Child Entrepreneur David Koretz, Now CEO Of Mykonos Software (Part 3)

Sramana Mitra: You navigated a sizable business from 14 to 18 years of age. Did you parents get involved in it? 

David Koretz: My parents and my grandfather were not involved and that was intentional on my part. I went to high school on various schedules. It was not official, but I just did it. From 8 to 5 I could deal with U.S. distributors. I basically attended each class once a week. I don’t think my parents really understood how little I was going. I was dealing with Asian companies and had the 12-hour time difference.

I would typically work from 9 at night until in the morning and then sleep for two hours. I would then go to high school or work with the U.S. companies. I would then flip so that I could attend other high school classes.

Sramana Mitra: What was the actual work you were doing? 

David Koretz: The first element of that work was a constant vigilance to find new manufacturers. Once you get a product you have to assume that it will commoditize in 12 months. Once people realize how good a product sells, they will hand a copy of the product to a larger manufacturer and ask them to make 50,000 units which meant we could no longer compete on cost.

The second part of the job was selling to U.S. buyers. I would put together distribution deals. I did a lot of phone and fax work. Email was not as big yet. The third part of the business was managing the logistics to get product from that part of the world to the U.S. efficiently.

Sramana Mitra: Where you involved in that process?

David Koretz: If you take a product FOB Hong Kong, most distributors do not understand how to take a product and get it into the U.S. market. You have to deal with customs, freight forwarders, and insurance regulations. I managed all of that. I hired customs agents, freight forwarders, and had to keep my eye on that entire work flow. If I bought a 40-foot shipping container and it came to port in New Jersey and I would have to split that container among my various customers. I would then have to truck ship all of the customer shipments from that container in New Jersey.

Sramana Mitra: Did you have any employees? 

David Koretz: I just had a few. It is not an employee-heavy business. It was about deal-making and orchestrating. I only had a handful of people even when I reached $100 million in sales. I was not inventorying product, which helped a lot.

Sramana Mitra: So you were 17 years old with a $100 millionbusiness that only had 4 or 5 employees and you decided to sell it? 

David Koretz: Yes. Once we had the right contracts in place I started getting a lot of offers to buy the company. They would always try to figure out if they could work a deal around me, but if they were not able to do that they would pick up the phone and call me. They usually wanted to just purchase a contract. I had 125 contracts, but they were not even. There were roughly five contracts that were worth 60% of the business.

If I had the U.S. locked up then other companies would sign with that same manufacturer for the rights to Canada. Then they would create another company to import the product from Canada, so they essentially bought from their own company.

Sramana Mitra: How much did you sell the company for? 

David Koretz: I sold it for mid-seven figures. Margins at that time in the industry were 0.25%, but we were at 1.4% because we played the 12-month anomaly of identifying products ahead of their time.

Sramana Mitra: The valuation of that type of business is always on earnings?

David Koretz: Always.

Sramana Mitra: So you were now 17 years old with a nice stash of cash. What came next? 

David Koretz: I had gone to college at night while I was running that business. I went to Rochester Institute of Technology from 6 to 10 at night four nights a week. I wanted to go to business school and signed up for Babson College. Before I went there, I sold my company and started another business with a friend doing website development. I sold that business back to my partner and started a third company. We got VC financing right after I got to Babson.

This segment is part 3 in the series : Child Entrepreneur David Koretz, Now CEO Of Mykonos Software
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