Sramana Mitra: Was this a company that you financed in any way or was it self-financed?
David Steinberg: I maxed out my credit cards and tried to get some money from my family. They would not give me any initially. I then went to my stepfather and said, “This is what I want to do. I have this plan. Would you help me?” He said, “Absolutely not. You’re way too young to do this. Go to work for somebody for five years in the business and then I’ll lend you whatever you need.” I didn’t want to wait but we grew the business so quickly that within six months, we were already doing over a million a month.
We couldn’t afford to make payroll, so I called my stepfather and showed him the numbers. He said, “I can’t believe you did this in six months. This is incredible.” It’s going to blow up in two weeks if I don’t get money, because I can’t afford to pay people because the carriers were paying me net 60 days and I have to pay my people every two weeks.” He ended up lending me some money, of which I paid everything back. For the first six months, I was totally on my own. Then I got a family loan.
Sramana Mitra: How long was this journey?
David Steinberg: I started that when I was 21 and I sold that when I was 26.
Sramana Mitra: That brings us to what year?
David Steinberg: 1996.
Sramana Mitra: You sold the company for how much?
David Steinberg: I can tell you that of the four companies that I have run before the one I’m currently running; I sold three, and took one public before selling it. Collectively, they exited for just under $2 billion.
Sramana Mitra: In terms of stepping through your story, I’m assuming that this is all bootstrapped and you got at least some multiples. You’ve made substantial capital in exiting this company?
David Steinberg: Tens of millions. I then started Sterling Communications in which I invested $10 million of my own cash to start. This was a business to effectively telemarket and sell wireless phones using telemarketers back in 1995. We grew that to 5,000 employees and sold that to AT&T three years later. Then, I started a company called InPhonic, which was effectively the concept of activating and selling wireless phones over the Internet, and using a portal to maximize the sales.
All technology products move effectively from a development phase into a monetization phase and then into a commoditization phase. From a distribution perspective, I always believed that the maximum money can be made in the back half of the monetization stage and the early stages of commoditization where you can really hit velocity but still make money. I felt like the mobile space was entering into that space and that the Internet was the right place to start. So in 1997, I founded a company called InPhonic on the premise that people would one day activate and buy wireless phones over the Internet. We grew that business organically from zero to $450 million in sales in five years. It was the number one company in the Inc. 500 in 2004, which is the same year we took it public in a $1 billion plus IPO.