How Australia’s Internet Pioneer Helped Get The Country Online

Lloyd Ernst introduced Australians to the internet by getting the country’s most tech savvy into hotel ballrooms and blowing them away by showing off how email worked. He was introducing them to the future. That’s what he does.

It started when he hooked up a computer in his garage to a phone and created a bulletin board called PowerUp. At first, only one person could log in at a time, but as the business grew he paid for more modems and more phone lines and pretty soon his customers could talk to each other. Then the internet came and PowerUp let its customers connect to the world. But how do you explain something so new? That’s where the ball rooms came in.

After selling PowerUp, his next company, WebCentral, helped companies set up their first web sites, back when the concept of web sites was still foreign. Listen to this interview to hear how he built and sold WebCentral, and how he continues to ride the cutting edge with his latest company, Event Zero.

Lloyd Ernst

Lloyd Ernst

Lloyd Ernst is a founding shareholder and Director of Brisbane based Event Zero Pty Ltd, which developed a Complex Event Processing CEP platform which is design to provide organisation with Real time operational intelligence by analysing very large amounts of data in real time from disparate data sources. He’s also the founder of PowerUp Pty Ltd, WebCentral Pty Ltd, XtreamLok, and SinoCode Ltd.

 

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Full Interview Transcript

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Andrew: Hey everyone, it is Andrew Webber, founder of Mixergy.com, home of the ambitious up start. And in fact before I introduce today’s guest, Lloyd hang with me for a second, I have got cold you can hear, I have been feeling sick all day today. Will Lamb from the audience sent me a nice card here, sent me which I won’t read in the interview, sent me Tea. I never do this but it is such a nice gift and such a great time. A scupper for the Tea, a tea ball, people see that. Will Lamb thank you for doing that, it is actually I am glad doing that.

Well yah, the audio is on. Someone people are asking if audio is on. The audio is working.

Will thank you for doing this as you can hear it is helpful. And here in Buenos Aires they do not really drink tea, they drink yerba mate, which is what I have got here. I will be switching to tea after this interview. Sorry for the interruption, I had to thank Will for being so helpful.

Let’s introduce you. You are a guy who actually was building internet companies essentially before the internet was what it is today. We will talk about the companies that you built over the years starting with power up which was _ board system but I think it is like, the kind that I was a member of back in the day where you just would go down to somebody’s computer and then you will exchange files and hopefully somebody will dial in afterwards and talk to you. We will talk about how the system was? We will talk about how you sold that company to _? We will talk about how you build everything from there? We just go through your biography the way I ordinarily do and we will find about event zero where you are right now. In fact why do not we just start introducing where you are now before we go back, what is event zero?

Interviewee: Event zero is I guess is a complex event processing technology. And the reason we are involved in this business, is the fan of event zero, myself, have been involved in several projects and _ is a very smart guy. And I guess and as we look at how internet’s evolved. We have gone from messaging and _ and dialer bases and the whole range of _ technologies. One of the things that is challenging businesses as we move forward is this movement to real time. As you start to acquire real time processes and applications, existing technology doesn’t really work very well as you start to surge, as you add more data. So event zero kind of works in the space where data bases are broken and they no longer work. And if you are a large banking bond, you need to process large amounts of information in real time. You can’t have a data base with a senior running in the background. So, event zero is a large geographically dispersed technology for inflicting large, very large amounts of information from very different data resources and putting it together. And one of the best ways of describing it is if you imagine it’s like monetary and the exhaust cubes from IT systems. Because the other challenge we have is that we lots of different technologies out there, and the businesses now, not only do they need real-time reporting but they have got 5, 10, 16 literally 100s of different systems there and to get this overall operational intelligence of what is going on is very (2) difficult. And so that’s where event zero is coming from. Now I am not sure whether we are 10 years of ahead of the goal in this game or whether we are on the cusp of this event technology really taking off but it is kind of where we logically believe the future is going to evolve.

Andrew: And what I am seeing in this specific company is something that I saw throughout your background which is things businesses you get into just evolve. You do not end up day 1 coming up with the idea and the relationships seem to evolve. And you are head of the _. I got a cold today. I apologize _ , I really grateful to you for sticking with me through this cold. Let’s go back in time, let me sort questions and give you more time to speak since I am having trouble here today.

Interviewee: Sure enough. No problems.

In the eighties you started something called “Power-up”. What was “Power-up” when you first launched it?

Andrew: When it was first launched, it was literally an apple tube with a modem on it. Back on those days, bulletin boards were not connected. They were simply just, you will dial up and you will just leave messages and maybe you have some private email but really that was just posting messages and people would have particular topics that they were interested in. One of the things that we found was that then on a sudden you started adding multiple modems and then it was a really cool process of having people being able to chat and our bulletin board system really grew around the back that we had at one stage, sixteen telephone lines and we had sixteen simultaneous users and this was really kind of cool. And this was a bit way – when we look into this technology I can really say “Wow I can really see where this is going to go. This whole interactive chat process was very neat”. Then came along some other networking components. We started to see things like ?. The bulletin boards then started to get together. We could exchange different pieces of messages and those sort of things and then from having networks and all of these sort of rock networks and these bulletin boards, then the internet started to be introduced. Then we started to offer email and email gateways from our bulletin boards through the internet and that’s when the internet became involved in the bulletin board areas obviously more ?. Now at that time, this was a hobby business. It was run by sort of three guys. Two guys, work at Tel Co. and I was working for Microsoft at that time and it was like that sort of backyard hobby sort of jobs running in the garage. The cool and interesting thing about bulletin boards is that we used to charge about thirty five dollars a year and have this money machine that would read out credit card details of the person subscribing and that sound of money coming through – that was just quite neat.

Now eventually, we continued to evolve the system and all the money was back into the system and soon as the penny would go ten times, we had more modem line that we could order and those sort of things. It was really this organic growth – focusing on evolving the product all the time and adding little features. The guys were writing TCP/PIP that supper serial card converters back then. That was sort of the early days of this whole joining people together and getting communications working. The other key thing, I guess when we look at this kind of business is that a lot of people – if you can try to run the business on the side, I know that is difficult but it really gives you the ability to sort of, slowly make sure that things are really going to work. You are like going to raise a whole pot of money and throw everything else inside and literally there comes a point wherein their was enough money coming off this machine we then decided that we have to leave our real jobs and start focusing on this organization and building the business so that’s three guys in the garage and we eventually sort of grew that business and we become the guys were just from Queensland and it was just simply organic growth that we were able to do it. But we also have the other advantage that we get this first room advantage with this technology when you obviously could not do it nowadays without a huge capital investment.

Andrew: Okay let’s go back to when this was just a hobby. This was just a pretty extensive hobby. You didn’t just have to give up a computer that was just going to sit there and let people connect to it. You also have to pay for the phone. I guess – no, did you have to pay for the phone calls?

Interviewee: No, in Australia it was a little bit different. In fact what happens there is that the subscriber pays the call and the receiver doesn’t pay anything for the call and so we just have to build telephone lines and modems and those sort of things but then again we were buying twenty or forty gigabytes at that time and these are about two thousand dollars. This are still big commitments for us.

Andrew: Yes, so did you in the back of you mind say that at some point this is going to be a business and well make that money or maybe I will contacts that will lead to business.

Interviewee: No. I mean yes we really just focused on the organic growth and we built the business so as the subscribers would actually pay for the business. But yes, we kept the cost low. I guess our biggest commitment there became the point when we had to sign directive guarantees on the space when we actually had to move out of the garage to get a proper office and so that was the day that we figured what are we going to do with all this space. Can it be turned into a nightclub if all this thing falls over? What could you do with it? Who would you sub-let it to? And so, you know, there definitely are points where, you know, you’ve got to put it all on the line.

Andrew: You’re talking about the printer that made the sound of money coming through. What were you guys charging for?

Interviewee: We were charging subscription for a bulletin board service. And it was like $35 dollars a year back then. So it was, you know, a pretty small, a pretty small fee. But as we started to add things like the internet access, and you had to pay for bandwidth, which we have to make more strides still, then, all of a sudden, you know, you can bring up the level of offerings. So as you add in more features, as people wanted to be able to sort of send files, and you know, browse news groups, and those sort of things, then there was definitely, we were able to bring the subscription fee in line with the fact that there were more costs associated with providing that service.

Andrew: So was it what we call now the freemium model, where people were able to log in and get a certain amount of access for free, but they’d have to pay for more?

Interviewee: No, we always charged our customers a fee to start off with pretty much.

Andrew: Oh, so no matter what, if they were going to start accessing your database, if they were going to join your bulletin board, they would have to pay.

Interviewee: Yeah, yeah, that’s right.

Andrew: I see. OK.

Interviewee: But you had the services there. You know, you had files. You had the news groups, and there was a range of different offerings for them.

Andrew: I see. So it started out as a hobby, but even from the beginning, there was a possibility of it breaking even, and maybe even making a little bit of a profit.

Interviewee: Absolutely. And if you didn’t do that, you didn’t have the money to keep funneling into the business. You know we wanted to add more lines, more disc space, more you know, more features, and those sorts of things. So that’s, you know, you’ve got to have that model. And if you get your users involved in this process, you know we made a big thing about trying to get, you know, maintain contact with the users, and figuring out what they were looking for. And then you’d add a new feature, and you’d explain it to them. And it just had that organic growth net, sort of. Well, today you’d call it social networking. Back then it was just word-of-mouth marketing.

Andrew: How did they even find you because you’d have to…

Interviewee: It was all…

Andrew: They would have to find your phone number, have it punched into their system, dial-in to you. You know? And then one person at a time, they couldn’t even say to their friends, “Log in with me, and we’ll both chat.” How did they find you?

Interviewee: We, well, Microsoft had a, one of the things I took away from Microsoft was this little concept called leverage, leverage, leverage. And so in Microsoft’s case, it was leveraging partners throughout their, you know, user development tools, etc. In our case, it was about leveraging the resellers out there, the computer shops. We literally go around there and we provided information packs for them, and then we eventually we even developed sort of retail sales packs that they could literally sell, they made a bit of margin, and we got the customers. That’s how we built the marketing base. And it’s always thinking about how can someone else help build your customer base.

Andrew: Wow. So, Lloyd, were you always an entrepreneur, even before this?

Interviewee: I think the [Parrot] was kind of the first business, and it was, but now I think that’s kind of where I cut my teeth on actually learning. Previously, I was involved in active resellers and Microsoft and those sorts of things. And it was really funny. Microsoft was, back then it was one of those organizations that was growing very quickly, and it was always about the “e’s” and the “ah’s” when you’d be presenting a product to someone. You’d be showing something like the new Auto Fill feature in Excel, or you’d be showing the new Access database, etc. So, back then in Microsoft, it was very much a different organization. In fact, like one company presentation where Gates presented, he described Microsoft at that time as a train that was hurdling down this track and everyone there was hanging on, and people were bolting rivets back into the train as someone kept shoveling more and more coal into the thing to make it go faster and faster. And that was this real vibe that Microsoft had back then in the late ’80s and the ’90s. Now, of course, they have things, new pushes, they’re very much a very different organization.

Andrew: Very much. I remember once watching Steve Balmer come to New York and he would show off these little features. And like you said, the audience would “ooo” and “ah” the way today people “ooo” and “ah” about Steve Jobs or about what Google’s coming out with. So, as you’re watching this, is that when you became, when your entrepreneurial spirits started to fire up? Or, as a kid, were you the kid who had a lemonade stand and was selling, maybe candy in school? Did you have this entrepreneurial thing in you before?

Interviewee: I think you do in some ways, but it was just, I was mostly passionate about what I do. It’s a thing that makes you want to get up in the morning at 5 o’clock and ply around. I finished school on a Friday, and on Saturday morning I was working at a little computer reseller in the local home town and that sort of thing.

Interviewee: So, In My case is really about, you know being passionate where what you are actually sort of selling or being involved with and those sort of things. But, look I think there is definitely an element of having some sort of entrepreneurial skill but i think its more about the passion of what you are actually doing.If you cant get up in the morning, and if you dont go to bed at night thinking about what you are going to do next day then you really got to be thinking about are you doing the right thing.

Andrew: I see, Okay and do you still feel that way?

Interviewee:Absolutely

Andrew: Why? I’ve Got a question here from, lets see Lenny Ramyras, Founder Mex Verzaskin: Why do u keep on going after you have done so much and so well? Most people would after, If we talk about the sale of this company, most people after the sale of just that one company, after the power up exit would say : Thats it, I am living on an island for the rest of my life, I am going to go and enjoy myself. Why are you continuing?

Interviewee: Look, I think that, you know Its Fun, I mean you can, look We took a couple of years off between one of the businesses and we do a lot of travel and those sort of things, but eventually you got to come back and find something that actually keeps you interested in.

Andrew: What’s the part that keeps you interested?

Interviewee: It’s new technology, its about finding solutions, its about you know talking to customers about what their challenges are and trying to figure it out, you know how you can solve that problem better. I mean and look I am totally hopeless that any sort of property development or any work in the stock market and those sort of things you know. I just have absolutely no expertise in those sort of fields whatsoever, and so you know, do what you are comfortable with and where, I think you have the expertise

Andrew; Within the companies that we will be talking about in the interview, what is your expertise, what is the focus that Lloyd takes on when he joins a business?

Interviewee: Well I am the media, so I am the guy that sort of takes the technology guy, as in sort of blends it in with the marketing. So my expertise is probably the communication on the marketing side of things, but having a very strong technical background as well so, being able to communicate between the different groups and departments. So, that is why where I think my skills lie.

Andrew: Give an example of how you did that back in the early days, that power up?

Interviewee: yeah Sure, so you know i was the guy used to you know, write all the manuals and do all the brochures and build the partner programme and those sort of things or you know, I would be the one that would be out there arranging the drinks sessions with the partners and you know. One of things, we never really had a big marketing budget, but we always had enough money to have a pretty good every couple of weeks and those sort of things. And there the sort of networking events where people come along and they feel that they can you know sort of, and they will give you a little bit of feedback like saying this feature really sucks and you know you should do it this way and then next couple of weeks your guys are going to make the changes and you meet the same guy again and they say , Wow you know you have made those changes, how on earth did that happen? That’s you know, the kind of you know this blending between working in the crowd, if you like, or you know networking with your customers and then making sure it gets back into the product development cycle and even with web central, it very much has this process of continuous feedback and continuous updating of the systems based upon what, you know what the customers requirements were.

Andrew: See, I remember in the early days of the bulletin board systems, what kept them going was file sharing. Was that the same thing on your system?

Interviewee: Absolutely yes, you know all the you know buying discs to be able to support that and then being able to have, being able to buy the bandwidth to be able to suck down the files, make them available. That’s where we initially started with all the file transfers, but what we found is that we added more and more telephone lines, we had more and more simultaneously online. Then all of a sudden it became, chat became really important you know the interactive

Andrew: Real Time Chat?

Interviewee: Real Time Chat, yeah

Andrew: You know Lloyd, I was really reluctant to even ask you this question because I didn’t think you would be open to talking about how in the early days, file transfers or file exchanges was what kept that business going because you know its kind of a grey area in a business, not so grey, its not right. Why are you willing to talk so openly here about that?

Interviewee: Because back then it was, back then it was very much the shareware libraries, you know we weren’t distributing copies of Microsoft word and those sort of things. But there was a very vibrant community of people promoting freeware and shareware products that were out there, you know the different discs that you would buy from your local reseller. So the libraries that we had were the ones that were distributed through the wider network and those sorts of things or accumulator, but they were ultimately legitimate, then that kind of moved across as people started to have access to you know, newsgroups or news net and those sorts of things.

And then you actually lost control of the whole process and that’s when you can control the images, the powers of the ? most of the things but all the powers ? guys , it was all legitimate , it was from share way

Andrew- Really?

Interviewee-Yeah

Andrew- Okay, I actually do that right, I forgot that Share way? Was actually so big back then, you got the program and then you either got to voluntary pay or you are being forced to pay after a certain amount of ? with it. You are right there is no other place to get it except may be from disk swapping.

Okay so then the internet comes along and you don’t fight the internet and say no this is going to be just a great community for just ? you open the gateway to the internet for your users. How do you grow from there? Now that you have got the internet , the big, the big community, the biggest one out there and you are letting people in, how did you get people to join ?

Interviewee- Again it’s marketing, you know, its trying to work the press a little bit. We did actually, we did 1 promotion with the help of computer magazine in the ? way , you know, we provided one free access for a week

Andrew- Everyone in the magazine or all the users?

Interviewee- No an advertisement in the magazine, free internet access for a week and this is back when no one really know what the internet was. So you know that was pretty successful and for a week but we then also did road shows, so we would go through and obviously hit the road and get a few hundred of people in a ?and talk about this stuff and we presented this to people? and people to do demonstration, so my back ? being presented with Microsoft, so to hope? There a lots of things, and propaganda was kind of really key part of having ? web central business as well

Andrew- How did you get people in the room to listen to you?

Interviewee- it was partly word of mouth but also working the marketing angle and most of the things going to the resellers who wanted an angle to going back to their customers . One of the philosophies people had was trying to think about the customer’s customers , you know when the customers really were the resellers ? partners of most of the computer shops out there, trying to think about what’s important to them, for their customers and these guys liked to act? to be good and say hey come along to the ? hotel at 7 am on Friday you have some free drinks and you can look at some really cool technologies like ? and most of the things and so that’s like very much of grassroots marketing.

Andrew- Wow so the ?computer store will bring their customers to the ?, where you will present the internet and that’s how you are selling the internet one person at a time

Interviewee- ? and then you know you will find always that most people will then sell to other people and then you have this ground ?I mean you obviously cannot touch everyone but then you had this magnification of ? getting these people and when you get them may be compassionate and then you know there will be sorts of people that will get there and get all of their friends to come along and join because this is really cool and you also find the early technology that is for the ones who like to show off. ? have people around to ask and say look what I can do , look what I downloaded, look we can chat ?

Andrew- ? back then getting the internet was a complicated mess of different programs , you will have that one program to connect you and then it would run in the background, another program to give you email, another program to give you go for, another program to give you the use nets as you are talking about, and then may be Netscape or mosaic to get you on the web and it was so tough that most people just could not login that most people could not deal with it. How did you make it easy for your users?

Interviewee- Yeah absolutely that we developed some little programs that you know we bough the license, the TCPIP win stack from ? so you have ? supply of disc to all the resellers and that disc , theat installer disc you know install all the basic components and set up all the programs ? most of things so . So you had to make it easy for people to come along and enjoy and try to get connected up . So that’s how we solved that program and put a lots of floppy discs and sent them out there and ?

Andrew- Again my producer in the audience she is asking what year are we talking about out here . This is actually what year did you start doing these road shows

Interviewee- This is we are talking probably here , the bottom ? started in the late eighties and we are probably now round about 95-96 timeframe

Andrew- Okay. ? In the audience mailed the date exactly 95-96. Okay What was it, before we get into ? business, what were the ? around the internet when you were showing it off to people at the hotels

Interviewee- I think ? was like it would be doing things like, even going to the ? and looking at the weather forecast for Los Angeles,? something like that ? you can really do that stuff, and sending email and you have someone back in the office reply and

Interviewee: People go wow! You can really do that stuff. Or sending and email and having someone back in the office reply and say, “Dang look at that, happens on the screen automatically.” It was that interactive you know, nature, I think of the beast, that, that really, really got people going. And this was, this was back in the days before we started to even have sort of, web browsers connected and those sort of things.

Andrew: Uh, Gopher was one of the first things I discovered and it was an oooh and ah until I discovered mosaic. And then…

Interviewee: That’s right.

Andrew: Everything else didn’t matter, except for email. Okay, so Ozmail, were they a partner and owner in the business before you sold out to them?

Interviewee: Ab, absolutely. And one of the, one of the things I learned, whenever you are going to sell a business, you already know who you are going to sell it to. So, we met up with the Ozzymail guys a, a few times. They were sort of competitors and its, I’ve always had a policy of knowing who my competitors are and having sort of, open dialogue with them, ’cause you never know when you’re all going to face, whether its legislative issues, or, or what. So you need to have a bit of a relationship with all of your competitors regardless. And umm, with the Ozzymail guys, they then came along and decided they’d like to buy part of the Powerup business and uh, so, they did that. And we had a particular timeframe that they would then buy out the rest of the business. So, we got to run the business and grow it and the final buy out figure was going to be a multiplier based upon…

Andrew: I see. And by the way I’ve noticed you calling them Ozzymail, and I’ve got OZmail in my research.

Interviewee: In, in in Australia we call them yeah, its Ozzymail, but uh yeah, OZmail.

Andrew: I see its just the pronunciation.

Interviewee: Yeah, yeah that’s right. Its just the pronunciation.

Andrew: Yeah, I just wanted to make sure I was right in the research I did here. Umm, why them? Why, why didn’t you end up buying them? Why did they end up buying you?

Interviewee: Umm that, there are logic. What ended up happening, was that, one one of things that we, you had with the internet back then, was that as we grew the internet business, we were always worried about where it was particularly going to go. And we had, you know the emergency, everything was still dark, modem back then. And in Australia, to access, when we looked the way broadband was coming. We kind of realized that you would need very large amounts of money and very deep pockets if you wanted to expand your ISP. We just focused, the other thing we did with our ISP, we just focused on the local Queensland market. That was all we did and we did it well. And we didn’t have lines, renting lines, down to Sydney and Melbourne, and all over the country side and pops, two hundred different pops. We just focused on one local location. And as we looked at where, if you want to grow in this business you are going to have big costs. Big costs in being out of, drive data down to your pops, and put pops around the place and those sorts of things. And so, at that point, we were kind of a little bit concerned about where we thought the market would go and the amount of money that would be required to actually sort of grow the internet, the ISP business as we required. And thats when the WebCentral business was growing out of the parent business. No was really doing web hosting with any success in Australia. And all of a sudden you looked and this business and went,”Wow here is a great opportunity to create something our existing users can use and at the same time build a national brand, build a national business without all the infrastructure costs associated with building up large POPS infrastructures and back hole networks.

Andrew: I see. Did you have a vision of wanting to be the top internet person at this time? Did you have this vision that you were going to be the Bill Gates of the internet in Australia? And no, I’m seeing the look on your face as I’m saying that.

Interviewee: Naw, naw. I think, you know, certainly with the WebCentral business you know, we definitely wanted that business to grow and to still be large. I don’t think you ever think that you want to be, sort of like, the number one character out there and those sort of things. Its, you know, the buzz that I still get is, that when you do something cool for your customers. I think, I think that is the best recommendation I have out there.

Andrew: Okay, and the value of that first business, a power-up if I am understanding right was twelve million dollars?

Interviewee: Uh, that’s correct, yeah.

Andrew: What portion of the business did you have when you sold it?

Interviewee: Uh, I’m, uh, about 20% and a very large tax bill.

Andrew: Laughs. Umm, actually, what are the taxes in Australia like for a bill like, like that?

Interviewee: Well, at that particular point there was, the language of the deal was structured in a little bit of an issue that we found, that we uh, that we found, that we have quite a bit of taxes. It was a capitol gains component of valuing the WebCentral business that we’d be building at the same time. So umm, in Australia the capitol gains tax, uh, does tend to be a bit of a disincentive unless you’ve done the proper planning process. So, definitely with the first part of the parent business it was like “Wow, look at the tax bill that we’ve got to pay. And how are we going to fund that and those sort of things.” So, that was an interesting challenge.

Andrew: And before you wrote that check, you got a check. Do you remember what that, and we’re going to talk about millions here, millions there. It becomes so much that people don’t know how to process it. Just focus on the first one. Do you remember what it was like when you got that first million?

Interviewee: Well actually, the first amount we had for the part of the ___ was $666,666.66. So that was our first down payment, if you like. And then, we invested that in the US stock market, which then collapsed. And so that particular investment, I think, moved up to its value, no? And again, when we sold the power of business the money was then invested into the next part of the business, which was web central. We all made the decision that this wasn’t enough money to retire on, and we could see where the future would be in the web hosting game. So we decided to roll the dice again, if you like.

Andrew: Okay, alright. We’ve been talking about web central a little bit. So let’s introduce that. 1997, while you still owned Power Up, you and a couple of people from Power Up created Web Central.

Interviewee: That’s right.

Andrew: What did they do? What did the company do, I mean?

Interviewee: Web Central focused on web hosting, and we focused on the SME market starting at about the $20-30 per month price category. We worked our way up into dedicated servers eventually, and those sorts of things but again, this was the bit you really did have to focus on education. We were focusing solely on businesses; we had to go through the learning process with them and take them through this whole ëwhat does the internet do?’, ëwhat did the websites do and those sorts of things’. And it was really funny because my other two partners were very much into the Linux and Zinux operating systems at that particular time, and I being the Microsoft guy. And when we started the web hosting environment, I said, ‘We’ll have to use Unix because it needs to be a bit more reliable than Windows MT, which is all we actually have.’ And the other guy said, ‘Look, you’ve got programs like FrontPage out there. You really need to have the Microsoft hosting solution working there.’ And so our very first hosting platform was based on Microsoft Windows MT with FrontPage extensions. And the importance that that actually had was that we got to leverage the Microsoft relationship. We literally got to go up there and work with the Microsoft partners then, who were starting to get involved in this whole internet sort of thing, and websites. So that’s where the business started off, but again, very much in those days, we didn’t even have 24-hour support. And I remember that I used to have a laptop that I would carry around, and I would dial up the internet when I go to bed. And it ran a little program called ëWatch Dog,’ and when the web server went down, this laptop would actually start barking at me. Then I had to phone up the guy at the house, and he would have to go down there and restart this Windows server. And so, even till today, when I hear this particular wav file, I will just wake up no matter where I am in the world. I’ve a bit of a phobia to it.

Andrew: I remember that, actually. You’d get FrontPage, and one of the great things about FrontPage was it just worked. It was like we get excited about Apple for making things that are intuitive today. Microsoft used to make these beautiful, intuitive programs, and I know that they bought FrontPage, but what they did to it after they bought it was just a work of beauty. People could just install it, they could run it; they could publish online with it. And what they needed was a company like yours to host those websites, and that’s how you partnered up. And Microsoft, I guess every time they were selling this software, they were introducing their customers to companies like yours. But how did they do it? Technically, how did you get customers in those early days?

Interviewee: Again, exactly the same thing. And this is when the road show started to become a little bigger, and instead of just focusing on our local market, we would do national road shows. We would get people like Toshiba and Microsoft and everyone involved in it. But the other key thing is we re-labeled our services. So we allowed them to be re-branded. The other key thing about the Web Central business was, back then, everything was manual. If you were using a web hosting company, and you want to change the DNS, or you want to change to something or permissions on a directoryÖ

[0:35:00]

Interviewee: Öon a directory, you would write on a fax, you would fax it to them, and some technician would then go through and look after that for you. With WebCentral we automated as much as we could. So we have an interface called Mission Control where people would go there, and they would create the button to say ’email box, create.’ And it would be created automatically through the scripts and away it would go, and five minutes later the email account was working.

If you did that with OZemail or Telstra or the other ISPs out there, you’d create a mailbox and someone would have to go there and type it on their computer and set it up. So it was that level of automation and giving people this feedback. You know, we’d say when the mailbox was created and you had all these features that you could enable on it and those sorts of things. So we added this automation, and again that got us the techo guys. You know, the guys that were looking after five or six customers out there. Their customers were on a mailbox grid, and they could go through and do all this stuff for them.

Andrew: I see. How did you get them, then? Who were they specifically, these resellers? I see now why it makes sense for them to work with you, but how do you find them and convince them?

Interviewee: Well, when you’re working with FrontPage and those sort of products, it’s the Microsoft Hockey[?] Channel. And so the same guys that were developing visual basic applications for their customers, that was our market. So we just then started to find the guys that were selling Office out there because they were the ones that wanted to set up the websites for the customer and those sort of things. So it was just a matter of getting just about any computer reseller or any sort of what we would call the ‘technology influencer’ out there involved with this particular process. And that was again hitting the road, buying the drinks and a few cigars and a bit of cognac for some of the good guys and those sort of things. And it’s just hitting the pavements there and getting all these guys involved in the process.

Andrew: OK. I’m about to ask you about 2004 when you sold the company, but I can’t ask you about it yet because we’ve got win, success, greatness, everything works, everything works, everything works about this interview. And people are going to think you’re inhuman because they’re not going to get to see some of the setbacks and how you got through them. So I want them to be able to identify with your story. Is there some kind of setback that you can talk about that happened in one of these two companies that was devastating but you found a way to get through it? I want to learn how you did it.

Interviewee: Oh, absolutely. Where do I start basically? In the ISP business, we faced issues in the political scene. In our ISP business we had 400 analog telephone lines coming into a garage in a residential suburb. It clogged up the local exchange. And the incumbent, Telka [sp] at the time, Telstra, was lobbying the government and using us as an example of how we were destroying the local telephone system, how people couldn’t get a dial tone at seven o’clock at night when all our users were dialing into the systems and those sorts of things.

So we were battling sort of political issues at one end. And as we started to grow the WebCentral business, that’s an area where we actually did raise some money–about five million Australian dollars to actually start that business off. We had competitors coming out at that time. Some guys were called PeakHour[sp], and they raised something like $65 million to do a web-hosting business. And they had advertising billboards around the place and everything. This was back when the dot com stuff was booming along, and they just scared the living pants off us. How could they have so much money?

In fact, our best example of this is when we were talking to the board about these guys and how much money they had and all they were spending on advertising. So the board said, ‘Well, you’ve got to start spending some of your $5 million. Go out there.’ We had one director slamming his hand on the table saying, ‘Spend! Spend! Spend! You’ve got to grow the market. You need all those customers straight away!’ It was all about growth, growth, growth and ridiculous looking J curves and hockey sticks and those sort of things on your growth charts.

And so we then went out there, and I actually had one advertising company that had always been contacting us. And they did a pitch to us. And they wanted to sort of launch off this big marketing campaign for us. And we went into their offices, and on one side of the wall of their boardroom they had all the PeakHour[sp] ads–newspaper ads and radio ads–all displayed there. On the other side, they had our three ads that we had in the Microsoft partner magazine called Communique, and that was it. And they said, ‘This is what we’re going to do. You’re going to spend $150,000, actually about a quarter of a million dollars, and we’reÖ

[0:40.00]

Interviewee:Quarter million dollars and we’re going to start off with a six page spread inside this big business magazine with big pictures of Jacques Cousteau sharks and all that sort of stuff and so this was a big marketing campaign, spending a quarter million dollars and you know we added more staff and we added more telephone lines to kick this off and then we launched this big campaign, there was advertising, television and radio all leading to buy this magazine, learn about the internet and we spent a quarter million dollars and we got a hundred and fifty customers for it and so we went “ooh, that hurts”, and we just couldn’t figure out how on Earth these guys were spending all this money and getting all the customers and then we kind of realized they’re not getting the customers. Of course when you go back to the advertising guys and said ” Guys, we just spent a quarter million dollars and we got a hundred and sixty customers” and they said “Well,you’ve just got to spend more money” and so it’s like “Ok guys, that doesn’t really quite work for us”. It’s realizing that sometimes your competitors are out there and there’s an element of bravado or bluff, if you like, and sometimes common sense does have to come back to bear on your decisions. Don’t believe everything your competitors say and don’t believe everything that they actually put out there in advertising as well but that was definitely a very interesting moment. As the web-central business was growing there was also, I guess one of the other interesting processes, this was ??? dot com, spend, spend, spend all you advertising, we literally started burning through the cash and our investor’s always said ” Don’t worry, there’s always more money where that comes from, you can always get more money, always more money from us” we then we got down to our last million dollars and we were looking at doing some more fund raising and those sort of things and the investor said “Yes you can have more money, here’s a

convertible note which will give you a million dollars if you draw it down but just for the process of issuing this convertible note we’d like another ten percent off the company please” and it was like “That doesn’t really work” and that was a coming to Jesus moment for us, we decided it was time to cut costs, cut the advertising and turn the business around and so that’s what we did.

Andrew: I see, wow, those were the days. FTR, before you sold to them, they had a piece of the business, FTR holdings?

Interviewee: Yeah, they were the initial investors that, I guess, kicked off the cash that we needed to grow this business and do the national role…

Andrew: Were they the ones pounding on the desk telling you go out there and spend more money ?

Interviewee: Yeah, complete respect for the guys, they’re very smart guys, again back the dot com days things weren’t as they seemed, this fever out there about growth and getting

Andrew: I’m not putting them down, in fact many times when you get money you have to go out there and spend it to grow your business, just curious about them. Let’s see, sold stake for 19.6 million at the end in 2004, that was to FTR holdings that had a piece of the business. At that point did you get to put serious money in your personal bank account?

Interviewee: Yeah that was the bit where, you know you got to do the travelling bit, go and visit all these places that you want, it’s the bit where you got to take that break, I suppose, from the business.

Andrew: Can you tell us about, what was it like when you saw the check or you saw the wire transfer?

Interviewee: It was a little bit of a revelation that a whole chapter had closed so quickly, it was in some ways kind of cool, in other ways it was a little bit scary because it was like, so what’s next? What do am I going to do from here? There was a bit of a party, I can assure you, those sort of things and the other thing we’ve always had, celebrate your wins. Whether it was web central, whatever you do, you do have to enjoy part of the process as you go along

Andrew: So how’d you celebrate?

Interviewee: We celebrated, my wife and I, spent six months travelling around the world in helicopters and those sort of things, down to Patagonia and exploring different parts of the world which was, you know, quite an amazing sort of trip.

Andrew: I’m going to be in Patagonia in a few days, sounds like it’s going to be wonderful.

Interviewee: Fantastic area, just amazing place.

Andrew: I can’t wait, I can’t wait, I’m all geared up.

ANDREW: I can’t wait, I can’t wait I’m all geared up. Zang in the audience who’s also Australian said that Telstra was the equivalent of American Online here back then in Australia

INTERVIEWEE: Yes.. Infact, but actually One thing I wanted to mention that your competitors can also be some of your best customers so what we did with the web central businessÖis we developed all this great interface for automating the mail box creation and every thing like that. So what we then did is we then got them touched as a reseller. So in Australia if you board a website from Telstra from Optis from Auzimav Ö. The three top buyers piece, you are actually buying from web central. We just rebranded the product and it was fully rebranded. It was Telstra-hosting. There was no reference to web central anywhere inside the product set. As far as customers were concerned they were dealing with Telstra. So that was the other part. So at one part, we had small resellers and the other part we have the big ISP’S. Completely, complete wide, liable product for them.

ANDREW: But, I got itÖ..before I move on to the next biz, I got to thank you for being a such a good professional IM. I am hating, people can’t see it. I hate the cough button a few times here because I am coughing, I am wheezing and I am looking annoyedÖ because I am saying and I am saying don’t loose try, because you have given us the gold here in these answers and thank you for parroting through it with me. OK

Let’s seeÖ..Let’s find may be one another company to talk about and then talk about where you are nowÖ..and I can see that we have gone a little over.

ÖDo you have another few minutes?

INTERVIEWEE: Absolutely, no problem, Andrew

ANDREW: Thank You. How about Extreme Lock? That’s a company

INTERVIEWEE: Yes, Extreme Lock was a kind of very interesting technology company and IÖ a friend of mine has actually started this business and I did best in the process and once I solved web central, I got involved with running kind of see aÖÖÖ.of this business of to help run it. And this business developed DRM technology for application so this was the rapo of the serial number effectÖwe had one customer Symantec and so we developed all the DRM technology in the raffles that would go aroundÖ.around the particular product set. I know that was very interesting because this was the company that had no biggies working forÖ.you know web central had really smart people. These guys had the real window hackers out there. These were the guys that would be sitting there way with the [?] and the black eyes and stopping processes and writing real time encryptions and all that sort of stuffsÖ..And so it was a very, very interesting company to be involved with when you had sort of like forty-nine gates and one mapping person which turns out to be me and so with Extreme Locks. I joined the company because Dave is doing it for a while and I guess it has gone to a stage where we needed to grow up the business to the next step or we needed to workout an exit for DaveÖ..who you would be knowing for a quite a long time and so as part of the process I came on board to work on Ö. How we are going to sort of, you know structure the business for moving forward and eventually we get this business deal with Symantec.

ANDREW: So it is Symantec. And you got on to according to your website 30 million PC’s. How did you get this?

INTERVIEWEE: No that technology, I think is stored in approximately some where160 million PC’s in the world I guess.

ANDREW: 160 million!

INTERVIEWEE: I guess, yes

ANDREW: How did you get so many resellers to wrap yourÖ.?

INTERVIEWEE: Oh I’m Sorry. This technology was really justÖ.solved through well at one customer, that, kind of stop. SoÖIt’s just that technology there was not storedÖrolled out through the customer.

ANDREW: So, you had one customer Öyou were just incharge of building this.

Interviewee: That’s right, and I guess my part of the role was to find the next customer when I was out there. When I came to sell this particular kind of business, we faced a big problem in that, we only had 1 customer. Had he tried to build some competitive tension in the sales process then soÖ. You know we were out there in the US in the west coast, trying to work on develop some kind of a competitive tension in the sales process. So that wasÖand that involvedÖI guess you knowÖ because we didn’t have any other customers we then had to look like well guys. We have got to raise this amount of money Ö.actually grow the business to this level and so we tried to use a couple of VCs who are potentially looking to invest in the business and then to took it to a potential buyer of the particular company trying to get that competitive tension work in so good. So to rack up the value up a little bit Ö bit more otherwise you knowÖYou don’t want to sell a business when you are planning to have one customer are there, one buyer are there.

ANDREW: OK. Let’s talk about today event 0. Where did this idea come from?

INTERVIEWEE: This idea came from when theÖ.. When we saw Extreme Lock some of the guys working on a small business then gotÖ.they hadn’t earn that period where to workÖwork for a lot US had listed organisation

contact phones by phones many phones. https://mixergy.com/wp-content/audio/Mixergy-Pioneer-Lloyd-Ernst.mp3

Andrew: I’m looking behind you to see if I can spot lights or what but it’s the sun that’s coming up. What part of the world are you in that the sun has been coming up as we’ve been doing this interview?

Interviewee: It’s about 6:30 here at the moment, so I look up to the age of the pacific region for this side and I base myself out of China and also out of the Philippines and I basically commute every couple of days, I’ve been to Hong Kong, Singapore and Beijing so I’m pretty much on the road just banging the throttle at the moment

Andrew: So you got up before 6 o’clock in the morning to do an interview with me here on mixergy?

Interviewee: My day starts usually around about 5 am and that sort of stuff so…

Andrew: Really?! Consistently for years, 5 am you’ve been getting up and going?

Interviewee: Absolutely, yeah

Andrew: How do you do that? I hate to ask about something so mundane but I’m fascinated.

Interviewee: I don’t know, it’s just my internal wiring, so I like to get up so the way in which I intend to spend my day is I get up at I… The first couple of hours is the delegation time. This is the bit where you sit down and you try to make sure that the people who are still working with you, that they know what they’re doing during the day and that sort of thing, so I spend a couple of hours just delegating with different people as to what we’re working on today or what’s expected and then there’s… One of the interesting things about selling the web central business is that I focus a lot more on health so then that’s a couple of hours out of the gym, then back and it’s sort of doing email and work you get on the business and those sort of things, so that’s how I kind of start the day off. In fact, the other interesting thing is that, you know, a lot of us don’t quite realize the health indications of working long hard hours and sometimes you can get a little bit too involved in business and web central was a great example of where my health suffered in those sort of things so it’s taken a few years to get all that sort of stuff back on track, a little bit too much cognac and a few too many dinners out there but people talk about work-like balance and it is something you do need to have there, I tend to find that if I’m sort of involved in the activities that I’m doing, sort of the exercise in the morning that you literally have a lot more energy out there than you previously have had so…

Andrew: Because I was asking…

Interviewee: I’ve never been a fan of exercise or anything like that so…

Andrew: *laughs* the founder of Style Guidance and the audiences, I was asking you that question about how you wake up, was asking what time do you go to sleep at night?

Interviewee: It depends, usually probably by about 10 o’clock or 11 o’clock and that sort of stuff, so I’m kind of like the 6 or 7 hour person for sleeping so…

Andrew: Impressive, alright well thank you for doing the interview, thanks for being here this early in the day and I appreciate it, it was great to meet you.

Interviewee: No probs, Andrew, thank you very much.

Andrew: Thank you all for watching, I’ll see you in the comments.

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[This interview happened because of a very generous introduction by Benjamin Boyter.]

Who should we feature on Mixergy? Let us know who you think would make a great interviewee.

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