Child Entrepreneur David Koretz, Now CEO Of Mykonos Software (Part 2)

Sramana Mitra: How did you learn about home automation and energy efficiency at the age of 14? 

David Koretz: I used to read trade journals such as CES Today and Asian Trade Sources. I signed up for some journals as a distributor, and it allowed me to see all of the latest technologies coming out of Asia for the U.S. market. It was a paid-for precursor to what became Alibaba. Buyers used to scour those magazines and trade journals hoping to find that one interesting product that nobody else had.

I started finding products that I felt would do well in the U.S. market with minor adjustments. I started contacting those companies to see if they would give me distributor or license rights to that product for the U.S. market. A bunch of them agreed, and by the end of the first year 15 companies had given me exclusive rights to the U.S. marketplace. I always asked for a sample so I could validate the product. I would play with it, and if it was cool and the technology worked the way it was supposed to I would ask them for the rights.

Sramana Mitra: Did they know you were 14 years old?

David Koretz: No, none of them did. Eventually some of them figured it out.

Sramana Mitra: Whom was the contract between?

David Koretz: I had created a company and that company would make the agreements with the other countries.

Sramana Mitra: Did you focus only on home automation?

David Koretz: No, I started out in consumer electronics. I started in home automation because I found that product very interesting.

Sramana Mitra: What did you do once you had distribution rights to a product?

David Koretz: I would serve as the distributor and sell it to consumer electronics stores like CompUSA, Frys and others. I did that until I was 17 years old.

Sramana Mitra: How many distribution deals did you achieve with that company? 

David Koretz:  The first year I did 15 distribution deals. We did $226,000 in revenue, and I made about $26,000 off it. The next year we did $2.4 million in revenue. We had 35 distribution deals at that time. The following year we did $14.2 million in revenue and had 60 distributors.

A year and a half before that I really got into home automation. It was driven by small electrical pulses that would go through your home network. The flaw is that most Americans do not live in standalone homes, especially early adopters. They live in apartments. They live in multiunit dwellings where the home network was not a perfect loop, and the products would not work in apartment buildings. Additionally, even in the event you had a standalone home, there would be cases where the signals never reached the other end.

I partnered and cofunded development of the first wireless home automation system. That system was effectively using mesh networking systems. It took every device and made it a receiver and a repeater, so they would also broadcast them. Mesh networks are not very efficient, but on a small network like ours it was a good thing. That allowed us to build a system with no size limitations.

The home automation technology we developed really powered our sales. My last year we did $110 million in sales, and I ended up selling the company in 1997.  That was an interesting time because it was in the middle of the Asian financial crisis. There was massive currency devaluation. We would sell to companies and they would tell us they were selling at cost minus seven. That was normal. The government would fund large companies with loans, but the small companies just went under. We watched 110 manufactures drop down to 20 manufacturers in just 18 months.

Sramana Mitra: Why did someone buy the company, given the market dynamics?

David Koretz: It was not specific to us because it was a macro problem. The guys selling at cost minus four had done it for years, and they had strong loans from their governments. If you stopped selling for three or four years you were not going to be able to re-enter the business. Most governments felt that it was the cost of doing business.

This segment is part 2 in the series : Child Entrepreneur David Koretz, Now CEO Of Mykonos Software
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