Founder of USA.NET shares his secrets for success at Colo. Springs seminar

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John Street will be the first to tell you that he’s learned about his industry through trial and error. But it’s that perseverance that has put this businessman in the top echelon in his field.

As chairman of the board and founder of USA.NET, Street shared his experiences in a seminar presented during the Rocky Mountain Technology Expo 21 earlier this week entitled “The Life Cycle of Starting a High-Tech Company.” The three parts of success for a start-up operation, he said, are to pick a good idea, remain optimistic and be persistent. Once those pieces are in place, he continued, the company will need solid financial footing, a successful operations’ person and a “rainmaker” who can sell.

His rise in the telecommunications field began in the mid-80s when he was an accountant with Arthur Anderson in Houston, Texas. Always wanting to run his own show, Street, took time off of work to study business plans.

“I always was a lousy follower,” said Street. “I wasn’t that good of a student. I wanted my very own business. I though I’d do well.”

He eventually hooked up with an investor with Colorado Springs-based, long-distance company Northwest Telecom in the mid-80s. What started as a temporary assignment turned into a long-term situation. In 1987, he co-established and ran Telephone Express, which attained 11 leverage buyouts over the years. During this time, he was convinced that prices and costs would be falling quickly — which they did. Volume would be the key to profitability and adding data communications would increase volume.

In 1993, Street entered the Internet realm, convinced that application service providers — a new concept at that time – was the wave of the future. The problem, he said, was that “everything was hardware based.”

In the summer of 1994, his company designed and launched an Internet product that offered Internet access with long distance services. In 1995, he and some friends came up with the idea of e-mail address portability. This allowed users to switch carriers without changing their e-mail address. Later that year, the company split and USA.NET was born.

A cash infusion in 1997 of $3 million from American Express wasn’t enough to last USA.NET, so Street went on the road, trying to stir an interest in venture capital funding. He raised an additional $23 million but learned that he should have captured VC funding before receiving corporate backing.

He wanted to go public in 1999 but, fortunately, he admits, his attempts failed. His presentations were unsuccessful but learned from his mistakes: he did not have a knowledgeable management team, he relied too much on Netscape — the company’s largest mail provider, and he had no institutional investors.

“If you ever see me running a public company, you’ll know I’ve lost my mind,” said Street, adding that public companies frequently take on partners they don’t want to work with but need the money to survive.

In January 2000, USA.NET received what Street called “a big elephant” in venture capitalism for $60 million from Chase Capital.

“The (VC) cash is there but you have to show them a pretty great plan,” Street explained. The VC community is looking for a number of items when investing in a company, including prolonged profitability and a crisp presentation.

“What makes small companies succeed and small companies fail is the leaders’ instincts,” said Street. “You have to do a lot of financial modeling … and work real hard on your assumptions … and talk to a lot of people.”