Teen
Internet Moguls
Web-savvy
kids are turning their fun and games into million-dollar businesses
When
Michael Furdyk and his partners sold their Web site for more than $1
million last spring, Furdyk got a pile of money, gushing publicity--and
work-study credits toward his high school degree. Furdyk, now 17, still
doesn't have his diploma. But he got enough venture capital for his new
startup to lease a spacious office suite and employ 20
staffers--including his father, who just quit his job as an executive
at NCR Corp.
Bouncing in his chair, Furdyk stares at
his blue laptop, scrolling through reams of e-mails, looking away just
long enough to glance down at the caller I.D. screen on his ringing
cell phone. All the while, he's rattling on so fast about the virtues
of his latest venture, BuyBuddy.com, a comparison-shopping service,
that he's almost impossible to understand. He hardly mentions the
big-bucks sale of his first dot-com company, MyDesktop.com, an online
computer-help service, before launching into his business philosophy.
Finally, he breaks into a broad smile as his new secretary appears in
his office. ''Cool! Having a receptionist is cool!'' he says.
As Internet entrepreneurs go, Michael
Furdyk, dressed in baggy black pants and a gray flannel top, doesn't
seem all that unusual these days. But at 17, with a year to go before
graduation, he's still really just a kid. Too young to vote, buy a
drink, or get a credit card, he's in the improbable position of running
a promising business venture, not to mention working as a consultant
for Microsoft Corp.
Furdyk is no fluke. A small but growing
army of teenaged entrepreneurs is making a bundle online by turning
what began as hobbies into money-making ventures. The first generation
ever to grow up in front of a computer screen, these teens are working
late into the night hatching business plans, hiring employees, and
lining up customers. ''Teens are becoming world entrepreneurs,'' says
Nicholas Negroponte, founding director of Massachusetts Institute of
Technology's Media Lab.
For these kids, business deals are just
an extension of what they love most: interacting online. And never
before have teens had the knowhow, the access, and the tools at their
disposal to pursue business on an equal footing with adults. No degrees
required, no dues-paying necessary. Just log on and go. And with time
to burn, kids spot business ideas that adults don't. Says Don Tapscott,
author of Growing up Digital:
The Rise of the Net Generation:
''Children are an authority about the biggest revolution in society.''
The number of teens doing some kind of
business on the Net is already a lot bigger than many grownups would
ever expect. For every teen millionaire, there is a veritable swarm of
regular kids who routinely earn pocket money doing software work via
the Net. It's impossible to pinpoint exact numbers, but they are large.
Researcher Computer Economics Inc. in Carlsbad, Calif., estimates that
8% of all teens, about 1.6 million in the U.S., are making at least
some money on the Net. ''There's not a period in history where we've
seen such a plethora of young entrepreneurs,'' says Nancy F. Koehn,
associate professor of business administration at Harvard Business
School.
For about half of these kids, the work
entails little more than collecting small commissions for links to
larger sites, such as Amazon.com Inc. But for countless others, it's a
lot more involved--and the money is serious. In its first annual
ranking of the top 100 entrepreneurs aged 8 to 18, YoungBiz magazine
found that its four
highest-earning junior tycoons each had six-figure incomes averaging
$432,500. All four are Internet entrepreneurs who have made their money
in e-commerce or Web design.
With kids earning that kind of money,
there are some proud parents out there. But others worry about the toll
their kids' obsession with doing business on the Net is taking on their
grades, social development, and their ability to experience a normal
childhood. ''This economy is going to create a few lifetime winners and
a lot of human wreckage,'' says Michael Jolkovski, a psychologist in
Falls Church, Va., who treats adolescents.
Janet E. Cosner, a writer of educational
materials in Rocky River, Ohio, has curtailed her 18-year-old son's
computer time to a maximum of five hours a day. ''There's more to the
world than being up in his room on the computer,'' she says of her son
James, who has a Web-page-design business. ''I want to make sure that
he's a well-rounded person. I have insisted that he join clubs at
school.''
Workaholic teens pursuing the big score
is hardly the image of adolescence lodged in the collective memory of
grownups. In the 1950s, it was cool for teens to be rebels, driving hot
rods and cranking up their rock 'n' roll tunes. Then, in the '60s and
'70s came hippies and the drug culture. Teens dreamed of healing the
environment and working toward world peace. In more recent decades,
media-saturated kids have aspired to become celebrities, as teen
tennis, skating, and basketball stars ruled. But business? No way. That
was boring stuff for old guys in suits.
Boy, have times changed. Fifteen-year-old
Cameron Johnson, whose idol is Dell Computer Corp. CEO Michael S. Dell,
says his dream is to ''sit in an office building all day and work.''
Johnson, a freshman at an Orange (Va.) boarding school, says he hopes
''the market settles down soon.'' His Web startup, SurfingPrizes.com,
pays users to surf the Web and collects revenues from advertisers. ''We
will hopefully be able to file for an IPO very shortly,'' says Johnson.
Johnson's advertisers include Ask Jeeves,
Discover Card, Warner Brothers, Tickets.com, and iVillage, according to
Bobby Berna, who heads business development for L90, a Santa Monica
(Calif.) advertising firm that specializes in the Web. On one recent
day, SurfingPrizes displayed 4.5 million ads. That translates into
about $13,500 in revenue, says Kristin Glennie, an L90 project manager.
That's why Johnson can pay his 25,000 ''member'' Web surfers 20 cents
for every hour they are logged on.
MISCHIEF. Lots of kids, of course, are
still as
rebellious as ever. No one has caused more of a ruckus on the Net than
Shawn Fanning, the 19-year-old who launched Napster, now the subject of
legal battles with the music industry over copyright laws. The more
mischievous they are, the worse the pranks. It was a 15-year-old
Canadian, nicknamed ''Mafiaboy,'' who was charged with causing the
meltdown of such sites as eBay Inc. and CNN.com earlier this spring.
While some kids have struck it rich, in
the go-go world of Internet investing it's often unclear who's calling
the shots and who's winning. Rishi Bhat, a 15-year-old from Chicago,
and his parents are thrilled with the deal he struck. Last year, he
sold his security-software program to a Canadian mineral-exploration
company for $40,000 in cash and some stock. He could get a big windfall
if the company takes off. But after a brief surge, shares have
plummeted. Meanwhile, the businessman who bought the software has
already made a bundle via some skillful selling after a flurry of
publicity about the teen entrepreneur prompted a spike in the stock.
For many kid tycoons--who invariably are
boys rather than girls--all the frenzy takes its toll. Pulling
all-nighters has become routine--not to cram for finals but to work on
business plans. Brad Ogden, a 17-year-old high school junior, logged so
many hours putting together his Sterling Heights (Mich.)
Web-page-design company that his girlfriend broke up with him. And
though he earned $540,000 last year, according to YoungBiz, Ogden won't
confirm that number, saying
he worries what his friends at school would think. ''The worst thing is
to be liked because of your money,'' he says.
It's not just a social life that goes by
the wayside. School often becomes a daytime nuisance to be endured
until the real work begins at night. Ogden, for instance, got into
Web-page design when he was 13 years old. Now 17, with spiked blonde
hair and braces, he spends his class time doing paperwork to keep his
company, Virtual Web Pages, going. His teachers, who say Ogden is
bright and well-adjusted, don't seem to mind. In fact, the school's
principal, James Bannon, says the faculty looks forward to the stock
tip sheet that Brad and a friend post weekly in the school's
audio-visual room. But Ogden's mother, who says she rarely sees him,
worries a bit that Brad isn't challenged enough. ''He's just spinning
in school sometimes,'' says Pamela Ogden.
Other kids just give up on school
altogether, lured by high-paying jobs. Paul Dinin, 19, of Marietta,
Ga., dropped out when he was confronted with an unusual choice. He
could repeat his senior year, or he could go to work for Atlanta-based
Interland Inc., a Web-hosting company. His salary: $90,000 a year for
''configuring routers and switches.'' He took the job. ''School wasn't
for me,'' says Dinin, who now owns a house and four cars, including a
Jaguar, a 1981 DeLorean, and a vintage Plymouth. His ambition is to
become a standup comic, but for now, ''it's all about money,'' he says.
''All those guys who say they just want to make a difference in the
world, that's bull.''
Maybe. But a lot of kids, unaware that
their skills and knowledge are valuable to grownups, stumble into the
business world almost by accident. Three years ago, when Michael Furdyk
launched a help line from his family's suburban Toronto basement to
explain how the Net works, the site was just for fun. A chat-room fan,
Furdyk also became pals with a 16-year-old who was living in Australia,
Michael Hayman. The two like-minded kids decided to become business
partners in 1997 to run MyDesktop.com, a help site that Hayman had
already launched in Australia. At first, the site focused on helping
people with Windows problems, but later, it expanded to include
information on games and other topics.
It never occurred to the boys that being
on opposite sides of the globe would pose a problem, and it didn't.
Upfront costs were minimal: $100 to register the domain name, and they
got Web-site storage for free in exchange for placing the host's ads on
the site. Never meeting and only occasionally speaking by phone, the
two were rarely awake at the same time. But they were having a blast
all the same, reviewing software and the latest computer games, which
they got to keep.
By 1998, their site was attracting 10,000
visitors a month. On their own, the teens hired advertising firm
Doubleclick Inc. and began taking in thousands of dollars' worth of ad
revenue each month from companies such as Microsoft and WinZip. ''We
had to learn something new at every turn, and that made it fun,'' says
Hayman, who moved to Toronto in August of that year.
THE CALL. The move paid off for both
boys. By May,
1999, MyDesktop.com had grown to include six e-mail newsletters,
attracting about a million visitors a month and generating some $30,000
in revenues. The pivotal call came last spring from Alan M. Meckler,
the CEO of internet.com in Darien, Conn., an online-publishing company.
Meckler says he wanted to buy MyDesktop.com for its content and vast
readership. ''Five million page views a month, even by today's
standards, is an extraordinary amount of traffic,'' says Meckler.
Furdyk, Hayman, and a third partner split
more than $1 million upfront, according to Meckler, and could ''easily
have well over $4 million by the time this is done.'' Future payments
depend on the site's growth. In the past year, the site's audience has
nearly tripled, to 13 million page views a month. And the payouts to
Furdyk and the others don't include the thousands of shares in stock
options each of the partners received in internet.com. ''We all lived
in shock for the first few months,'' recalls Furdyk's mom, Marcia. ''It
was totally unreal. It didn't really sink in.''
Life got even better for Furdyk. Hitting
the lecture circuit after the deal, he caught the eye of Microsoft
executives. He and his girlfriend, Jennifer Corriero, who specializes
in getting girls more involved in technology, are now working in
Seattle for six months. There they are running focus groups with other
teens to help Microsoft study what kinds of products teens like.
Although Microsoft won't disclose how much it is paying Furdyk and
Corriero, such input is invaluable to the company since it ''allows us
to get a glimpse of what it will be like when his generation gains more
business-savvy,'' says Bart Wojciehowski, a business-development
executive at Microsoft.
Back in Toronto, Michael's father, Paul,
45, is now running the show. Last month, he left his job as NCR's
managing partner for product marketing in Canada to work for the teens
as BuyBuddy's CEO. He believes he can bring business experience to his
son's fledgling empire and claims to have no qualms about his new role.
''I'm sure I'm not going to be the last father doing this,'' he says.
One place where most fortysomething dads
would never fit in, though, is the fast-evolving world of online music.
Angelo Sotira's obsession with his music Web site propelled him from
Poughkeepsie, N.Y., to Hollywood right after his high school graduation
last year. Sotira, 19, clean-cut with short dark hair and a supremely
confident manner, now works with one of Hollywood's power brokers.
Michael Ovitz, head of Artists Management Group, bought Sotira's site
last year through his investment company, Lynx Technology Group.
Sotira created the Web site when he was a
15-year-old high school sophomore so that his girlfriend, Sarah, could
have a place to write and chat about music. At first, the site was a
flop--hardly anybody signed on. Then, ''somebody mentioned this MP3
thing, and I was like, well, O.K., I'll check that out,'' says Sotira,
who first cut his online teeth as a 13-year-old running a multiplayer
video-game Web site.
MUSIC BOOM. He spent $100 to reserve
dimensionmusic.com as a domain name and posted a story about the hot
new technology, and suddenly, 150 people were clicking in each day.
Before long, his site had become the top MP3 clearinghouse, with links
to about 500 sites where people could download and swap their favorite
music. The only problem was that he had no permission from record
companies or artists to allow people to download the music. ''We were
doing a lot of illegal stuff because we didn't know what illegal stuff
was. I was 15. I didn't think I could get in trouble,'' he says.
Life changed quickly for Sotira after a
conversation with Jim Griffin, the technical head of Geffen Records
Inc. who is also a consultant to an industry trade group. Griffin's
threats of legal action had successfully persuaded 300 Web sites to
close down, but Sotira wasn't so easy to cow. He proclaimed Griffin
''Satan'' on his Web site, writing that Griffin wouldn't have the guts
to contact Sotira. But Griffin called his bluff, phoned Sotira, and
spoke to him for four hours. The conversation convinced Sotira that
what he was doing was wrong, so he pulled all his links to sites that
carried copyrighted works.
Sotira's conversion quickly led to
connections in high places. An agent for Ovitz' newly created agency
asked Sotira to come to Hollywood to work. Sotira, having a good time,
wasn't all that eager to sell at first. But the truth is, he had put
himself at the epicenter of a huge transformation in the way the music
industry delivers its product, and he was in demand.
Today, Sotira works out of Ovitz'
Wilshire Boulevard offices as the CEO of Dimension Music, a music
portal with online disk jockeys. Neither he nor the company will reveal
the terms of his deal, but he says he couldn't be happier with the way
it has all turned out. Sotira and his mother now live in a comfortable
two-bedroom Beverly Hills (Calif.) apartment. That's quite a switch
from their life in Poughkeepsie, where his mom worked behind the
cosmetics counter of a department store.
Sotira is a lot like other teen tycoons:
If anything, many teen Netrepreneurs and their parents underestimate
the extent to which their skills are in demand right now from all
corners of a business community that is hot to cash in on the Net
craze. It's not just Microsoft and Michael Ovitz on the prowl. There's
an insatiable hunt for the brightest, and that's leaving some kids and
their parents vulnerable.
Just weeks after launching his online
privacy-software business, 15-year-old Rishi Bhat sold it to David
Hodge, CEO of Rocca Resources Ltd. in Vancouver B.C., a
mineral-resources company. But so far, it's Hodge who has made a
killing, not Bhat. Rishi got $40,000, 30% of first-year profits, and
the right to 1.5 million so-called performance shares, based on the
number of hits the site attracts.
While that may sound good, Hodge sold
79,900 shares, then worth $179,219, on the days Rishi appeared on CNN
and ABC's Good Morning America. The shares were trading at nearly
double the $1.22 they were trading at six weeks before--and more than
10 times the 20 cents they were trading at last October, shortly after
Hodge struck the deal to buy Bhat's software.
Hodge says: ''I sold these shares because
the stock was trading at a good price level, and I have a few expenses
to pay.... For anyone to suggest that I have unduly profited from
Rishi's appearances on television is unfair because we're a
team--Rishi, the company, and I. Rishi profited from his appearances on
television, as did all of the shareholders.''
It shouldn't be a shocker that a
15-year-old math whiz might not be the shrewdest businessman. Many
teens, in fact, call it quits after they hit $100,000 or so, says
Jennifer Kushell, 26, who runs the Web site youngandsuccessful.com.
Why? In the end, it isn't always so fun being a teen tycoon. Melissa
Sconyers, 16, of Austin, Tex., a Web designer and one of the few female
teen entrepreneurs, cut back after she realized she was on the verge of
serious burnout a few months ago. ''I had lost touch with my friends,''
she says. ''I had to remember I am a teenager.''
LONG VIEW. Every teen entrepreneur should
be so
smart and so lucky, because when the dust settles and the Internet boom
times are over, a lot of burned-out kids with no college or even high
school degrees may wonder what hit them. That's why Amar Goel, 23, who
stayed at Harvard University while creating chipshot.com, a golfing Web
site with millions of dollars in financial backing, says he now tours
colleges, urging students to stay in school. In the world of Internet
businesses, ''we're barely at first base,'' says Goel. ''There are a
lot of opportunities to come.''
Even Michael Furdyk, with his
million-dollar-plus deal, Microsoft gig, and bright prospects, has
decided to complete his education. Why? Because his father says so.
It's good to know that some grownups are still in charge, even if they
may end up working for their teenage kids.
By
Rochelle Sharpe in Boston, with Ann T. Palmer in Chicago, Joann Muller
in Detroit, Elizabeth Hayes in Los Angeles, and Deborah Rubin in
Atlanta.
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