financed by an Armenian businessman whom Kaufman had met through a coworker's father, a former CIA agent. "We didn't know a thing about Russia," says Kaufman. "We just sold the guy our products. A lot of the time he wanted to pay us in vodka and artwork, but I wasn't into that. I don't know a thing about art, either."

Shipping and communications were problems. And as it turned out, Kaufman should have taken the vodka and sold that to the Russians. Their economy was rapidly falling apart. The computer stores closed within a year.

While Kaufman didn't suffer direct financial losses—the Armenian paid up front for the computers—the experience hurt. Sales from Kaufman's original business declined $300,000 that year, and his staff shrank from 12 employees to 2. "We were trying to grow the Broomall store when everything else collapsed," he says. "I had to cut costs and do whatever it took to keep the company alive."

Amazingly, during all this upheaval Kaufman still managed to attend Wharton's undergraduate school of business part-time. A friend recently had quit the computer business and was doing well as a stockbroker on Wall Street. "At one point I think I said that I'd head for Wall Street too, as soon as I got my degree," admits Kaufman.

Then the phone rang. A disgruntled employee at a competing firm wanted to discuss something else about which Kaufman knew absolutely nothing: government contracts. Kaufman hired the woman, and Computer Market Place was soon selling its products to agencies ranging from the Department of Health and Human Services to the Naval Undersea Warfare Center. Within six months Kaufman decided to dump commercial customers. Sales rose from $1.4 million in 1992 to $6.2 million last year. During that time, Kaufman paid off his school loans and bought a Lamborghini Countach (around $100,000).

Kaufman's latest scheme: go back to selling to nongovernment customers—this time using the Internet. Since mid-1996 he's been using the Net to make bids and cut down on paperwork in his dealings with the Feds. Last year he invested $200 in a virtual shopping cart feature that allows users to buy directly from the Web site. Result: Since December the cart has attracted monthly sales of $520,000—about 50% of the firm's total business.

Moreover, Kaufman's profit margin has climbed sharply. "I quickly realized that the Net can solve all the problems we faced with the store," he says. He doesn't need to invest time and salaries on salespeople, an expense that was a major drain on the retail store. And rent is minimal: $200 to an Internet service provider. "That's $200 for a virtual store that people in every country can shop at 24 hours a day," he says.

But success has come not just because of new technology. Kaufman has learned a few lessons from his previous failures. "I've learned how important it is to have good people around you to deal with the day-to-day stuff." He's also learned the never-say-die lesson: "If you're truly an entrepreneur, you have to say, 'I'm in this until I die.' Giving up is not an option."

Kaufman figures the Net is his chance to build the empire he's always craved. He recently formed a partnership with Spread Eagle, a Japanese computer consulting firm, to launch a version of his Web site in Japan. "Back when I opened the New Jersey store, I wanted to be Sam Walton," he says. "I still do, only now I have the Internet."

MARK KVAMME
CHAIRMAN AND CEO, CKS GROUP

At 24 he lost $3 million.
Resorted to selling his office furniture.
TYPICAL GEN-X ENTREPRENEURS are scruffy outsiders who succeed for two reasons: First, they're not burdened by an insider's knowledge of what works and what doesn't, so they're free to reinvent success. Second, they're hungry.

But Mark Kvamme doesn't fit the mold. Kvamme, chairman and CEO of CKS Group, a 600-employee ad agency in Cupertino, California, was born with a silicon spoon in his mouth: His father, Floyd Kvamme, cofounded National Semiconductor in 1967 and is now a partner at the venture capital firm Kleiner Perkins Caufield & Byers. The younger Kvamme's pedigree at least partly explains why, as a junior at the University of California at Berkeley, he came up with his first startup idea. While working at Apple as a programmer, he saw an opportunity to sell non-English keyboards to foreign computer users in the United States. Kvamme, now 36, called an old high school buddy, and together they raised nearly $100,000 to start International Solutions. That included a few thousand dollars Kvamme had saved; in addition, his parents and his partner's parents each chipped in $10,000 to $25,000 apiece. Kvamme's contacts at Apple helped the firm land the right to distribute Macintosh software to international customers. Sales climbed from $750,000 in 1984 to $3 million a year later.

Then things fell apart. International Solutions's two largest clients, Computer Depot and First Software, went bankrupt in late 1985. Together they represented more than half of the company's business. Worse, Macintosh sales slumped in 1985.

That slump alone might have been enough to sink the firm, but Kvamme blames the failure as much on sloppy financial controls as anything. "We were so busy plugging along that we didn't track how much money we were making or spending," he says. "Remember, my introduction to business was at Apple, and in the early days there, no one talked about cost control or budgets."

VAMME TOOK EIGHT MONTHS in 1986 to unwind the business, paying back every creditor and vendor by running product promotions and selling office equipment. A two-year stint as director of international marketing at Wyse Technology, a terminal and PC clone manufacturer, and a short-lived position at Pillar, a software company, gave him time to ponder the lessons of his failure. "It was disheartening to say the least," he says. "We had our parents' money wrapped up in it, and I had to lay off my friends. But I learned so much more about business when my company was going down than when it was thriving."

For starters, Kvamme learned not to rely on just one product line or customer for an outside share of revenues. Another lesson: "You can't control if a client is going bankrupt or leaving you, but you can control your finances. I was determined to do that in my next business."

In September 1989 Kvamme teamed up with Bill Cleary, a friend who had worked with him at Apple and for him at International Solutions. Kvamme paid $137,000—mostly money saved from his Apple days—for a half interest in Cleary's small communications firm and took the job of president. In 1991 the two invited another Apple alum, Tom Suiter, to join them as creative director. "The three of us basically became equal partners over lunch," he says.

Kvamme's strategy to build CKS was twofold, and it reflected his failure at International Solutions. "A big reason this company came together was that I failed and learned from it," he says. First, he was determined to create a one-stop shop that could produce advertising, product design, corporate identity campaigns, and multimedia content for a broad range of clients in technology and other industries.

His second goal? Get a stranglehold on cost controls. Not surprisingly, given his pedigree and experience, Kvamme turned to technology to meet his ends. He estimates that he has spent more than $10,000 per employee on high-end workstations and sophisticated networking, such as T1 lines, in the past couple of years. "When we formed CKS, no one was using Macs to do anything, not even to write copy," he marvels. "No one was using digital technology to put images in ads and brochures. We were using Illustrator for all our illustrations and using color copies for proofs, when other firms were using felt-tip markers and galleys. Everyone in advertising was talking about technology, but the fact is that CKS was one of the very first to actually be using technology to work efficiently."

The result: CKS has gained a reputation as the most innovative agency in the business. Sales have grown from $1.3 million in 1989 to a projected $130 million this year. The firm offered 2.5 million shares of stock at $17 apiece in its IPO last December, and the stock traded as high as $45 in May 1996 before settling at $26 this April.

While most Gen Xers in the technology industry seem disdainful of traditional motivations like drive, ambition, competition, or even money (they're doing it because it's so interesting), Kvamme's drive to succeed at least initially had something to do with his father's illustrious record (although now he's acting like a typical Gen-X outsider: Father and son have been estranged for years). Another early role model came from his days working at Apple. "I used to wonder what it would be like to be Steve Jobs—walking in the door every day and knowing that this great company was his doing," he says. "I wanted to know that feeling."
 

Source: Clint Willis, Forbes, June 2, 1997