MindSpring: Building an Internet Empire on Traditional Values

 

MindSpring CEO Charles Brewer founded his company on a set of core vales and beliefs that have propelled the ISP to lead the industry in customer service and support.

 

When Charles Brewer left his executive-level post at a small software company in 1993, he was determined not to get another job. He had wanted to start a company of his own for more than a decade, and with $150,000 of personal savings, he decided the timing was right. Brewer had no idea what kind of business he wanted to start, but he had strong visions of what kind of organization it would be: one in which employees enjoyed their work and were given real responsibility, and one that treated its customers with respect and always met its commitments.

 

Several business ventures began springing to Brewer's mind, but the idea of applying his philosophy to an Internet-related company was the result of a frustrating user experience in 1993. Brewer says he logged countless hours attempting to connect to the Net for the first time using a primitive text-only shell account with no documentation and unresponsive technical support from an Internet Service Provider (ISP).

 

Brewer immediately recognized the need for a software package that was easy to install and self-configuring, for graphical elements that made the software user-friendly, for a technical support staff that was accessible, friendly and competent, and for a reliable connection. And that's when it hit him: The Internet was the perfect arena for his unique corporate core values and beliefs.

 

"I was very much the prototype customer, which was good because it gave me a lot of intuition about what other customers might care about," explains Brewer, founder and CEO of MindSpring Enterprises, Inc., a leading Atlanta-based ISP.

 

Early Days of an ISP Pioneer

Brewer used the power of the Net to generate interest in his new, easy-to-use, customer-friendly ISP by posting an announcement to an Atlanta-based online user group that called for test customers. That ended up being a smart move, says Brewer, because a lot of the resources he needed to get the service going just magically started appearing. For example, Jeff Russell, a best selling communications software programmer, offered to develop an Internet starter kit for Brewer's fledgling enterprise at no charge. And a local ISP offered to let Brewer co-locate with them in exchange for sharing some of their equipment and connections costs.

 

By the spring of 1994, Brewer started offering his service for free to a group of 20 beta testers, and he hired 20-year old whiz kid Robert Sanders to provide technical support and build the network. MindSpring had officially arrived on the Internet scene, and, based on customer feedback, Sanders concentrated on improving the system. Word quickly spread about the cutting-edge ISP that focused on service and support, and by the end of the summer, MindSpring was ready for paying customers.

 

"It was a modest startup. We had just eight modems that I bought at the store and two 486s," recalls Brewer. "We were running Linux, and we didn't even have a router or a terminal server -- we just borrowed ports from another ISP."

 

There were at least a dozen other providers preceding MindSpring in the Atlanta area, but the humble upstart quickly outgrew the local competition to stake its claim as the region's leading ISP, serving 1,000 customers by the end of 1994. Brewer didn't have any proprietary technology, and the service was far from perfect -- modems tended to freeze up, and it was hard to get good phone service from the basement of a house, where the network hub was located. Brewer believes it was MindSpring's commitment to the customer that carried the ISP through the early challenges of establishing a reliable network.

 

"I think customers had a feeling that we were telling them the truth, which is incredibly important, particularly when things aren't going perfectly all the time," insists Brewer. "Most ISPs didn't tell the truth, for whatever reason, but we did. And we tried to do the right thing for our customers when we could. For example, if we couldn't get any more phone lines in the basement, we'd just stop taking new customers for a while until we had some more capacity."

 

Self-Funding an Internet Startup

Initially, Brewer sought no outside investors, instead choosing to draw from his personal savings to fund the Internet venture. "I only wanted to use my money," explains Brewer, "because I thought, that way, if it didn't work, I could just quit." He says, by his way of thinking, if there was somebody else's money at risk, quitting ceased to be an option.

 

But by September 1994, MindSpring had successfully accomplished the formidable tasks of launching an Internet service and attracting a user base. This gave Brewer the confidence to begin seeking additional capital that would take the company to the next level. His experience working with an investment banking firm, as well as his time as vice president of Sanders & Company, a venture capital firm, made short work of corporate fund raising.

 

"I had met the people at ITC Holding Company and had been hugely impressed with them. I thought if I ever had a venture that was appropriate, they would be ideal investors," explains Brewer. "So they were the one and only investor I ever talked to until we became public, and they very quickly agreed to make an investment, and along we went."

 

ITC has a long and successful record of building and financing telecommunications companies, including SouthernNet and TeleCom USA. In November 1994, ITC invested approximately $765,000 in MindSpring, promoting the company headquarters from Brewer's apartment to a small office at a Georgia Tech incubator. Brewer says by 1995, his crew of eight was ready to build a real company. And so they did. But their fast track to success wasn't without the occasional speed bump.

 

Bumps Along the Internet Superhighway

In 1995, the ISP grew to employ 90 MindSpringers and enjoyed a customer base of more than 12,000. These numbers may not seem dramatic today, but Brewer says reaching that plateau was a major challenge for the young company, and describes 1995 as a constant race to see if they could complete the infrastructure before they outgrew themselves.

 

"A lot of ISPs started on a rapid growth curve like that but hit the wall at some point and didn't win the race -- the growth outran the infrastructure," explains Brewer. "I think something that helped us through was having some sense of what was realistic and what we could really commit to and be able to deliver without it being too much."

 

The customer base grew by another factor of 10 in 1996 for a total of 122,000. But MindSpring's exponential growth and national expansion efforts were achieved against the odds. By the end of the year, the MindSpring team was feeling under appreciated, says Brewer, because everybody in the world seemed to be convinced at that time that the ISP business was a lousy one. "Everybody said no one was ever going to make any money, certainly not anybody that serves those individual subscribers, and certainly not at $19.95 a month," he explains.

 

1996 was also the year that Brewer took MindSpring to the public markets. The stock came in at about $8, went up a bit, but then sank to $5 by the end of the year. Though the IPO raised about $15 million, Brewer says his financing options were bleak by the fourth quarter, and his only option was to prove everybody wrong by showing them that an ISP company could make money.

 

So 1997 was about attaining profitability. Going out on a limb, Brewer announced public goals that included being cash-flow positive by the second quarter and bottom-line positive by the fourth. Quarter by quarter, the company performed on schedule, and Brewer met both his objectives. As well, the company grew from 122,000 customers to 278,000 customers. "The world looked much brighter then, and I think both we and our whole industry, to some extent, had earned a lot more respect than we'd been getting the year before," recalls Brewer.

 

Through all the hoopla surrounding the Internet, MindSpring's growth strategies have been very consistent. The business is built on helping people connect to the Internet and helping them use it effectively. One component of Brewer's growth plan is pursuing customer-base acquisitions. He says these acquisitions allow the company to grow not only in terms of the number of subscribers, but also in the services they can offer, the geographic areas they can cover, and the expertise and knowledge the new employees bring.

 

MindSpring has completed more than 40 acquisitions since its inception. The Spry acquisition in 1998 was the most significant, bringing MindSpring approximately 130,00 new users, 100 Seattle-based employees and access to another nationwide network. Most recently, a February 1999 acquisition of Netcom's subscribers and selected assets brought MindSpring's user count to more than 1 million.

 

Brewer is also exploring new products and services, such as high-speed connections, LAN-On Demand and Web hosting. But perhaps the most important factor in MindSpring's growth strategy is their continued focus on offering the best service and support in the Internet industry.

 

"If customers like us and they're happy, then when new services come out, they are likely to try getting that service from MindSpring rather than somebody else," explains Brewer. "Making customers happy has been the main key, not only to growth, but to profitability. And it sounds simple, but making it come true has proven to be challenging for everybody in the industry."

 

Dealing With the Competition

The ISP industry is now dense with competition, and MindSpring is surrounded by opponents both large and small. However, regardless of size, Brewer's strategy for dealing with the growing number of ISPs remains the same. It's based on his philosophy of treating customers and employees with respect, and it's made MindSpring a fierce opponent.

 

"Our main advantage over these mighty competitors is our company culture," says Brewer. "It comes from having a group of people who are dedicated to living up to our core values and beliefs. This has enabled us to please companies better, and do it more economically. This should be a very enduring advantage, because I think it is extremely difficult for our large-company competitors to imitate."

 

MindSpring continues to set greater customer-service standards in an industry crying out for improved user relations. In 1998, MindSpring won three major awards for those efforts, including PC Computing's "1998 MVP Award as the best national Internet Service Provider," Home Office Computing's "Gold Award for Best Internet Service Provider," and PC World's top honor, the "World Class Award for Best Internet Service Provider."

 

MindSpring employees provide this top-notch service from a relaxed workplace atmosphere where common attire is a T-shirt, jeans and sneakers. All employees are on a first-name basis, even with executives, and are encouraged to personalize their workspace with posters, stuffed animals, action figures, and so on. Then there's "Chow with Chuck," where Brewer participates in a weekly luncheon with MindSpring employees.

 

Of the casual atmosphere, Brewer says: "Part of it is about respect for the individual and part of it is the notion that, fundamentally, nobody here is better than anybody else. Obviously, we have different roles, and some people are in positions of more authority and leadership, but that doesn't mean that they are better, and it doesn't mean they are more important."

 

Employees have played a decided role in the success of MindSpring, a company that depends largely on "grass roots" and "guerrilla marketing." As part of an effort to target the thought leaders in local communities, MindSpring employees often visit computer user groups, business social organizations and computer store employees. The idea is to win the recommendation of a well-connected and respected community member.

 

On the guerrilla side, MindSpring recently grabbed media attention by drawing the company logo, name and phone number on the sidewalk in front of a movie theatre in Phoenix on the opening night of the popular Tom Hanks-Meg Ryan cyber-romance film "You've Got Mail." In addition, the company has a standing offer to repaint any employee's car, as long as the MindSpring logo is painted on the doors. To date, more than 30 employees have taken advantage of this offer, helping to further spread the word about the growing ISP.

 

MindSpring Prepares for the Future of ISPs

Brewer says that while the Internet Service Provider industry barely existed five years ago, today, it forms a small but noticeable part of the overall telecommunications industry. And he predicts that, in the future, it will be the core of the telecommunications industry.

 

Brewer says during the next several years, the Internet Revolution will continue to charge forward, and people will not only use the Internet for more applications, but they'll also connect to it from many new devices. Being on top of the new technologies -- and being there at the right moment to help customers use the new devices -- is the next major challenge for MindSpring.

 

"Probably the biggest piece of uncertainty on that road is making sure that we have enough access to broadband, always-on, last-mile connectivity to our customers' homes because, looking at it from a slightly different angle, what we do is connectivity, service and support," says Brewer. And he says to get the service and support right, you need to be involved in the connectivity.

 

Today, the Internet access market is wide open, but nobody knows for sure how it will change after the transition to high-speed cable and broadband connections. Brewer, however, is paying close attention to cable-access developments, and MindSpring has been very active with these issues, building relationships with both telephone companies (to explore broadband) and with the public policy arena (to help ensure the principle of openness extends to the cable networks).

 

Brewer has a large stake in the ISP industry and is looking to continue increasing MindSpring's market share during this period of transition and beyond. "I think our opportunity is to be one of the very major providers of the core telecom service of the future," says Brewer. "We think of that as our manifest destiny."

 

Company Snapshot:

Name: MindSpring Enterprises, Inc.

URL: www.mindspring.com

Founder: Charles Brewer

Industry: Internet Service Provider

Location: Atlanta

Founded: 1994

Employees: Approx. 1,000

Revenue: $114.6 million (1998)

 

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