Many years ago, in a dark time known as the ‘Dot Com Crash’, Business Technology’s resident U.S. blogger Keil Hubert was hired to build two nearly-identical consulting practices. This is the story of how everything went sideways.
It’s June again. For us Texans, spring is most definitely over. Starting yesterday, we can expect our usual six months of summer: long days, cloudless skies, 40° highs, blistering asphalt, and the never-ending drone of overloaded air conditioners everywhere you roam. Other parts of the USA will get to start enjoying autumn as early as September, with changing leaves and cool evenings; down here, we usually roast non-stop until November. If you find yourself bored with your ‘seasons’ and ‘clement weather,’ feel free to come join the fun. If you feel like bringing something as a ‘hostess gift,’ please consider bringing rain.
So… June. I’ve written six draft columns for Business Technology this week alone, and I’ve archived all six of them in frustration. It didn’t dawn on me until I was chatting with a mate over a pint why this time of year gets me so bloody irritable. It isn’t the arrival of furnace-door weather; it’s because of what happened at the end of spring in Anno Domini 2001, when one of the biggest professional frustrations of my working life kicked off. Once I realized what was bugging me, I decided that it was time to tell the story of what happened with Steaming Authority LLC.
For context’s sake, let’s go back to September 1995 when a couple of enterprising fellows named Todd Wagner and Mark Cuban got involved in a technologically intriguing little start-up called ‘Cameron Broadcast Systems’ and renamed it ‘AudioNet.’ A few years later, in 1998, the tech juggernaut AudioNet was renamed ‘Broadcast.com’ and had a very successful initial public offering. In April of 1999, the proud owners sold Broadcast.com to Yahoo! for $5.7 billion in stock. Even after the sale, this was a thriving, innovative, and exciting company to work at – I know that, because I had several mates working there during the AudioNet/Broadcast.com/Yahoo! Broadcast days. The employees had very high morale, because they had a dynamite product that customers enjoyed. Their bosses were reasonable, the stock was valuable… people loved it there.
Right after the sale to Big Y!, the Engineering Services Department (the internal Tier 3 tech support squad) realized that they were inadvertently alienating some high-profile clients when they tried to bring live streaming content into their customers’ brittle production networks. The powers that be realized that they needed a pre-delivery service that large clients could leverage to properly ‘prepare’ their networks for the webcasts that they’d paid for. Early experiments deploying engineers were… disappointing. Upper management wisely realized that they needed seasoned tech consultants to get the job done right.
In mid-summer 1999, the ESD team hired veteran network consultant James Harris to investigate whether such an in-house consulting practice was the right answer. James did extensive research in the field and corroborated management’s beliefs. The consulting practice idea was green-lit.
Not long after, in July 2000, I got a call from one of my mates at then-Yahoo! Broadcast asking if I’d be willing to leave The Firm to come help build the new practice. I said I’d consider it, but I wanted to meet the team first. They made the arrangement, and I met James for the first time. We came from similar tech consulting backgrounds and immediately clicked. In September 2000, I signed on.
We drafted the service models, pricing models, engagement plans, example deliverables, and marketing materials throughout the blazing hot autumn and early winter of 2000. Right before Christmas, we received approval from upper management to take our new service live. In late January 2001, the new ‘Webcast Infrastructure Services’ line of consulting products went live. In 72 days – from launch until the close of the 1st Fiscal Quarter – WIS contracted $3.5 million in engagements and delivered $350,000 in services. We recouped our annual salaries in a month with lots of cash left over. The business-within-a-business was a smash success.
Eleven days later, Yahoo! corporate HQ laid the entire team off. That’s sort of their ‘thing’.
James and I were kicking around ideas in our local coffee shop later that week when we received a call from one of the surviving insiders: the company still had $3.15 million worth of consulting engagements contracted, and now had no way to deliver them. Since we had all left on good terms, would we be interested (they proposed) in coming back aboard to finish out those engagements – but as subcontractors wearing Yahoo! purple rather than as employees? The only logical answer was ‘yes, of course.’
From a new business proposition, having $3 million in guaranteed work before you’d even started was a great value proposition. Even if big-Y! kept 50 per cent of the cash and if we never got another gig again, we’d bring in enough revenue to run a small business for at least five years. We’d have the industry credibility and reputation needed to get more work, and we’d be well-past the ‘ugly duckling’ phase that most start-ups experience when they launch with an idea but no clients. We immediately secured a $150,000 cheque from an angel investor and set to work.
James and I had been working together long enough that we had a clean division of labour: James had most of the engineering expertise, consulting panache, and charisma. In turn, I did all the grunt work in the back office to keep the place running. Starting in May 2001, I got with the lawyers to file the paperwork to incorporate the three required business structures.
My consulting company (Khubert LLC) went live on 11th June because I used myself as a test case to make sure I was doing everything right. Once we understood the process, we launched James’s consulting company (Kingdom Consulting LLC) in late July. I wrote the contracts and business artefacts needed to formalize the relationships between our two small businesses and the externally-owned joint venture that would do business with Yahoo! Broadcast – Streaming Authority LLC – when was finalized and active by late August.
I set up the company’s new bank accounts and deposited the initial investment immediately. I insisted that we needed to be as thrifty as possible, and borrowed space from the angel investor’s new business incubator complex rather than burn cash on rent on a suite in a high-rise. I raided a bankrupt tech company in Dallas to buy their old office furniture for pennies on the dollar. I got our first office computers from a VAR’s off-lease warehouse. I built our web and e-mail server on an old PowerMac G4, and created the company’s first website with my awful HTML skills. I created our company logo, designed our stationery, printed our business cards, paid all the bills, wrote all the meeting minutes, vacuumed the office, and emptied the bins. All James had to do was make the arrangements to go secure an engagement.
Then 11th September 2001 happened and everything at SA went completely to crap.
Steaming Authority’s last meeting with the lawyers – to finalize the incorporation so that we could start officially doing work – took place on 12th September. There were no planes flying overhead. Most people stayed home, still in shock. Dallas was like a ghost town as everyone tried to grapple with what had happened the day before. Our lawyer seemed disinterested in our pedestrian little questions about incorporation specifics. Optimistic as always, James insisted that the country would right itself in a few weeks, and we’d be back on track to start delivering services.
James was wrong. A week later, I was re-called to active duty to serve as the public affairs spokesperson for Texas’ airport security mission. I spent the next six months on that assignment, on-call 24/7. Since I couldn’t perform my duties at SA, James was left on his own. I did my best to stay in contact with him. He’d drop by the house once a month to hand me a check from the company to make up the difference between my military wages and what I’d been making with SA. We’d talk for hours in my driveway about what was happening in both of our worlds, and the news I got from James grew increasingly distressing.
In the summer of 2001, we thought we had the world by the tail. By the time I mustered off of active duty in April of 2002, our fortunes were in full retreat. Yahoo! corporate had laid off most of the rest of the Dallas operation, including everyone that had known us when we were insiders – including everyone who knew anything about the contracts that they’d signed the year before. At the same time, American businesses started drastically curtailed their tech spending. The tech sector was already straining under the collapse of the Dot Com Bubble before 9/11, and went into full retreat afterwards. The streaming media imploded – by our count, over 70% of the businesses in our industry niche folded while I was off on active duty.
As I wrote in my April 2002 report to the investors, the changes in market conditions meant that SA no longer had a revenue path or viable business model and needed to refocus. We still had over half of our angel investor funds in the bank and could afford to strategically reposition the company. I quickly got us signed up with Apple’s ‘Solutions Expert’ program so that we could generate some revenue as systems integrators. I was working on three other partner programs when James announced that he wanted to keep SA’s focus on streaming media facilitation. He said that we should commit the last of our cash to hire a full-time sales person. I was stunned.
It didn’t take very long to learn just how bad things really were. During the six months that I’d been off playing soldier, James had done… nothing. He hadn’t performed any sales calls. He hadn’t developed any new products or services. He hadn’t done anything to drive the business. He’d gone to the office and had spent almost all of his time researching the markets and investigating changes in network tech. Activities that didn’t do diddly squat for the bottom line.
I spent all of May desperately trying to re-energize the business. We spent ten hours a day together, whiteboarding new potential lines of business and potential customers. The pattern was always the same: James would suggest some intriguing new technical concept, and I’d tell him ‘Go ahead! Build it, and we can try to sell it!’ Then he’d admit that his idea was too abstract to get out of the lab. It was ‘cool,’ but not ready to sell. I’d recommend in turn that we shelve the unworkable idea until it matured.
I never realized until then just how much my friend and boss needed a formal business structure around him to channel his talents. He was an absolutely brilliant consultant, and had a gift for bending technology to achieve business objectives. What he didn’t have was drive. We’d been tremendously successful back at Yahoo! Broadcast because the sales people would find him a problem, James would craft the solution, and I’d get all the paperwork done. Left to his own devices, James was paralyzed. He was like a glider pilot… He couldn’t get off the ground under his own power, but he was dazzling to watch once someone got him into his element.
I put my foot down on the ‘full-time salesperson’ idea, arguing that you have to actually havesomething to sell before a salesperson can do you any good. I said that James had to commit tosomething and then prove that he/we could actually deliver it. Prototype it. Do it for free if necessary, just show me something that he could and would do that would interest a paying customer.
James countered with the suggestion that we take out a few years’ worth of small business loans and then leverage that to pursue formal venture capital (VC) funding. That route, he said, would give us enough cash to weather the post-9/11 tech sector crash and be in position to start selling services gain once businesses started funding IT project again in a few years. I pointed out that it would be very difficult to get VC funding – investors would be interested in a business that was already making money, or in a business that owned a valuable idea. We had, at the time, neither.
Nonetheless, I drafted James’s business plan for him, but I put the onus back on him – as the company president – to get out there and ‘sell’ the business. Before we took out a loan that we couldn’t repay, we needed to see if the market felt that we had something worth buying. James took the draft business plan and… went back to researching cool new ideas. I shrieked.
After a month of spinning our metaphorical wheels, I reached my personal GO/NO-GO decision point. I didn’t have any reserves of my own to live off of, and I had a family to support. Financially, I could either stay with SA full time and pray that we somehow managed to secure a paying gig before our cash reserves ran dry, or I could leave the venture in James’ hands and go to work somewhere else. I agonized over the decision. I wanted SA to succeed, but I couldn’t get the man in charge (and also the man with all the crucial engineering knowledge) off high-centre. When a company offered me a director-level IT management job that June, I accepted it.
James told me that he understood and that he empathized with my position. He changed the contract between SA and Khubert LLC so that I was no longer obligated to provide SA with a full-time resource. In turn, I turned over control of the servers, the records, and the financial ledgers to James so that he could run the outfit as he saw fit. He asked me to stay involved as an unpaid ‘advisor’ and said that I could come back aboard in any capacity at any time. It was an amicable and professional separation.
I started my new full-time gig in late June of 2002 and had very little time to spare for outside activities, but I did my best.  From then on, my relationship with James and Streaming Authority was never strained, but it was also never productive. For the first three years, we’d meet on a weekend at least once per quarter to discuss new ways to make SA profitable. In May 2006, SA could no longer support James on a full-time basis, and he took a job as an IT manager for a Dallas-based firm. From then on, we’d still meet regularly. James would pitch his newest ideas for a cutting-edge technical solution and I’d gently challenge him to deploy it. I told him that I wasn’t interested in his theoretical pitches; I needed to see a working product or meet a paying customer before I’d agree to take part in another business venture. James said that he understood and that’d ‘make it happen’. James never got off of high-centre.
From 2005 on, I pushed James hard to shut SA down and give its remaining money back to the original investors. By 2007, all of the company’s equipment had fully depreciated and been scrapped. The domain and email services had gone dark shortly after I’d left, and James ran SA as a virtual company for next to nothing. That was fitting, because there effectively was no company; it existed on paper, but hadn’t done anything meaningful in years. James never truly got over his conviction that he had ‘the next big thing’ for small businesses and that SA would be able to fund itself ‘by the end of the year’.
Streaming Authority operated for six and a half years, and (as far as I know) made no money for the entirety of its existence. During that same period, I operated my little consultancy as a side project on weekends and holidays and managed to bring in $15,130.25 in paid services for 22 different clients for jobs that billed as little as $5. No, it wasn’t nearly enough to turn my little company into a full-time living… but it sure as hell beat James’s accounting: he was working full-time with SA for the full five years after I left and brought in… zero revenue. Zero.
It took months of arguing my position, but I eventually convinced James to formally shutter SA, close down its accounts, and formally terminate the venture in February 2008. James assured me in one of our last-ever conversations that he’d turned over everything of value from the SA project back to the owners, including cash and anything that could be converted to cash. He expressed genuine regret that SA hadn’t been the success that he was sure it could be, and said that had a bunch of new ideas for future projects.
James Harris died in December 2012. I talked with James’s brother at his wake, and got the impression that James never did manage to get any of his other entrepreneurial ventures off the ground.
I don’t regret any of the great work that James and I did together at Yahoo! Broadcast and afterwards, with all the different start-ups. James was a brilliant technologist and was probably the most gifted tech consultant that I’ve ever met. The man was brimming over with talent… He just needed a structured environment and many key handlers to realize his potential. Left alone, he couldn’t focus. The will was there. The brilliance was there. The vision… was definitely there. But James always came up short on execution.
In the summer of 2001, I turned James’ concept of a streaming media consultancy into a reality. When I left to go serve after 9/11, James had literally everything that I thought he would need to be successful: phone, fax, email, website, tax ID, lawyer, accountant, a desk, a chair, and a wall of white boards on which noodle. I handed the entire operation to him… and nothing happened, because I didn’t give him what he needed most: a steady flow of unresolved technical challenges.
The man wasn’t addled or lazy by any stretch of the imagination. I watched this fellow walk unprepared into a room full of angry clients and walk out again three hours later with a signed, seven-figure contract that filled an aching need in the clients’ lives that they didn’t know they had at the start of the meeting. The man was amazing when he was ‘on’. What I didn’t understand (until it was too late) was that he would lose focus when left alone. He needed the constant interruption of phone calls, IMs, and unscheduled meetings on the front end in order to stay engaged, and he needed someone else to handle all the administrivia for him once he’d solved each problem and lost interest in it. I was the right guy to partner with for the second job. I wasn’t for the first. The thing was, when I first joined the team, they only needed the second guy, so that’s all I saw of the process.
I still believe that we started a viable business model. Had the world not gone crazy in late summer 2001, I think we probably could have pulled off the first of Yahoo!’s scheduled contract jobs and established a strong reputation as the go-to people for network optimization for Yahoo!’s webcast services. Had the contract management office not been laid off, they likely would have given James the constant ‘push’ (in the form of critical delivery dates) that he needed in order to ‘rev up’ for each new challenge. Instead, we got to within a few weeks of starting our first job… and then everyone that had been ‘feeding’ James’ appetite for challenges was gone. Yahoo! Broadcast went completely silent. We lost our link to the work that knew was still there, but no one remaining at Big Y! knew or cared about some old legacy contracts that they had no intention of servicing.
In the May 2014 print edition of WIRED magazine, Gideon Lewis-Kraus wrote a riveting tale called ‘No Exit: One Silicon Valley Stratup Struggles to Survive a Modern Gold Rush’. In his long-form story of neo-Dot-Com company ‘Boomtrain,’ Gideon discussed the inherent insanity of the tech-sector start-up world. Towards the end of his piece, he quoted a VC who (I believe) summarized our problem eloquently:
‘It’s pretty easy to get enough money to get in over your head and pretty hard to get enough money to stay afloat. The fact is that the rising tide does more drowning than it does lifting.’
Maybe we should have hired the full-time salesman after all. Maybe that would have been the critical catalyst that we needed to ignite James’ ambition and hunger for business. I don’t know. Had the salesperson managed to snag us enough paying work swiftly enough to keep the accounts flush, then maybe the consultancy could have recovered and made a worthwhile go of it.
I took the more conservative position at the time, and I still think it would have been dangerously reckless to promise someone full-time pay and benefits when there wasn’t enough money in the company bank account to cover more than six months of their service… especially when we had no actual ‘product’ for them to sell. James was the best in his (very narrow) field… but none of our old Y! customers had understood that they needed his expertise until afterthey’d bought (and botched) a large-scale webcast package.
James assumed that big businesses would keep having trouble with webcasting and would seek us (him) out over the web. Instead, streaming technology got free and less complicated, and networks got faster. After a few years, there was no reason anymore to hire a professional trouble-shooter to sort out your streaming delivery issues inside of a business network. If you lacked the talent in-house to configure your encoders and switches, there were cheap, disposable streaming appliances that you could buy off the rack. Global live-casting was another story, but pretty much no one did that unless they had the boffins already on staff to figure things out.
That’s why I treat the story of Streaming Authority as an important cautionary tale for my friends who are considering starting up their own business or are thinking about signing on with a start-up. Entrepreneurial ventures are, I think, a lot like muscle cars: you can have the biggest engine on the block, but it’s useless if you can’t put the power down and actually gosomewhere. The trick, then, is to figure out how best to translate all that power into controlled thrust…
With James, work was always either smoking burnouts or a low idle. There was never anything in-between. We were missing a critical piece of the machinery, and it meant that we never made it off the line (so to speak).
That’s also why I get melancholy and a smidge bitter every year when spring gives way to summer. Even though he left me exasperated most of the time, I miss James. I spent ten years trying in vain to figure out how to get him moving so that we could bring one of his great ideas to life and, thereby, vindicate his reputation as a world-class tech consultant. We never succeeded. We ran out of time before we found a solution.
If you’ll excuse me, I’m going to go raise a silent toast to James’s memory. Then I’m going to get back to work.
 I didn’t get paid until the end of August thanks to a process screw-up, but that’s another ridiculous story.
Keil Hubert is a retired U.S. Air Force ‘Cyberspace Operations’ officer, with over ten years of military command experience. He currently consults on business, security and technology issues in Texas. He’s built dot-com start-ups for KPMG Consulting, created an in-house consulting practice for Yahoo!, and helped to launch four small businesses (including his own).
Keil’s experience creating and leading IT teams in the defense, healthcare, media, government and non-profit sectors has afforded him an eclectic perspective on the integration of business needs, technical services and creative employee development… This serves him well as Business Technology’s resident U.S. blogger.