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Terry Drayton: Entrepreneur Contraire Founder of HomeGrocer.com and Ramp Technology Group by MIKE O'DONNELL Like most entrepreneurs, Terry Drayton sees the world differently than other people. Unlike most entrepreneurs, however, he doesn’t care for big management teams, big egos, or big money. He cares about making an idea work - one paying customer at a time. Terry Drayton is the Canadian-born entrepreneur best known for co-founding HomeGrocer.com. As one of the fastest retail rollouts in history, HomeGrocer.com epitomized the dotcom go-go years and subsequent bust here in the Northwest. Drayton muses, “We went from zero to $400 million in revenues in 24 months. At the height, we hired 540 people in six weeks. Never a fan of corporate overhead or head office staff as those grew under the Fortune 500 staff he’d hired he kept thinking, “How many groceries do we have to sell to pay for those 600 people and all of this other overhead?” As it turned out, a lot more than was humanly possible at the time. Drayton remains undaunted. “ HomeGrocer.com is still the only standalone Internet grocer to ever operate profitably. We had the right customer value proposition and business model. Plus we really learned how to acquire e-commerce customers. In the end, it all comes down to customer acquisition and renewal.” Drayton is now applying these lessons in several new ventures. His approach just might surprise you, because it is contrary to how many successful entrepreneurs build and release new products and tackle new markets. One such venture is a consulting company called Ramp Technology Group, LLC (www.rampgroup.com), which he runs along with HomeGrocer.com co-founder Ken Deering and CTO Bob Duffy. Part incubator and part venture catalyst, Ramp offers a variety of “customer facing” services. “At RAMP, we re-do e-commerce web sites, we develop self-serve models, we make it easier for our clients to make money and reduce the cost of customer acquisition,” says Drayton. At RAMP, we answer the question, “What do people think it is?” According to Drayton, a company’s paying customers have great insight into what the real value proposition is and what the product does. Often that is something different than what the company thinks it is. When Drayton, Deering, and Vancouverite Mike Donald got the idea of delivering groceries that could be ordered online, they called their venture “GrocerNet.” When they went out and talked to prospective customers and explained what they were going to do, that quickly changed. “People thought GrocerNet was a disease,” says Drayton. “We quickly changed the name to HomeGrocer.com because that’s what people thought it should be called!” RAMP boasts Corbis, Nordstrom, Applied Discovery and Starbucks among its consulting clients. Terry and his team also use RAMP to take a personal and financial interest in promising start-ups. Just when conventional wisdom is telling everyone that the incubator model is dead, RAMP is proving that it is simply being reinvented. To win the backing of RAMP, an entrepreneur needs to be flexible and willing to “retool” their notion of the business and how it makes money. Dean Carlson is one of those entrepreneurs. Carlson approached RAMP to help him develop a web-based project management tool that would leverage the coming release of Microsoft .NET. “Sort of Microsoft Project for Dummies,” says Drayton, “it took Dean three months to convince us that there was a solid business opportunity. He was hot on getting the product built before someone else beat him to it. We kept telling him, don’t worry about the technology, tell us how you intend to acquire customers and why those customers are not only going to keep paying you to use the tool, but help you acquire even more customers.” Dean changed his focus from product development to revenue-model refinement and sales channel development. After a year of beta testing with over 200 customers what started as Outcome Productivity Solutions, Inc. became Teamwork.com, Inc. The name change was classic RAMP strategy: says Drayton, “Outcome was initially focused on achieving positive Outcomes for projects by improving the ad hoc planning process hence the name. When it turned out that customers actually found it more valuable for helping their teams manage simple recurring processes and projects the functionality and name were changed to reflect that. Launched at the end of February 2003, customers pay $25 per month to use the tool, which allows them an unlimited number of guests who have only partial access. It’s designed specifically for simple, recurring projects and processes that don’t require something as sophisticated as Microsoft Project, but are more demanding than what Excel and e-mail can handle. About 100 new customers sign up to use Teamwork.com each week; most of them have participated in a project of an existing Teamwork.com user. “Dean is going to be successful,” adds Drayton, “because he is open to changing his business to what customers want and are willing to pay for. Over the past year he’s fine tuned the value proposition, based on the REAL opportunity and REAL customer feedback ” Not only would many entrepreneurs suffer bruised egos under Drayton’s approach, most would wince at how he prefers to build a company. Despite his HomeGrocer.com experience, you can’t put Drayton in the “get big quick” category. “With RAMP we deliberately look for base hits, not home runs,” says Drayton. “We don’t like fashionable markets with lots of capital chasing few customers or big markets with 20 entrenched competitors, or markets that will eventually attract behemoths. We like calm, targeted business models. We shy away from deals that require tens of millions of dollars to get out the door and years to become profitable. We like new ventures that require an investment of between $1 million and $3 million with a high likelihood of profitability within 18 to 24 months. That means we can raise angel, strategic, or modest venture capital dollars. We don’t like products that can only be sold once, that depend on finding more and more new customers. We like products with an “annuity revenue” component that can be sold over and over to the same customer. We are not big on grand strategy or long product development cycles. We like to put out a straw man to customers and see what happens. You don’t have to be that smart if you are good listeners.” Drayton concedes that it is easy to guess wrong. He prefers to be a mile wide and a foot deep in the beginning. Most entrepreneurs are taught to go deep, in product functionality and in market positioning. RAMP uses a deliberately simple test. “If a customer is willing to pay for it, it’s good. If not, it sucks.” Harking back to his high school football days as a halfback, he says, “We’d practice lots of plays but in a game situation it often didn’t work out the way we planned. But once you are holding the ball you put your head down and look for some daylight to run through. If it worked we’d look at adapting our game plan instead of sticking to a play book that wasn’t working.” This is the approach he used to start and build yet another company, Count Me In Corp. Count Me In provides registration services for both for profit (eg, Nike) and non-profit organizations (eg, Boys & Girls Clubs). “Have you ever tried to register for an event or program online or in person? It’s slow and painful and counter intuitive to the people they are trying to engage,” he laments. “For two years Count Me In has applied a iterative, user-centric design. If people like it, they use it. If they don’t, we refine it or trash it and start over.” How many entrepreneurs would be willing to throwaway the thing they have labored so long and hard to create, and start over with an entirely new product design or market approach? For an entrepreneur who has had a pretty good run of it in the U.S., Drayton remains self-effacing. Having spent 37 years in Canada (grew up in Calgary, eleven years in Toronto, six in BC) and only six years in the U.S., he would admit to having waited too long to take his own advice. Asked why he moved HomeGrocer.com from Vancouver to Seattle, he fires back unabashedly, “Because the local market was too small and we couldn’t raise enough money. Vancouver may be one of the nicest places in the world to live but that doesn’t make it the only place you can launch your business.” Fighting words for Vancouverites, which we will hear more of on May 2nd when Drayton addresses this topic for Northwest Entrepreneur Network members and guests. “I tell my comrades in Vancouver, 'Go wherever you have to go to build you businesses and stop worrying about having to return home with your tail between your legs if it doesn’t work. There’s only one thing you need to stick to and that’s your customer. Stay close to the customer. Get it out and get it profitable as soon as you can. You have so many more options when you are cash positive.'”

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