Rough Start-Up Lifestyle Hits Home
For Entrepreneur's Family, Friends
By ERIC BOVIM
Dow Jones Newswires (9-25-00)
BARCELONA, Spain -- Ken Wrede hasn't taken his family on vacation in almost four years and
there are no plans for one anytime soon. His wife hasn't bought any new clothes since January. The kids
drink water during the week and can have Coca-Cola on the weekend. Usually, the refrigerator is almost
But tonight at the five-star Hotel Arts, there are trays of smoked salmon and brie, an open bar
beside the olive trees on the seaside patio where Mr. Wrede has invited nearly 50 friends and business
contacts. He and partner John Grisby waited five months for this, sat out the stormy markets of the spring
and summer and are now ready to showcase their Internet incubator, First World E-Commerce Group SA.
They have only one client; only now are some of their three employees being paid.
For this party, Mr. Wrede hasn't invited any investors: "The point of tonight is to let people know
we are out there," he says. Many guests run fledgling start-ups of their own; some are traders and analysts;
some don't even know what FirstWorld does. Others have clearly had too much to drink. There isn't a
venture capitalist in sight.
"It's not the first company he's started so in a way I am very confident that this company will also
be a success," says Diane Van Blitterswijk, watching Mr. Wrede, her husband, work the crowd. "Of course
it's always easier when there's money coming in, right?"
This is Mr. Wrede's seventh company. The former U.S. Army captain helped to found Versatel
Telecom International NV of the Netherlands but took a leap of faith and came to Spain to pursue the
chance of owning a start-up all to himself. So Mr. Wrede, 41 years old, sold off his equity in Versatel
before it listed. He says he could have been a millionaire.
Instead, he and Mr. Grisby, 35, have poured their savings -- while getting additional funding from
friends and family -- into FirstWorld. As of today they have $100,000 (119,126 euros) -- and slightly less
after the party. Mr. Wrede says he needs $5 million to really get going. They have given up asking Spanish
Messrs. Wrede and Grisby begin their search for the missing financing after tonight, and are
confident they will get their money.
"Incubators are difficult to do," says Mr. Wrede, who are hardly uses the word anymore when
talking about his start-up to investors. "But most aren't focusing on the infrastructure plays."
Incubators are the latest permutations of dot-coms. Like venture-capital firms, they provide seed
funding to start-ups, taking a chunk of equity in the process. But most, such as FirstWorld, often go a step
further and offer office space, management counsel and help fine-tuning a rudimentary business plan.
The dream is to "incubate" an idea and grab some equity, cut the cord and one day watch the thing
soar in an initial public offering, the sweet gusher of the New Economy.
But the market is oversaturated with incubators and the entrepreneurs likely to knock on the door
of small ones like FirstWorld are those who have had business proposals rejected by the bigger venture
firms, says Eamonn Toland, chief operating officer of Andersen Consulting's London Business Launch
"This isn't the greatest time to launch this idea," says Mr. Toland. "It's a valley of broken dreams
out there, and it's sad -- it shouldn't ruin people's lives. For two people to say they're going to offer advice,
... best of luck to them."
The odds are stacked against credible venture investments: Maybe one in 20 pay off, Mr. Toland
says. Confronted with cast-off proposals, FirstWorld's chances of incubating a "gusher" are something like
one in 400.
So far, a few more than 40 business proposals have crossed Mr. Wrede's desk, some solicited,
others finding FirstWorld by word of mouth. One project has come of it; FirstWorld took 30% in equity, in
line with the industry standard of 20% to 40%. The company is also a technology start-up in Barcelona
with still few employees. Mr. Wrede readily admits that the payoff, if the company even lists, won't come
for two years.
Yet the cash drought hasn't deterred Messrs. Wrede and Grisby from paying for the image of
success: They work out of an office on Barcelona's stunning Passeig de Gracia, an avenue of chic
boutiques, touristy Modernista masterpieces and designer tapas bars.
The business plan is equally sexy: incubate vanguard technology in companies that can become
part of the infrastructure of the Internet. If Mr. Wrede had his way, FirstWorld would incubate the next
Cisco Systems Inc. or Intel Corp. of Europe.
Mr. Wrede hopes FirstWorld can attract established U.S. companies looking to make a grand
entrance into Europe. Through previous work in telecoms in the Netherlands and consulting work in the
United Kingdom, Mr. Wrede says his network in those countries can be parlayed into fresh contacts. "I
admit it gets a little thin, but I have the capacity to develop the contacts needed for a project." Mr. Grisby, a
former ski instructor and importer of cleaning materials to Spain, says he has contacts in Italy and Latin
Perhaps the biggest hurdle facing FirstWorld is Spain. While the country is one of Europe's
fastest-growing markets in the New Economy, the corporate culture is still highly conservative. Spain's tech
index, Nuevo Mercado, launched in April but most of the stocks on the index are already listed on the
benchmark IBEX-35 Index. Besides, most U.S. companies seeking to enter Europe come by way of the
But Mr. Wrede defends his decision to set up in Barcelona by quoting a book of Chinese
philosophy, Sun Tzu's "The Art of War": "Go where your enemy is not."
Barcelona's beach, short winters and palm-lined streets were also factors. "It's also about
leverage," Mr. Wrede says. "You can convince clients to come to work in Spain much easier than in
Yet working in Spain has created for Messrs. Wrede and Grisby as much frustration as fun. After
spending months looking for Spanish investors to no avail, the two have concluded that there are
fundamental differences between Spanish and U.S. investors.
"Investors here would rather wait for the perfect investment and put all their money into that,
instead of the American style, which is pump $1 million into 10 and play the odds," Mr. Wrede says.
Mr. Grisby, who admits he has considered leaving Europe behind for a "six-figure" salary in
corporate Manhattan, can sound angry. "In Spain there's no entrepreneurial spirit. Sometimes you'll make
two or three, maybe five phone calls in a day, and you have to wait for people to get back to you. They call
you back four days, maybe a week later. And what do you do in between?" Mr. Grisby goes boxing four
days a week.
Some nights, to relieve the stress, Mr. Wrede sits on the back porch of his house outside the city
and strums his favorite Jimmy Buffett songs on the guitar, "He Went To Paris" and "A Pirate Looks At 40."
Sometimes he throws knives at a practice target in the backyard, or amuses his three children by pulling a
marble from his pocket and pretending to rip his eye out from its socket.
FirstWorld "has created a lot of stress for me. We're not living a high-end lifestyle," Mr. Wrede
says. "We're depending on the war chest and it's been hard on my wife."
As she waits for the windfall of dot-com riches, Ms. Van Blitterswijk bears the burden FirstWorld
has created at home.
"We don't do sports," she says matter-of-factly. "You have to look for sales in the stores. You
don't buy a lot of new clothes for a while so you've got to deal with your old suits and dresses. We do
things like that and [the kids] know it's because nothing is secure yet."
Lately, she's been bugging her husband every so often to abandon the dot-com life and find a nine-
to-five job, Mr. Wrede says. Something secure.
But he isn't giving up. He is going west to the U.S. in mid-November to find investors. San
Francisco is a stop, of course, and Washington, where he will visit his longtime mentor, retired Lt. Gen.
Emmett Paige Jr., president of information technology concern OAO Technology Solutions Inc.
That is the only meeting scheduled so far. Before he leaves, Mr. Wrede wants to set something up
with an investor "who believes in the incubator model."
Mr. Wrede came back from a trip to the Netherlands a few weeks ago, staying at his brother-in-
law's house. He visited venture firm Meseic, Banque Paribas and three private investors. No money. There
was some interest at one of the meetings though: "In this business that's something," he says.
He insists that that something could be what's needed to fire up FirstWorld and give it the
lifeblood to chase down a "gusher."
"I have a nibble," he says, laughing.