John Friess was 23 years old when he and his brother launched Wired.MD, the first company to stream patient education videos into the exam room.
“This was in 1999,” he says, grinning and speaking loudly over the late-afternoon din of the Backspace crowd. “You could write a business plan, launch a software application and get acquired about six weeks later. Naively we were thinking this was going to be a year, maybe two years. It’s been 10 years.”
Friess and his brother Mark founded Wired.MD on March 13, 2000. On April 14, 2000, the tech bubble burst. It took time and work, but they survived the bust, with more than a little help from their peers.
As the crash was playing out, Friess found himself standing in the Oregon Zoo parking lot one evening after an Oregon Entrepreneurs Network event, talking with a circle of tech company founders for hours. “I realized that this was the most valuable interaction possible,” he says, “other founders of other start-ups, talking about the problems and solutions we had found. We were joking we should start our own group, for founders only. No one else can come in, because we’re naïve, we’re pathetic, but we also have a lot of potential. That was the impetus for Starve Ups.”
Starve Ups held its first meeting on Oct. 15, 2000, with founding companies Wired.MD, Rumblefish, Asset Exchange, viaLanguage, GC Materials, Versation and CoolerEmail. Friess argues that the results of these and other Starve Up companies over the past decade prove that peer-to-peer mentoring works. “Seven of our original eight members kept going with the group,” says Friess. “Two have been acquired. All are profitable. Some are extremely profitable. And we’ve added 47 members total over the years; 40 of those 47 are still in business. Over two-thirds are profitable. We think that by the end of next year we’ll be close to 15% getting acquired and by the following year we’ll be at 20%.”
Friess also credits the Starve Ups’ model for his own successful exit. He estimates that more than 130 people made money when Wired.MD was acquired by Krames (a division of MediMedia) for $7.5 million in January 2008. “We sold the company for about two-and-a-half times the amount of money we had raised,” he says.
That payout has enabled Friess to move onto his next business, Journey Gym, a mobile gym for fitness-conscious travelers. Journey Gym is a member of Starve Ups along with Jive Software, Plas2fuel, Keen Footwear, Khanna’s MergerTech and other promising companies.
Friess is particularly jazzed about MergerTech’s membership in the group because of Khanna’s expertise in building up a company and cashing in ambitiously. “It’s all about the acquisition now,” says Friess. “With Nitin’s help, we want to get 25% of our member companies to acquisition if exit is the plan.”
If that plan comes to fruition, it could spawn a related fund that would be similar to the Portland Seed Fund, but open exclusively to Starve Ups companies. Friess says members have been planning to create a fund for years, to vote on investments and require that all companies that earn investments must join the group to make the most of the peer-to-peer mentoring. Member companies would pay back into the fund as they sell their companies, continuing the cycle.
Friess believes that such a fund would complement the city’s seed fund rather than compete with it.
“I don’t think there would be any competition between a Starve Ups fund and the fund Josh wants to start,” he says. “We need 20 more of them. The more funds we can start in Portland, the better. The more money we can bring into the state, the better. The more entrepreneurs we can spawn, the better.”