Surviving Near-Death Experiences and Going Public in London: Michael Hughes, co-CEO of LoopUp (Part 2)

Sramana Mitra: What year did you guys come together to start LoopUp?

Michael Hughes: We first met each other from 1995 to 1997 at Stanford. I had this fellowship, which meant that I had to go back to the UK. I went back for about nine months and then moved back out to California. I then joined a European-led startup called Pagoo. Pagoo was an early-stage VoIP player.

Back in the day when everybody was using dial-up to get on the Internet, you could not answer people calling you. What these guys built was a very simple system which basically redirected your incoming phone call, answer that call in the cloud, take a voice message, and then send that voice message back to a little app that would pop up on your desktop.

From that very simple and original idea, it morphed as we added more technology to it. We made it so you can answer the phone from your laptop or computer. That was the first company doing that. We then raised a bunch of money from a bunch of people, the most notable of which was Cisco. We ended up working quite a bit in China trying to implement a plan so that new buildings need have a PSDN connection. Everything will be over IP. Cisco had just bought a company called Komodo. They had these mini gateways in each house. They would run a Pagoo service on top of that.

Unfortunately, 9/11 happened. Cisco pulled right back to traveling into China. The project died and that killed Pagoo. When I left, there was a core group of engineers from that team who decided that they quite liked to work together. My current business partner Steve had been through a similar rocket-ship ride in the UK with a company called Go Industry. We’ve both been through these experiences where we had overhyped and overfunded businesses.

When those companies hit a wobble, the nasty side of the relationship between venture capitalists and entrepreneurs came out in full force. We felt like we got the ugly end of that situation. We actually got together as a group. This would now be in 2002 to 2003. We decided that we would like to start a business but we were thinking about it in a slightly contrarian way. We deliberately didn’t want to raise a load of venture capital money. We were thinking more about what to do to be working with people we wanted to work with, what would our Internet culture be and all those questions which for a lot of companies come as second-order questions.

To be very frank, the idea about what to do as a business ultimately was the second order issue. To give you an example of ludicrous extremes, the final two choices that we were wrestling with was either doing caravan parks in the UK or doing telephony staff, which we ultimately did. We were fairly ambivalent about which way we went. What we decided is however we were going to go after it, we wanted to make sure that we built a company and a culture that we ourselves would like to work in for however long it takes.

Sramana Mitra: Talk to me a little bit about what was going on around the ecosystem. Besides the cultural issues that you were pointing out, what was going on from a business environment point of view?

Michael Hughes: It was 2002 to 2003. It was an absolute disaster. It was the popping of the first dot-com bubble. We went to our five-year reunion in 2002. It was really quite hilarious. I would say, maybe, 40% of my classmates were unemployed. You could really tell the guys who wanted to be entrepreneurs because they were off to start something new versus the guys who are giving it a try. Those guys were moving back to hedge funds and consulting. The market was really ugly. It was hard to raise any money.

We basically went around to a whole bunch of our friends. We couldn’t get anybody to bite. Quite randomly, we were in Las Vegas. We met a friend of a friend’s husband. We were playing Blackjack at some ridiculous hour in the morning. He said, “I’m in.” We thought he was joking. The next morning, he wrote a check. That was the precipitating moment that once one person had jumped, all of our other friends and family came in and put in enough money to get us going at a fairly modest level. We had $350,000 to $400,000, which back in 2003 was quite miraculous particularly when we really had an idea rather than a prototype.

This segment is part 2 in the series : Surviving Near-Death Experiences and Going Public in London: Michael Hughes, co-CEO of LoopUp
1 2 3 4 5 6 7