The MIT men who make a killing

May 7, 1999

Mike Cassidy retired for a year when his telephone/computer software made him millions, but now he is back in business. Julia Hinde reports

Send a parcel by Federal Express and you can check its progress electronically. Give your parcel number to a recorded telephone announcement and your parcel will be traced and a message will automatically tell you if, and when, it was delivered.

Mike Cassidy is the 36-year-old behind the technology, which means Federal Express can trace your package without your ever hearing a human voice. It also allows some United States airlines to tell telephone enquirers if a plane is running late. You can even book a cinema ticket in the US thanks to Cassidy's software.

At 32, he had made more than $4 million with his telephone/computer technology. A year out to unwind and study music, and the entrepreneur could not wait to get back to the fray. Now he seems to have picked another winner. But is it luck, is it America, or could a British student emulate Cassidy's success?

A business student at the Massachusetts Institute of Technology (MIT), Cassidy linked up with friends to set up his first firm, Stylus Innovation.

"The idea came out of a student project," he explains. "Originally it was to help elderly people do grocery shopping. They would have a wand and scan it over a catalogue to order something like milk. Then someone would deliver it."

But the business plan soon changed into a sophisticated voice feedback system which won the 1991 MIT $50,000 business plan competition. With that success, they were able to raise $100,000, mostly from venture capitalists, to get the company on the road.

"Ours was the first such project to be based on Windows, not Dos", he explains. "Ever since I was in school, I was coming up with crazy ideas for businesses, hoping to make a million. This is the first one which did."

Cassidy and two colleagues launched the product in November 1993. A year on there were 12 employees and $1.6 million worth of software had been sold.

In 1995, they sold $3.2 million of software, before being bought in February 1996 for $13 million.

"It was time to relax," he explains of his choice to move to University of California, Berkeley, to study jazz piano. "It was certainly hard doing a start-up - there's the work and the stress. You have quit your job for no income. You work for months and months making no money. My wife was supporting me.

"I was always the pessimist, thinking the odds of success were against us. I thought most likely we would go bankrupt. But we got lucky. It worked for my wife and me - now she's not working."

"But I got restless, " he says of music school. "I wanted to do another. It's the entrepreneur in me - if it's in your blood, you want to do it again. I was looking for an idea to hook up with when I consulted the MIT web site."

There Cassidy found Gary Culliss, a 29-year-old student with a great idea. Culliss wanted to set up a massive data base which looked at the terms people typed in when they searched an internet database and then the sites they actually went to.

He also wanted to monitor the time they spent at each site. Then they could find the sites people using a search engine under a particular phrase were most likely to be interested in and give them those site addresses first.

Lunch was enough to seal the partnership. Culliss had the idea, Cassidy the contacts. Direct Hit was formed. The pair entered and won last year's MIT business plan competition. Having already won $1.4 million from venture capitalists (Cassidy agrees it is partly contacts, but if you show your enthusiasm, he says, and tell them you are going to do this next week, they back you), they gave the winning money to the other finalists to help them set up their businesses.

Now they have 25 employees. They receive details from six of the big search engine providers of what people search for and what they access. In return they provide information to each of the engines on the most frequently accessed sites for the search terms used.

"Since then we have raised another $2 million in venture capital. We have moved twice and we are growing as fast as we can," explains Cassidy, whose office uses the computer telephone technology devised by his first company.

When you phone in a recording of Cassidy's voice asks who is speaking. You give your name and then he can decide whether to speak to you.

He stresses that the US venture capital system enables entrepreneurs such as him to finance their ideas.

"I have spoken to some people in the UK who say venture capital here is very different," he explains. "It's much harder generally to fund a software company through venture capital. You don't have collateral to offset the risk, so you are either hit or miss. But we have a network, an infrastructure in the US, which means venture capitalists will even give us money."

He reckons anyone with a good idea can develop the next million dollar company, but he adds: "It's a great advantage to partner with people with business experience. You don't have to reinvent the wheel. They have connections to hire people. They know how to do taxes and hire an office - it can be done in a day or two. Coming out of college, that can take ages."

As for Direct Hit, Cassidy and his colleagues are considering floating their company; but then he'll have to find another venture to which to turn his attentions.

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