Building a Technology Launching Pad
What happens when a management consultant and a rocket scientist start a business? For Roland Schumann, MS '97, and Marc Wallace, MS '97, it's a $123-million success.
While earning master's degrees at GW's School of Business, Mr. Schumann and Mr. Wallace began formulating an Internet-based, data-services company. They launched SwapDrive in 1999 and less than 10 years later, one of the world's largest software companies, Symantec Corp., bought it.
"The idea for SwapDrive came from challenges in Marc's job," Mr. Schumann says. "Launching satellites created a lot of data that had to move back and forth. Marc thought it would be great to have a website to upload the data, then people at the other end could download it."
William Money, associate professor of information systems at GW's School of Business, was an informal mentor and candid sounding board. Mr. Schumann and Mr. Wallace also assembled an advisory board of business acquaintances and friends for feedback.
"By early 1999, Professor Money thought we should run with the idea and kicked in the initial funding. Adding in some of our savings, we had enough to quit our jobs and concentrate on SwapDrive," Mr. Schumann said.
"We needed more investment and had a good business plan. We visited venture capital firms, but no one wanted to pony up any money. By late 1999, we had nearly burned through our initial investments and were starting to wonder if the business would survive."
That's when Mr. Schumann turned to the press, giving editors free access to test SwapDrive's product. Then Entrepreneur magazine wrote about SwapDrive in its January 2000 issue.
"It gave us a stamp of legitimacy. After that article, a capital venture firm committed $6 million. That was the springboard we needed," Mr. Schumann adds.
By mid-2000, SwapDrive had a small base of customers, but slower than anticipated growth. They asked their customers what they needed; the recurring answer was file backup.
"We are living proof that even though the business you start looks good, it may not be the business you end up with. In 2001, we changed direction and off-site file backup became SwapDrive's primary product," Mr. Schumann says.
The next year, the pair was looking at competitors who might want to buy SwapDrive. One was on Backup.com. They met with the company only to learn it was looking for a buyer too—for $20 million. After months of negotiation, SwapDrive acquired Backup.com for under $1 million.
"We got their technology, a handful of employees, and a solid customer base with some big customers," Mr. Schumann says. "We went from about 70,000 customers to about 200,000. This moved us into a different league. We had a much more national feel and a pedigree that we didn't have before."
SwapDrive's next growth came from Internet service providers. It began providing a file backup product the ISPs could offer in their name to their customers. Then a market-savvy SwapDrive salesman pitched file backup as an addition to antivirus software.
"Symantec included our service in its Norton 360 antivirus software. This sealed our fate in a good way. Almost overnight, we grew to three million customers with Symantec, and continued growing."
In mid-2007, SwapDrive's world changed. Its venture capital firm was ready to sell the company. The list of potential buyers was long, but few were interested. The list whittled down to SwapDrive's largest customers. Symantec initially didn't want to buy SwapDrive, but when a competitor offered to buy it, Symantec jumped in with a better offer.
After six months—an "emotional roller coaster" Schumann says—Symantec acquired SwapDrive. It paid cash, kept all the employees, and hired Mr. Schumann and Mr. Wallace to continue running SwapDrive. They stayed with the company until July 2010.
"We are more suited for the startup world," Mr. Schumann says. "Planning is already underway for a new technology startup."