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Personalized Alerts In The Enterprise: xMatters CEO Troy McAlpin (Part 2)

Posted on Tuesday, Aug 31st 2010

SM: What did you find? What were you looking for?

TM: I found a wild, crazy entrepreneur who needed help here in the Bay Area. The company was called Intelligent Choice Refreshment Company. He wanted to create a healthy cola. It was an Odwalla approach, but he wanted to take on Coke and Pepsi. I loved the passion he had; it was infectious. He did not have business acumen or discipline. I was employee number two, and we raised $5 million to run the first test markets.

SM: What year was that, and where did you raise capital for that type of venture?

TM: We raised funds in 1996 from two different firms. One was Levinson Capital Management and the other was Hickson out of Denver.

SM: Consumer products do not get a lot of capital. How did you figure out what firms to approach?

TM: We talked with a lot of different firms and we were told ‘no’ a lot. We found both firms via professional networks. Both firms were managed by wealthy individuals on behalf of a small group of wealthy individuals. We were fortunate that both investors understood the potential. Most of the firms told us it was a foolish undertaking because they felt people would never understand that soda is bad for them and that we could never win a fight against the major cola companies.

SM: Today you do not have to convince people that soda is bad for them.

TM: At that time they had studies coming out, one of which observed putting a nail in Coca-Cola and watching it dissolve from the phosphoric acid. Some of the science coming out illustrated how bad aspartame was as well. We had a scientist with us looking at Stevia and other low-calorie sweeteners. To me, it was exciting to focus on real problems.

We made some critical mistakes. First, the VC firm took a lot of control very early. Part of the reason was that the founder had become desperate. He was really down to his last nickel. It was such a passionate undertaking for him that he ignored the ramifications of the VC demand to bring in a co-CEO. They brought in someone from Kraft who had been running from Crystal Light. What we needed was hard-core entrepreneurism. That move looked good only on paper. It was not the person, it was the perspective. He had been a brand manager for a long time and needed a team of people around him.

I was doing everything from free tastings in downtown San Francisco to running the packaging and bottling at night. I also did the marketing and finance. I loved it because I was doing so much. For the first time in my life I felt that I could not work enough. It was infectious. It was also the biggest heartbreak of my business career. The founder got farther and farther away from being able to operate the business. He became paranoid that people were trying to steal the business from him. Things became dysfunctional.

A year after we had launched, the company had good placement and it was making its numbers. We had a management meeting and the founder was present along with the co-CEO and two lawyers. I was asking the CEO a question about placement and slotting fees. The corporate council then asked me to rephrase my questions because he felt I was being pointed toward his client. I told them that we were a management team and that we did not need lawyers there. At that point I decided to leave, but we ended up selling the business to Mystic before it got gobbled up by Snapple. They kept the formula for the nutraceutical line for the fruit juices but killed the cola immediately. They had no desire to compete against Coke and Pepsi head-to-head. That was a shame.

This segment is part 2 in the series : Personalized Alerts In The Enterprise: xMatters CEO Troy McAlpin
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