Couple optimistic despite company's closing

January 29, 2001

BY MICHAEL KRAUSS

How does that old Billy Joel song go? "Got a call from an old friend/ We used to be real close ..." These days, instead of calls, old friends resurface via e-mail.

Gayle Keck’s e-mail started out like this: "Well, it’s been a wild two-and-a-half years! Start an Internet business, get married, get acquired, move to New York—and now, I’m sorry to say, iCanBuy.com is closing."

With everyone from CBS’ 60 Minutes to the local newspaper gloating about the "dot-com bomb," I thought Keck and her entrepreneur husband, Paul Herman, would be bitter and angst-ridden after spending more than two years and thousands of dollars to start a dot-com business. But quite the opposite: They’re positive about their experience and raring to go again.

Herman, an ex-McKinsey & Co. consultant, and Keck, a big-league advertising agency creative, met aboard a United Air Lines flight from Chicago to San Francisco. They conceived iCanBuy.com on a trip from San Francisco to Chicago in May, 1998.

The premise for iCanBuy was simple and powerful. According to Herman, "Kids control approximately $180 billion in purchasing power. They’re among the most savvy of all Internet users."

"Yet they were stuck at the ‘kiddie’ table," Keck adds, "with no ability to make purchases online."

Without the access to credit cards, Keck and Herman saw kids ages 10 to 18 as underserved and in need of a means for spending online. Through San Francisco-based iCanBuy, a parent would sign up their child and provide an online allowance. Parents could also set up permission guidelines for their children’s spending.

It sounded like a concept with legs.

Like a credit card company, Keck and Herman intended to make their money through percentage transaction fees paid by the retailer. But unlike a credit card company, they’d have no payment risk because the parents would deposit money in advance of their child’s purchases.

Before being acquired, iCanBuy had about 50,000 customers. They had partner relationships with more than 50 retailers including CDNow, online computer store Outpost.com and Pacific Sunwear. They even signed up several charities, a bank and a firm where kids could invest, according to Herman.

After that fateful flight in May 1998, Keck and Herman recruited some cofounders in June, including Herman’s brother, Ross, who built the prototype site. In July, they hired a technical firm to start building the scaled-up version. Unlike most dot-coms, they conducted marketing research and did focus group concept-testing in August. The results were positive.

The goal was to launch their business in time for the 1998 holiday season. In October 1998, they got married and got the business into the market.

Keck and Herman funded the business out of their own pockets for all of ’98 and half of ’99. They started approaching investors once they had a working prototype and were told they had a good idea. They had lots of meetings and lots of opportunities to make presentations. They saw more than 30 venture capitalists.

But they were unproven start-up entrepreneurs. They got a couple of offers and term sheets but never closed on any external funding from professional investors. Instead, they kept raising money from angels, friends and family—pretty much shoestringing it all the way.

While the business continued to growmodestly, last March, they sold iCanBuy to a company called MainXchange, based in New York and Tel Aviv, Israel. Main-

Xchange had more than 400,000 customers, and Herman and Keck saw the deal as a way to scale the business.

They continued to try to grow but never had any significant money to attract a larger audience. In November, they shuttered the business.

"Financially, this was not a win for us or for our investors," says Herman, who nevertheless remains philosophical and optimistic. "Even though we didn’t realize a fortune, we learned a hell of a lot."

"The bubble of dot-com investing is over," he says, "but we’re only about five years into the era of the commercial Internet. It takes 40 years for an industry to fully mature. There’s another 35 years of work to be done and innovations to be made."

So now, Herman says, they’re free agents.

"We finally took our honeymoon after two years and went to Morocco. We’re catching up on our personal lives a little bit. We’re doing a little consulting," Keck says.

Neither Keck nor Herman seems particularly concerned about the future.

"As theworld moves faster and grows more complex, great talent is always in demand. We’ve had some pretty unique and widely varied experiences," Herman says.

Despite what you might think, Herman believes that he and Keck have been extremely fortunate, even if they haven’t created a pile of wealth.

"We’ve made the dumb mistakes. We have a better feel for how this world really works. When we go to get funding for our next venture, when they ask if we’ve done this before, we can say, ‘Yes,’ " he adds.

Where others might be heading back to some secure corporate environment, Keck and Herman describe a different type of security.

"People say we’ve done the hard job of taking the risk. Our unique risk profile has career security. It may not have job security, but it has career security," he says.

As for the future, "Bottom line," Herman says, "I think Gayle and I will find somebody who needs help or somebody in need of help will find us."

Michael Krauss is a partner with DiamondCluster International in Chicago.
He can be reached at news@ama.org.