It Started Out Simply Enough
I had always been a computer hobbyist. I taught myself html and coded my first website in early 1995, prior to leaving for McGill. The site was for my father's architectural practice. I built the site for him mostly out of my own interest in better understanding web development. That he was quoted thousands of dollars by a design firm to build a site also caught my attention. This was the era of static websites - web design was a simple task. This experience led me to the business I would start in my first year at McGill - DynamicWeb Design.
DynamicWeb was my first "virtual office" venture. Leveraging the great human capital available in Montreal, I assembled a team of contractors to whom I outsourced the website development work. My focus was on client acquisition. Using redirected phone numbers and mailing addresses in both Toronto and Montreal, I created the perception of a company much more sizeable than the actual reality (I worked alone out of my university dorm room!).
Entering the Web Hosting Business
DynamicWeb grew quickly and soon had a blue-chip client roster which included Bank of Montreal, Future Electronics, and a number of other large Canadian businesses. In addition to development services, we provided web hosting to our smaller clients via a reseller relationship with a web host operating out of Baltimore. Their uptime and customer support were terrible and reflected poorly on us. I reasoned that I could not be the only web developer dissatisfied with their web host. As this was not our first experience with a sub-par hosting provider, I made the decision to start my own web hosting company.
Using the DynamicWeb.net brand, the business grew rapidly through word-of-mouth referrals and targeted telesales. In 1996 I partnered with my roommate, Mike Apted, to help me grow the business. We ultimately developed a set of tools that could be accessed via a customer's browser that empowered them to comprehensively manage all aspects of their web hosting environment. This resulted not only in a vastly improved customer experience, but significantly reduced our technical support costs.
Bootstrapping Rapid Growth
We were excited about the growth prospects for the company. I recall predicting we would reach $1 million in sales within 3 years. Naturally, the loan officer at our bank did not share our enthusiasm and would only offer us a fully collateralized line of credit. I used a combination of funds from my previous ventures and a mixture of credit card and student loan debt to finance the growth of DynamicWeb.net. We were bootstrapped from inception.
I ended up in default of most of my personal debt obligations, but this did not concern me as I had no assets to protect (I ultimately repaid these debts, but nearly a decade later I still have a credit score insufficient to qualify for even the smallest dept store credit card!). Within a year of starting DynamicWeb.net we had surpassed our year 3 sales forecast and we were rapidly running out of space for staff in our crowded Montreal apartment. We made the decision to drop out of university and move the company to Toronto. I was 21 at the time.
The Lawsuit That Changed Everything
In late 1997 we opened up offices in Toronto on the third floor of an antiquities dealer. Within a few weeks of moving in we made our first major offline ad buy, purchasing a one page ad in PC Magazine for nearly $25K - a significant ad spend for us at the time. Within days of submitting the creative for the ad, we received notice from a New Jersey based company that operated in a completely different line of business at the dynamicweb.com URL that we were infringing on their trademark.
Their case had no merit, but they had tens of millions in the bank and a small army of lawyers. I didn't. After much deliberation, I decided against wasting my limited resources and time fighting their frivolous lawsuit. We agreed to change our name within a predefined period.
The timing could not have been worse. We were in the midst of rapid growth and had built brand equity in the DynamicWeb.net trade name. This was a significant setback for our company, or so we thought.
A Blessing in Disguise
A theme that will confront any entrepreneur on a near constant basis is battling adversity. We had a limited timeframe to develop a new brand for our company. Little did I know that this lawsuit would end up being the catalyst for an event that would soon elevate our business to the ranks of the world's largest web hosting companies.
I had long been intrigued by the power of category-defining generic domain names to both deliver qualified type-in traffic and serve as a brand for a business. When I was searching for a data center provider who could provide dedicated servers for our retail hosting business, I typed dedicatedserver.com into my browser. We ended up becoming one of the largest customers of the company that owned this URL at the time. If I could find a similarly appropriate domain name for our company, it would go a long way towards smoothening our brand transition.
To our good fortune, the company that owned the webhosting.com domain name was based in Toronto. They had amassed a database of thousands of prospective clients who arrived at the webhosting.com domain via direct navigation [archived site circa 1997]. They had yet to enter the web hosting business but made it abundantly clear they had no intention of selling the domain.
I refused to give up that easily. I had already convinced myself that this would be our brand.
WebHosting.com is Born
After a reluctant courtship, details of which I'll share another time, we convinced them to part with the domain for approximately $30,000 in early 1998. To say that the domain had a transformative effect on our business would be an understatement of the highest order. The day we launched our new retail web hosting brand at WebHosting.com, our sales quadrupled and would continue to grow in the weeks to come as the domain's generic descriptive nature was highly relevant for search engine optimization.
In time I would purchase a matching vanity phone number (888-WEB-HOSTING) to pair with the WebHosting.com brand. Through organic growth and the acquisition of three related companies that provided much needed human resources, our growth skyrocketed.
By 1999, within 15 months of changing our name to WebHosting.com, we had registered over 150,000 domain names for tens of thousands of hosting customers in over 140 countries around the world. We were on track to surpass $10 million in annual sales, handily exceeding my predictions of 2 1/2 years earlier. Our headcount grew to approximately 100 staff and we were moving offices on an annual basis to accommodate our constant expansion.
Maintaining Our Edge
One of the industry trends that concerned me was the increasing commoditization of web hosting. Competitors were quickly duplicating our early technology innovations. Quality customer support, a challenge for any rapidly growing technology business, was less of a differentiator than it once was. We found continued success through highly effective marketing collateral and a significant reseller network that represented over 60% of our sales. This was a good competitive advantage, but I felt we needed to do more to maintain our leadership position.
In my next post, I'll discuss the evolution of our business from a web host for small businesses into an application servicer provider of highly-automated, scalable hosting platform software for carrier class companies.
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