Back To School –

Mike McCurry, former White House press secretary for President Clinton, has found himself in some interesting positions by accident. The Monica Lewinsky mess aside, McCurry was, at various points in his life, an accidental Ralph Lauren model, an accidental press secretary (at first) and most recently an accidental, or perhaps more specifically, an unlikely CEO. In the two former cases, McCurry winged it quite successfully. In the latter, he knew he couldn’t fake it, so he enlisted the help of a dream team of VCs and Silicon Valley CEOs to coach him. Two years later, he has an MBA from Real World University and has transformed Grassroots.com, a dead-in-the-water dot-com, into Grassroots Enterprise, a promising software maker.

If being a CEO wasn’t initially on McCurry’s list of things he wanted to do with his life, it certainly wasn’t out of the question. He had had it with public relations and all of the accompanying headaches. “I knew going into Grassroots I might be buying low, but I just didn’t want to go back to selling toothpaste and doing the standard public relations thing,” he says. “The old way of doing politics had to give way to something new.”

Back in the heyday of the Internet that “something new” was envisioned as Grassroots.com, a political portal that was largely the vision of Craig Johnson, chairman of Venture Law Group.

The company launched in September 1999 with a series A round of $3.4 million from Advanced Technology Ventures (ATV), Charter Venture Capital, Catamount Ventures and private investors.

Five months later, at the height of the height of the Internet bubble, it raised another $30 million at a $100 million valuation from corporate investors including insurance and financial services company AIG and media conglomerate Knight-Ridder, along with ATV, Catamount and Charter.

McCurry In A Hurry

It was also around this time when David Chiu, a Grassroots founder, convinced McCurry to join the company’s advisory board. Johnson continued in his role as the company’s virtual CEO while he, Chiu and Jos Henkens, managing partner with ATV, began rushing McCurry to take over as head of the company.

Even with all of the money that was heaped upon Grassroots.com, McCurry didn’t jump at the job. He was also weighing an offer to be the top executive of his church. More to the point, he wasn’t convinced that Grassroots.com had a winning strategy. It relied on charging politicians and political organizations a hosting fee for posting their policy statements and political causes, as well as taking a cut of money raised from constituents. Like most portals, it couldn’t find enough customers to generate more than a few dollars in revenue.

The skeptical McCurry went to Henkens and Johnson and told them his concerns about the business model. “They told me not to worry, they had already figured it out,” he says. Not completely jaded by his D.C. experience, he believed them. Indeed, the VCs had already put the brakes on spending, abandoning all branding and marketing efforts, while conserving the hoard of cash the company had just raised. It was a prescient strategy, given that Grassroots was able to stretch that capital for two more years, a year more than planned. At the same time, the company turned inward and charged its engineering team with writing new software for the “advocacy market” while dropping the “.com” from its name. It was still mid-2000 and the Nasdaq was peeling apart.

If Johnson and Henkens were convinced McCurry was their man, others weren’t so sure. “At first, in comes Mike McCurry and suddenly we say: New model!'” recalls Jed Smith, managing partner of Catamount. “But still we had to do a gut check and ask ourselves: Is a White House press secretary really a high-tech CEO?'” That answer would be a long way off.

Model Student

When McCurry officially took the job in November 2000 it was a leap of faith and career, not unlike other unusual but often well-timed changes in his life. In a story known only to a few of members of the White House press corps, McCurry was once a male model. “I was at Princeton and Ralph Lauren was doing a photo shoot. They wanted some real students, and this guy just pointed at me and said, Like him.’ The rest is history.” His first job on Capitol Hill held a similar ring. He showed up to work for the senior congressman from New Jersey on the same day that the congressman’s press secretary quit. “They didn’t tell me until a week later that I was the one taking his place,” he recalls. “When I said I didn’t know anything about being a press secretary, they said I knew enough. … They’d teach me the rest.”

Johnson, perhaps the spiritual leader of Grassroots from inception, essentially said the same thing when pitching him. “My first reaction when they asked me was that I had absolutely no experience running a business,” McCurry says. “That’s when Craig said: “Don’t worry about it; we’ll coach you.” And that’s just what they did.

Shortly after taking the job, McCurry rented an apartment in San Francisco, spending at least one week a month on the West Coast and basically living with the company’s engineers. Gradually, between January and September 2001, he morphed the company in a direction he understood: advocacy. Suddenly, Grassroots could be a company where technology and the political process could blend together to create online, direct mail and call center advocacy campaigns. Its key product is a software package that redefines the concept of CRM from “customer relationship management” to “constituent relationship management.” If McCurry was the accidental CEO at first, he quickly became a CEO with a purpose.

While working with the company’s engineers, McCurry enlisted in a virtual CEO boot camp. Just two months after coming aboard, he began meeting with a range of entrepreneurs, technologists and venture capitalists all put together by Johnson, Henkens, Smith, and Barr Dolan, a partner at Charter. Since all four were the longest running investors in Grassroots, all had a clear financial incentive in helping McCurry help the company get it right.

Yet it’s important to note that despite the civic-minded natures of the VCs and other backers of the company, including John Young, former CEO of Hewlett-Packard, all maintain it was strictly a business decision to stick with the company and invest, not only in a turnaround, but also in McCurry’s education. The tuition reimbursement would be a return on investment, plain and simple. “We invest in companies to make money, period,” Smith says. Even McCurry had a bit of the corporate greed in him, something most VCs view as a job requirement for CEOs. “I saw this as an opportunity to not only combine technology and politics but also as a chance to run my own show and get a chunk of equity in something I believed in,” he says.

Food Network

With all intentions aligned, McCurry’s coaching sessions started in earnest. Dinners were set with a broad cast of characters, a true Silicon Valley network of grizzled veterans and wildly successful entrepreneurs. “It was really about trying to just communicate to Mike that it takes a long time, usually five to 10 years to build a great company, and these were several individuals who had been through that same process,” Johnson says.

John Dean, chairman of Silicon Valley Bank, was McCurry’s finance meal. Dean knew better than most how to build a company brick-by-brick, that there were no shortcuts.

Steve Poizner, founder and president of SnapTrak, which had been acquired by Qualcomm, held a more intuitive coaching session. It was the “trust-your-gut-and-the-exit-will-come” meal. It was also a reminder that companies first had to be built into revenue generating engines, as SnapTrak had, before there would be any suitors, let alone investors.

And then there was Jim Carraker, founder and former CEO of Aspect Communications. That was the “know-your-organization” meal. Or, as Carraker describes it, “Mike, or any CEO, needed to understand why his organization existed, why it employed people, why it should have customers and why it should be able to show a return for investors. If he couldn’t answer those questions, he shouldn’t be in business.” Amen.

Catamount’s Smith had yet another stable of mentors for Mike to pay attention to, including Jack Harding, CEO of eSilicon, a chip design company; Chris Hemmeter, CEO of Critical Arc Technologies, a supply chain management company; Ebbe Altberg, acting CEO of Keen, an Internet advice site; and Jon Goldstein, a top level sales guy who had been in the trenches at Oracle and Remedy Corp.

Swiss Cheese Whiz

Harding’s class? Help McCurry understand how to find the right people and the holes in his organization that needed to be filled. As with most new CEOs, McCurry had inherited a management team at Grassroots, but he hadn’t been through the Silicon Valley recruiting process before. Hemmeter’s class was more generic. A first-time CEO himself, Hemmeter had come from the food industry into a software company in the same way McCurry had been plucked from the business of politics. Each had raw skills, but Hemmeter had already learned the ropes of general startup management. McCurry’s lessons? How to relate to a board of directors, startup financing, dealing with senior management, setting corporate strategy and communicating with employees.

Drive Through Windows

Altberg, an 11-year vet of Microsoft, was McCurry’s specialist in creating, packaging and shipping product. He was an able instructor in how to relate a customer’s needs to your engineering team. That’s a critical function in any organization, but it was paramount in Grassroots because it meant translating everything that McCurry knew into software code and then into something usable by customers.

Last up was Goldstein with sales strategy, or as McCurry puts it, “How to sell, sell, sell.” It was a primer in the nuts and bolts of the sales process and how to get customers quickly, an area that could make or break Grassroots’ success.

And the verdict on Mike as a student? “Mike just picked it up extraordinarily well,” says Smith, perhaps the dean of all McCurry’s instructors. “It’s not everyone that can do that.”

McCurry’s take on the process? “The key ingredient of all that coaching was the virtue of patience,” he says. “I basically learned: Don’t try and throw the long bomb on the first down.'” The lessons were also a “build-to-last” formula for company creation that is now the mantra for the entire venture capital community. “How to build a company the old-fashioned way,” is how McCurry sums it up. It’s a lesson that contradicted how McCurry might have been coached during the Internet bubble, when younger, more exit-oriented VCs were running the show.

The timing of McCurry’s education was near perfect. His classwork followed a period during 2000 when much of the heavy lifting for turning the company around had already been set in motion by Johnson, Chiu, Smith, and Henkens. “The whole thing might not have worked if Mike had come on board when the new product was finished and already in the marketplace,” Henkens says. It’s an admission that the turnaround time that the company went through shutting down the portal, cutting the burn, writing new code for some as-yet-to-be-defined advocacy software – actually worked to McCurry’s advantage. There was more time for mentoring, more time for coaching, more time for learning before all the chips were on the table. “When he dropped in in late 2000, the software was still in the development stage, there was still $20 million in the bank, and he was able to form his own team and create his own strategy,” Henkens says.

After McCurry absorbed his lessons, he put together his own list of “strategic imperatives.” The list went something like this: Launch Grassroots’ product; secure additional funding; cut costs; and reorganize to be able to scale. If this was to be McCurry’s checklist for turning the company around, it was not solely his show. Even Johnson, Henkens and Smith recognized that despite a crash course in entrepreneurship, McCurry needed an ace operating guy. Says Randy Komisar, Stanford Business School Professor of Entrepreneurship: “I’m not sure just anyone can be a CEO…and even with a steep, steep learning curve, you’d better have a great COO.” What McCurry lacked, Grassroots COO Arvind Rajan seemed to have in ample supply. The startup veteran was previously with WarpSpeed Communications, a broadband technology company, and Solectria, a developer of electric and hybrid transportation technologies.

By December 2001, if McCurry’s one-year freshman sprint was over, he was now running a marathon. With the company’s new product finished, there was still the issue of raising more money, shipping the product, booking revenue and rebuilding the company under a traditional software licensing revenue model. It would take McCurry’s CEO schooling to the next level. Competing in the marketplace would be his last and most important challenge.

Prognosis Positive

Initial signs of the company’s success are promising. Revenue for the first six months since the product began shipping is roughly $2 million and “we will go cash flow positive by early next year,” McCurry says. Customers include Pacific Gas & Electric, Kansas City Family Programs, TechNet, and the Campaign for Tobacco-Free Kids. Says Connie Correll, executive vice-president of TechNet: “They had the best product for advocacy and we’ll probably do more with them in the future.” Good news for Grassroots, where an initial contract is $75,000 to $100,000 but can expand to $200,000 to $400,000 based on additional features and services.

The company isn’t without competition. While portals such as GovWorks.com and Voter.com flamed out before they could raise more money or redo their business models, other companies, such as GetActive Software Inc., have already established a respectable track record in this market.

Active War

GetActive, based in Berkeley, Calif., is a spinout from the non-profit Environmental Defense Fund and boasts 115 paying customers and a revenue run rate for 2002 in the seven figures. CEO Sheeraz Haji says that Grassroots approached him with a merger in mind, but he took a pass because “we felt we were further along than they were and were the clear leader given any stat you looked at.”

Haji’s fightin’ words notwithstanding, Grassroots’ venture capitalists are unwavering in their support for McCurry and Grassroots. “There was never any discussion at the board level, not once, to ever shut this company down,” Johnson says. “But if it weren’t for Mike, we’d all be six feet under.”

To help secure its fate, Grassroots recently raised several million dollars in a series C round from previous investors, and it intends to keep the round open as it seeks other strategic investors to help the company move forward. Raising this money, especially in this market, is yet one more passing grade for McCurry in his on-the-job training as CEO. And it’s one more vote of confidence from his venture capital backers, Silicon Valley mentors and startup coaches. Says Johnson: “I basically told Mike from the beginning he could be one of the great Silicon Valley CEOs. I believed that then and I believe that now.”

Peter D. Henig is a freelance writer who specializes in writing about Silicon Valley startups.

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