Serial Entrepreneur David Steinberg’s Four-Startup Journey (Part 3)

Sramana Mitra: That is a great resume. Can you tell me the story in a way that is useful for people to learn from?

David Steinberg: Here’s the learning. I do what’s called triangulation whenever I’m starting a business. I look for three different data points that say either the same thing or the opposite thing but lead to the same conclusion. What led me to believe that moving wireless sales from offline to online were a bunch of things? The first thing is I read a tremendous amount as the best way to learn is through read publications and online. I read an article in Advertising Age magazine that said that the Internet is going to explode and Internet marketing is going to grow at 25% a year. Two days earlier, I had read an article online that said the Internet was going to explode and content was going to grow at 17,000% a year. I said, “Wow! Content is going to grow at thousands of percent but advertising dollars are only going to grow at a small percentage.”

What I did was come up with this concept where I would take wireless phones and I would advertise them in what we called private branded wireless stores. We went to portals and said, “We’ll build you a store called Yahoo Wireless or AOL Mobile, MSN Mobile, and we’ll build everything for you for free.” Every time somebody activates a wireless phone, we’ll pay you a fee. We want you to advertise this in Internet space that is otherwise unsold. Therefore, creating a zero opportunity cost transaction.”

This is long before networks had ever been close to being conceived. They said, “This is great! So you’ll pay us when we sell something in spaces that we would otherwise make nothing of.” We triangulated Internet growth, versus advertising growth, versus adoption of mobile phones, which we thought was set to take off in 1997 as I moved from monetization to commoditization. We put those three things together into what became a clever business idea.

Sramana Mitra: How did you go to market? Was it a direct sales model?

David Steinberg: We went directly to portals and got them to advertise us. We were effectively a B2B2C. We private-branded the portal. We ran AOL Mobile at the time. We actually, at one point, ran AOL Mobile, Yahoo Mobile, and MSN Mobile. We had 5,000 private branded wireless stores that we had built. The go-to-market strategy was a B2B2C model where we paid a variable-based marketing fee when somebody activated. It didn’t require a tremendous amount of capital because we only paid when we got paid. The big learning experience for me was determining the opportunity versus the opportunity cost of the partners that we were dealing with.

Sramana Mitra: For people who have not done this before, it’s not easy to figure out those opportunities.

David Steinberg: What I’d done has largely been around information technology and software services.

Sramana Mitra: You’ve been around information technology and software services. When you look for an opportunity to go build a business in, is it domain knowledge in specific areas where you have cellular? Is that a core competency area where you’re doing your prospecting for opportunities or is it broader? What are the constraints on your process?

David Steinberg: My new company will do $200 million this year. It didn’t exist five years ago. We don’t even operate in the mobile space. I can’t say mobile is really my area.

Sramana Mitra: Mobile is not it?

David Steinberg: I think sales and marketing is more my domain expertise and strategic understanding of technology and where it’s going. Most of being a great entrepreneur goes back to very different things. It’s tenacity. It’s not giving up. It’s about being passionate.

This segment is part 3 in the series : Serial Entrepreneur David Steinberg’s Four-Startup Journey
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