Entrepreneur Generates Power for His Bright Idea

Less than two years ago Dan Cwieka, like hundreds, maybe thousands, of Southern Californians, was a man with a good idea for an e-commerce start-up--and no money. He had hope and enthusiasm and no clue how to get the backing he needed to give form to his dream.

Today his Newport Beach company, USAutonews.com (https://www.usautonews.com), is a thriving start-up financed by venture capital, with some 60 employees and revenues of maybe $5 million this year--far less than break-even money, of course, but not bad for a start-up at this point in its existence.

All of this happened, however, not because Cwieka got lucky. It happened because:

* Southern California is now a magnet for venture capital, with more than a dozen and a half venture capital firms seeking opportunity here.

* Cwieka networked to get himself in front of the people he needed to meet.

* He understood that he needed a lot more than cash to get USAutonews.com off the ground.

In plain English, Cwieka learned what he had to do to get the backing he needed, and his story is an object lesson in the mechanics of the new venture capital scene in Southern California--a how-to case study offering valuable lessons for anyone hoping to follow in his footsteps.

“Usually, the entrepreneur works from weakness,” Cwieka says. “You think: Just get me the money and I can do this. But I wasn’t just a guy with a good idea. I worked 12 and 16 hours a day nonstop to make my idea credible,so that when I started showing it to people who could help, they got what I was trying to do.

“I can’t tell you how many garage sales I had. Anything of value I had, I got rid of to buy time--even my ten-speed.”

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USAutonews.com is a Web-based business-to-business portal targeting the auto industry with a focused search engine and database linking auto dealers, parts suppliers and retailers, repair shops, lenders and others in the business. The Web site enables auto dealers, for example, to shop loans for car buyers or to locate suppliers of radar detectors and other after-market accessories for particular customers.

As you might suspect, Cwieka is a car guy from way back. An alumnus of the consumer car-buying service Autobytel.com, Cwieka got the idea for USAutonews.com when he realized that Internet search engines are tools for the generalist, not the specialist. As he puts it, when a car guy searches for wheels, he doesn’t mean Ferris wheels, and when he wants a loan, it’s not for buying a house.

Figuring that the same frustrations bothered other people in the business, Cwieka began cataloging automotive Web sites, in essence building a directory of sites offering everything and anything having to do with cars.

Cwieka showed his directory to friends toward the middle of 1998--and just in time. He was running out of money, and several liked his idea enough to back him with seed-money investments totaling about $40,000. That kept body and soul together and got Cwieka a functioning Web site backed by USAutonews.com’s first Web server.

Cwieka made sure that the companies in his directory knew about the Web site. He sent e-mail packages announcing the appearance of USAutonews.com to nearly 500 big-name companies in the industry; more than 175 responded, among them companies like Bose Electronics, Acura and the manufacturer of Turtle Wax.

Clearly, Cwieka had struck a nerve. Given his experience at Autobytel, he also understood the auto industry, and he sensed that this would give him credibility in seeking venture capital. But it was only the beginning. He had no business plan and no management team--crucial elements in any search for venture capital. He was still just a man with a good idea and no money.

So he networked. His brother introduced him to lawyer Mel Feldman of Irvine, who incorporated Cwieka’s company in September 1998. Feldman, in turn, introduced Cwieka to Dean Jensen and Aaron Michaelson, managing partners of a Newport Beach merchant banking and “venture management” firm called Catalyst Capital. Founded by entrepreneur Robert Zwelling two years ago, Catalyst Capital focuses on emerging growth companies, forming interim management teams and raising outside capital.

Within weeks Cwieka and the Catalyst Capital team put together a business plan and an offering memorandum and raised $350,000 in angel financing. Zwelling became chief executive of the enterprise, Jensen chief operating officer, and Michaelson chief financial officer. Cwieka--who understood that any start-up needs professional management just as much as it needs venture capital--took the title of founder and executive vice president for business development. He also signed an airtight employment contract.

And USAutonews.com was up and running. Zwelling et al followed up the $350,000 round of angel financing with $5 million in venture financing in December. They have a second round of venture financing underway now, with $15 million in sight. To cap things off, they may do a public offering or, in the alternative, hook up with a strategic partner this year.

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What does all this mean to the entrepreneur who wants to duplicate Cwieka’s success? What, in other words, are the lessons in his experience?

For starters, give form to your idea so that when you go looking for financing, you can tell a good story. In Cwieka’s case, this meant putting together a working model of USAutonews.com--the directory and Web site.

In addition, give your potential backers reason to believe that your idea meets a need in the marketplace, as Cwieka did in the flood of e-mail from big-name companies expressing interest in his Web site.

But don’t try to do everything yourself. Cwieka hatched the idea for USAutonews.com, but he understood that coming up with a good idea is only the first step in the process. He needed help in making his idea credible to investors--that is, help in writing a business plan and putting together a solid management team--and he didn’t hesitate to attach himself to people who knew how to get the job done.

Which brings up networking. Cwieka met his attorney, Mel Feldman, through his brother and the people at Catalyst Capital through Mel Feldman--and in this he got lucky: That’s not a whole lot of networking. But luck visits those who prepare.

Last but not least, Cwieka didn’t hog the limelight. He doesn’t hold the title of CEO, and he doesn’t own all the stock in USAutonews.com. If the company prospers, Cwieka will too. So will the people who helped him.

“When you go for venture capital, make sure you talk to people who can give you more than just venture capital,” Cwieka says. “What carries USAutonews.com is not me but other people who thought I had something that could change an industry.

“The speed of the team is the speed of the leader. We had to be out there first. But had I gotten only venture capital, I’d have blown half of it long before I gained enough experience to put this thing together.”

Next Week: Is the not-com business out of luck when it comes to raising outside capital?

Juan Hovey can be reached at (805) 492-7909 or at jhovey@gte.net.