The human incubator

Ex-EchoStar exec has created Net businesses and started a VC fund to nurture new Web ventures

By Jeff Smith, Rocky Mountain News (Contact)

Published March 3, 2008 at 12:05 a.m.

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Photo by Javier Manzano © The Rocky

Dave Carlson started AllAboardToys.com in 1999, one of six Web businesses the former EchoStar executive helped incubate.

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Dave Carlson started AllAboardToys.com in 1999, but not primarily to sell toys. Instead, he wanted to demonstrate e-commerce strategies.

"It sounds funny," Carlson acknowledged.

The Web site was valuable. But it also became profitable as an online toy retailer.

Today, AllAboardToys is one of six Internet businesses the 46-year-old former EchoStar executive has helped incubate. Two have been successfully sold, leaving four company- owned businesses.

More recently, Carlson and colleague Frank Watervoort have started a venture capital fund to invest in fledgling Internet-related businesses.

Carlson's Centennial-based eonBusiness Corp. isn't a huge player in the space, but it has carved a nice niche and employs more than 60 people. Because it's privately held, revenues aren't disclosed.

Eon represents an emerging business era in America, in which companies increasingly are tying their future and fortunes to the ever-evolving Internet.

In addition to AllAboardToys, eon owns BuyerGuardian.com, which processes online vehicle transactions; HeritageGiftStore.com, which offers specialty and collectible gifts; and HomePoint.com, which helps people sell their homes without a broker.

The venture capital fund has investment stakes in madKast.com, which helps users share Web content; mobileStorm, an e-mail marketing firm; Mocapay.com, a mobile-phone payment technology company; and socialthing!, a manager of social networking content.

Carlson, an Ohio native who has an international business graduate degree from Thunderbird College in Arizona, earned his stripes working for EchoStar for 12 years.

That included six years in The Netherlands as managing director of the satellite-TV company's European, African and Middle Eastern operations. Watervoort worked for him, overseeing information technology.

Charlie Ergen's EchoStar, recently renamed Dish Network Corp., has long had a reputation for driving employees hard.

"I think I learned in 12 years what most people learn in a career," Carlson said. "It was very intense, very fast-paced. I loved it, but it comes with its own sacrifices, too."

Carlson saw an opportunity to get involved in the Internet boom and decided to leave EchoStar to go out on his own. He founded eon in 1997 as an Internet marketing strategy and Web development company. Carlson soon set his sights on building e-commerce platforms.

Watervoort, who described himself as a business partner and "great friend," said it was an "almost logical next step" for him to join Carlson, which he did in 1999.

AT&T became a large customer. But the dot-com slowdown and especially the Sept. 11, 2001, attacks temporarily brought a grinding halt to business. Carlson had to lay off nearly a dozen employees, more than 20 percent of the staff, and senior management took salary cuts. But the tough times also were a motivator. Carlson said he realized that "necessity is the mother of invention."

Eon used the expertise of the remaining staff to start to build the company's own Internet-related businesses. That included Go Toast, an online marketing technology company that would be acquired by aQuantive Group in 2003. Microsoft bought aQuantive last year.

Watervoort said his strength is on the technology side and described Carlson as having an "almost contagious level of creativity, energy and enthusiasm."

"We certainly complement each other in terms of what is needed to run a successful business, both strategically and operationally," Watervoort said.

AllAboardToys, one of the first ventures, achieved success partly by excelling at same-day shipping, focusing on popular children's characters such as Thomas the Tank Engine and by adding such personal touches as a thank-you card and refrigerator magnet in each shipment.

A few years ago, entrepreneurs started to ask eon to invest in their businesses. The venture capital fund started investing aggressively in 2007 with the goal of doing 12 to 16 investments. Rob Hooke, a lawyer and another former EchoStar executive, is managing the fund. Investments typically average $300,000 to $400,000.

"We didn't realize what a wonderful market niche we were picking," Carlson said.

He noted that large venture capital funds look to invest a minimum of $10 million, while angel investors typically seek to put in less than $100,000.

"There's a gap there."

Many of the investments are related to the phenomenon of social networking on the Internet. Carlson sees the area as continuing to grow.

"To me it's an electronic form of the same thing we always have desired to do," Carlson said. "If you want to play ultimate Frisbee, you try to find the ultimate Frisbee club. . . . If you love golden retrievers, Led Zeppelin and snowboarding, all of a sudden you find there's thousands" of people who feel the same way around the world.

Carlson himself said he uses the Internet primarily to read news, though he is a member of LinkedIn, a professional networking site.

Not all of eon's venture-capital investments have been successful. An online database service that tracked legislative action in Colorado called LegDb shut down early this year.

Carlson said eon had agreed to make an additional investment if LegDb had met certain milestones.

"It's a sad story," Carlson said. "They didn't make it; they didn't meet their milestones. It's a big bummer."

Carlson acknowledges that LegDb disagrees. LegDb founder Scott Yates, in fact, sued eon in Denver District Court, alleging Carlson and Watervoort failed to make a second $200,000 investment even after targets were met.

Others speak favorably of Carlson's involvement.

Johann Moonesinghe, a partner in Boulder-based madKast.com, which is developing technology for sharing news and blog posts, said eon is the company's biggest investor and has been "fantastic" to work with.

"They've been quite generous with their time and advice, and have helped focus and grow madKast," Moonesinghe said by e-mail. "As a good investor, they help us in the areas that we ask for but don't impose themselves on the day-to-day decisions."

Moonesinghe, who is in his mid-20s, said the company also has benefited from Carlson's expertise in e-commerce.

Carlson said he believes eon has good advice to give but tries not to use a sledgehammer. He said it's important to look young entrepreneurs in the eye and ask oneself: "Is this the person who's going to be able to drive the business?"

The fund's Web site proclaims the goal of making a return of 10 times the initial investment within three to five years. But Carlson also is realistic.

"I try to tell people that this is not a business for the meek because you have to be ready to lose money to make money," Carlson said. "You make your investments knowing that several of them unfortunately will probably not make it."

In addition to making money, Carlson said he hopes to leave a legacy. He draws an analogy to the work of his grandfather, who helped build a power line in Pennsylvania.

Carlson calls working with young entrepreneurs "my personal passion."

"I still think of myself as 18 and now realize I'm the guy with a little bit of gray hair on the side," Carlson said. "I get my biggest kicks being able to sit down with somebody and helping them work toward success."

eonBusiness at a glance

* Headquarters: Centennial

* Revenue: Not disclosed

* Employees: More than 60

* Executives: Dave Carlson, CEO and founder; Frank Watervoort, president/chief technology officer; Rob Hooke, venture capital manager

Businesses launched and owned

* AllAboard Toys.com: toy retailer

* Buyer Guardian.com: helps secure online vehicle transactions with services such as title validation, vehicle history search, inspections, escrow

* HeritageGift Store.com: specialty and collectible gifts

* HomePoint.com: helps people sell their home without a broker

Investment stakes through a venture-capital fund

* madKast.com: fledgling Boulder- based business to help consumers share Internet content such as news and blog posts via e-mail, text message, instant message

* mobileStorm: California-based digital marketing company (e-mail, text messages). Clients have included Qantas Airways, MGM Grand and Squaw Valley Ski Resort.

* Mocapay.com: Based in Boulder, technology enables people to pay for things with their cell phones at stores and restaurants. The company lists 200 participating merchants, most of them in Boulder.

* social thing!: Boulder Web application to help people manage their online content (in beta testing)

smithje@RockyMountainNews.com or 303-954-5155

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