How a Little Software Company in Seattle is Mobilizing E-mail for Everybody (One Person at a Time)

One of the only distinctive characteristics of the headquarters of ViAir, located in Seattle's Queen Anne neighborhood, is a room that features an evidence chute, cinder block walls and a foot-thick vault door. The room houses not the wireless application developer's proprietary software code or other company secrets, but rather a foosball table, a refrigerator and an automatic espresso maker.

“This space used to be the Seattle headquarters for the Drug Enforcement Agency,” said ViAir CEO Bruce Chatterley as he punched in the coordinates for a mocha latté. “This was the evidence room.”

Outside the break room, the offices of the three-year-old ViAir have all the usual trappings of a cost-conscious start-up survivor in this post-apocalyptic era: an unassuming reception area, lots of unoccupied cubicles, a few whiteboards and programmers so absorbed in the glow of their computer monitors that they don't even look up when an outsider enters. Simple, utilitarian surroundings for a company with a simple, utilitarian approach to developing applications for mobilizing e-mail and other personal information.

“We've built carrier-grade wireless data applications infrastructure that allows a carrier to bring a desktop to every wireless device,” Chatterley said. “That's our vision: To bring the personality of your desktop to your wireless device, but in a way that's relevant to the device that's requesting that data, in a way that's relevant to the network you're requesting the data over, and most importantly, in a way that's relevant to a mobile user's scenario.”

That vision may sound very similar to the visions of so many other mobile data hopefuls in various stages of development and enjoying varied levels of success, including Microsoft and Research In Motion, as well as newer entrants like Seven and Wireless Knowledge. But ViAir's combination of talent, technology and strategy helped it raise $25.3 million in venture funding since the company was founded in 2000, along with carrier contracts in three countries and an ever-expanding following of more than 300,000 end users.

But there is one major factor that distinguishes ViAir from a list of apps developers pursuing a market of mobilized enterprise users: ViAir skipped the enterprise step and, rather than embracing IT managers, goes directly to wireless carriers. The company's strategy is based on an unwavering belief that not only will individual customers of wireless carriers drive the mobilization of personal information one by one, but also that they'll tell their friends.

ViAir was founded on a little money, a lot of intelligence and a simple idea. After quickly scaling the ranks of Microsoft — leaving Outlook Express and MSN Mobile, among other accomplishments, as his legacy — Harvard-educated Sung Rhee set off on his own with a new mission. “I wanted to be able to get my e-mail on my wireless device,” Rhee said. “I wanted to be able to get my address book. I wanted to build a company that was fun, open, flat in hierarchy, innovative and very fast-moving. That was it.”

Thanks in part to a venture capital environment that was not yet averse to start-ups in early 2000, Rhee was able to accomplish his goals quickly — particularly the one about being fast-moving. ViAir was founded in February 2000, had the beta version of its WirelessInbox product ready in May 2000, and launched with its first carrier customer (Rogers AT&T Wireless of Canada) in July 2000. Rhee attributed that speed to his own earlier accomplishments and the company's carrier focus.

“I had the credentials to be able to garner a lot of interest from the funding community,” he said. “I had people who believed in me, so I was able to attract good talent. I knew I needed to hire some carrier folks. I hired a couple other founders who are no longer with the company, and down the line I decided to hire Bruce because I felt we had a real chance to mature into a business that would require a more systematic and organized corporate infrastructure.”

For a start-up vying for a customer base of telecom carriers, Chatterley certainly seems a safe leadership bet. After launching his high-tech career at IBM and GE Information Services, Chatterley joined U S West as director of new products and business development for the carrier's small business unit. He then held management positions in multiple divisions of Ameritech, culminating in the position of chief marketing officer for the carrier's consumer wireline business. Chatterley relocated to Seattle to become president of small- and mid-sized markets and e-services for enterprise software developer Concur Technologies, which marked a brief telecom exit but also his entrance into the software realm.

“One of the things that excited me about ViAir was the ability to very rapidly start up, fund, build and execute on the technology,” Chatterley said. “It was very simplistic technology at the time, but it was compelling. Wireless was hot, wireless data was going to be hot at some point, and I couldn't think of an application that was more important than getting access to your personal information.”

Under the management of carrier veterans like Chatterley and Rex Bull, ViAir's executive vice president of product management and marketing and another veteran of Ameritech, ViAir's focus is almost obsessively carrier-centric — not unexpectedly, given that the direction is both a competitive differentiator and a major part of the philosophy that made Rhee's concept a commercial reality.

“We decided early on that the best channel to market wireless data services is the wireless carrier,” Chatterley said. “The penetration early on of wireless data was so small that there was no cost-effective way — using the general Internet model or direct consumer model — to figure out who those people were and target them. The only ones who knew who those people were were the carriers.”

To date, ViAir's theory has been proved out by contracts with all but one wireless carrier in Canada (Rogers, Telus Mobility, Bell Mobility, SaskTel and Manitoba Tel — the exception being Microcell, with which ViAir is in talks), along with AT&T Wireless Services and Nextel Communications in the U.S., and SmartTone in Hong Kong.

ViAir's toughest challenge in addressing carriers was changing their thinking about how personal information could fit into a mobile data offering, both in terms of how the applications are used and how they are sold, Chatterley said.

“When we started selling this concept, every carrier we talked to said they already had a wireless e-mail solution — a unified mailbox solution where if you change your e-mail address, you can aggregate all your e-mail accounts and also deliver it wirelessly,” he said. “The reason we built our business the way we did is because that was a failed model. No one wants to change their e-mail address.”

ViAir also had to convince carriers that it was not in their best interest to sell to enterprise IT managers — that the mobile data market has not yet matured to the point that the IT manager should be involved and, more important, that wireless carriers are still not good at selling into the enterprise.

“Carriers are just not skilled at selling to IT managers,” Chatterley said. “They don't have a history selling sophisticated IT-grade software products to sophisticated IT buyers. We developed this concept of selling directly to the end user within the enterprise. We knew that the key assets the carrier has are the relationship with the individual and an engine that's built for marketing to millions of people.”

The simplicity of ViAir's mobile e-mail application also makes it appealing to the individual user — even if the underlying goal of provoking individual use is to get the concept to catch on across an organization. An individual generally signs up for the service via a carrier's retail outlet, then downloads the software client to a desktop PC, which must be connected to a corporate network. However, ViAir's software allows the user to delegate that connection to up to five people within the enterprise organization — which means five more people learn about the service and potentially download the client.

“We think individuals are the start — they're going to mobilize their own data without having to talk to the IT guy,” Chatterley said. “Once they've done that, there's going to be a viral approach within the enterprise. We're already starting to see that — we can actually mine data to see which companies are adopting this.”

To Chatterley's way of thinking, the requests for proposal ViAir has received from “just about every carrier in the world,” coupled with the fact that competitors with server-based products are now announcing desktop client products similar to ViAir's, proves the market and ViAir's concept. And ViAir sees itself as having a competitive advantage, at least from a timing perspective, because competitors with an enterprise-centric approach also built their solutions for enterprise scale, not for carrier scale — which means that even if they can deliver a desktop client they can't put the backend infrastructure in the carrier network, Chatterley said.

Wireless carriers, being ViAir's principal focus and the source of its strategic differentiation, are perhaps the best judges of the company's technology and performance. Last June, AT&T Wireless Services launched a service called Office Online that is powered by ViAir's WirelessInbox platform. The carrier priced the option at $2.99 per month and markets it to customers on its GPRS network as a way to get access to Microsoft Outlook or Lotus Notes e-mail, calendar and contact information, and POP3 Internet mailboxes using any Web- or browser-enabled device.

Following a request for proposal, AT&T Wireless narrowed its personal information manager options to Seven and ViAir, ultimately choosing ViAir “because they were more responsive — and still are,” said Chris Handley, a product manager for the carrier. “There have been growing pains, though. We really made them look at reliability and compatibility.”

Most important to AT&T Wireless was ease of use, Handley said, because of the sales approach and because the application uses airtime, which drives revenue. “It's a long reach to expect the average sales person to be able to sell this effectively to the average person on the street, which makes usability critical,” Handley said. “We're relying on people using it.”

ViAir's Bull agreed that the retail distribution model makes the usability of the ViAir product paramount, especially in light of the ongoing downsizing that's occurring within carrier organizations.

“One of the biggest challenges we face in dealing with the carriers is their own bandwidth — getting them to focus on our application when they have scarce internal resources and are really tapped,” Bull said.

As for ease of use, Bull said ViAir is always looking at ways to make the product more user-friendly. “There are always opportunities to continue to streamline,” he said.

ViAir's viral approach of getting individual customers interested in the application first and relying on their usage — and the usage of the people in their organization to whom they delegate their connection — to spread the word throughout an organization and beyond fits well with AT&T's retail channel focus, Handley said. “The largest enterprise accounts are the most lucrative, but we realize we're not always going to be able to get those,” Handley said. “There's a much broader group of users we also want to be able to sell to.”

As far as product evolution is concerned, ViAir concentrates on its shortcomings — those it identifies itself, and those that wireless carrier customers (and those still on the fence) push back on ViAir to improve upon. The next step for ViAir is the introduction of what it calls a workgroup server, which the company expects to introduce in the second quarter of this year. The server would allow one person in an organization to run it in the background on a dedicated machine and provide access for up to 25 users.

“The next evolution, once you have a concentration of users within an enterprise, is to go to the vice president of sales, for example, and show him how he can mobilize his workgroup,” Chatterley said. “We think the market's going to evolve from individual to workgroup, and then ultimately to an IT-grade server solution, but we think it's 24 months until that market really becomes material.”

ViAir's solution also lacks synchronization or offline capabilities (compared with solutions like RIM's), which Chatterley expects to announce in April. “Today it's all real-time through a browser, and you don't have the ability to store stuff offline,” he said. Chatterley estimated that when both the workgroup server and synchronization are available, enterprise organizations would be able to offer a solution using the ViAir platform for 20% of the cost of providing BlackBerry devices to the same number of employees.

In addition to those upgrades to the product, ViAir's principals expect the coming months to bring more carrier contracts, particularly outside the U.S.

“We see Asia as a very big market for us, and Europe will follow Asia” Bull said. “In the first quarter of this year we expect a major operator in Europe to open that market for us as well.”

ViAir also recently announced a co-marketing deal under which Microsoft will make WirelessInbox available on PocketPCs and Smartphones — another milestone in the proliferation of ViAir's platform. “For ViAir to potentially be the redirector for Microsoft and the download from MSN Mobile would be very powerful,” Bull said.

As for the issue of curtailed capital expenditures from wireless service providers, Chatterley acknowledged that sales cycles are longer and budget pressure is a constant issue, but he pointed to money already spent on network upgrades and ViAir's offering as one way to fill the next-generation pipes.

“The problem is that carriers have spent billions on upgrades and have nothing to sell,” he said. “That creates a significant opportunity for us: Where there's money left over, they have to spend it on applications. No longer can a carrier say to wireless, ‘I did this big next-generation network investment for spectrum management.’”

Indeed, with more wireless carriers opting for ViAir's solution and selling service to their customers, carrier spending may be less of an issue for the likes of ViAir than it is for network infrastructure vendors. Whether the overall economic situation throughout the telecom sector could affect ViAir's viability, both in terms of future funding and competitive viability, is another matter — one that founder Rhee suggests eventually could be addressed by strategic means.

“In the space that we occupy, even though we do have traction, there are a lot of competitors,” Rhee said. “I think the logical thing for us is probably to partner up with someone that can give us more runway, more credibility, and help us become the biggest force in the marketplace.”

Microsoft Ascension, E-mail from Grandma and the Commercial Conundrums of Fatherhood: How ViAir Became a Company

Sung Rhee, ViAir founder and chairman
(As told to Jason Meyers)

I was a math major in college. Computer science was my backup when I found out I wasn't that good in math, or at least not as good as I needed to be to be really successful. There was no way I could compete with the pimple-faced, 16-year-old prodigies whose brains were wired in a way I couldn't understand. I was not in the same league with those geniuses. I did go to a college that was pretty competitive. I went to Harvard.

Right out of college I spent nine years at Microsoft. I started out as a developer doing handwriting and voice recognition. Eventually I moved up the ranks. I try not to stay on one project too long. After three years I grabbed three other guys and we pitched an idea to the executives. We said, ‘What this world needs, and what Microsoft needs, is a much more consumer-friendly e-mail application for doing simple messaging.’ That was in '95, when the Internet was starting to be what it is. Net-based communication was starting to take off. My motto was always that I wanted my grandma to be able to e-mail me.

Microsoft already had two other enterprise-scale e-mail applications, so people were hesitant. I kept explaining to them that they weren't solving real problems. I pitched the idea to Brad Silverberg, who's now the head of [venture capital firm] Ignition. Back then he was the head of all the Internet strategy at Microsoft. He was the guy who set out to go kill Netscape and help Microsoft take over the Internet. With his support I started this skunk works project. Three years later, we shipped the first version of what is now known as Outlook Express.

Three years later it was time to start another project. My idea was pretty straightforward: I wanted to be able to get my e-mail wirelessly. I moved over to Windows CE on a business development project. Wireless was going to be big, and Microsoft needed to get up to speed. So I cut a deal with Qualcomm to create a joint venture, Wireless Knowledge, with the idea of giving enterprises wireless access to enterprise data.

After that I pitched an idea to [Microsoft CEO Steve] Ballmer that again, from my perspective, was pretty straightforward: take all of MSN and bring it to wireless devices. Nobody in Microsoft was thinking about it. So I pitched an idea, again with one other guy, and started MSN Mobile.

I did that for two or three years, and then I had my life-changing event: I had my first son. So I took six months off, and decided after that that I didn't want to work at Microsoft anymore. I wanted to see if I could do it on my own. As good of a company as it is, Microsoft is big, and there are issues I didn't feel like I wanted to deal with anymore.

It was a lot of intuitive and instinctive decision making, as opposed to a well thought-out methodical thing. But all of the other projects I've done were sort of in a similar way. Whatever is going on in my brain that says that's the right thing to do, I go after it. I can't explain how I come to that conclusion. Maybe when neuroscientists have figured out how your brain works, they'll know. But I'm a big believer in intuitive and instinctive thinking. You can't explain how your brain works.

I recognized that software was going to be a primary differentiator over the long run — not the network infrastructure, not the devices. If you mirror the wireless ecosystem to the PC ecosystem, the fundamental similarity is that software can make things happen much more quickly and increase the pace of innovation. So software was my bet.

The second bet I made was the carrier as the channel. It's probably one of those things I wouldn't have understood if I didn't know how Microsoft worked as a business. The logic was pretty straightforward: As compelling as this was, it would take a long time to get adopted in the enterprise. The return on investment for enterprises just wasn't there, and the cost associated with going over an enterprise channel was prohibitively high. A lot of people were going down that path, but I had that view that simple economics would prevail. This had to be done on a large scale, and carriers ultimately were the gatekeepers.

I raised my first round in two days. It was me and three other guys showing our résumés and saying here's who we are, here's what we're going to do, we believe we can be successful, please give us seven million dollars. It literally took two days to close. Those were the wonderful times. The second round was during the nuclear winter and was very different.

In retrospect, I think it would have been better if it were harder. It was almost too easy, and it set the wrong kind of mindset for the company and some of the management. We formed the company at the apex of the market, and from that point on we were trying to fight the downward pressure of the market. It doesn't help you in terms of your psyche, the morale and all that.

I was cleaning up my PC recently and looking at my old presentation — the investor pitch that I used for the founding of ViAir. It was a 10-page slide presentation, including the cover page. No background colors — it was just black and white, Times Roman text, very simple, very bland. But the things that we had talked about building are very close to what we have today.

That's not to say we didn't change. The culture and processes and organizational structure have changed a lot. That really stems from the fundamental decision about targeting the carrier market, as opposed to having a Web site that you try to draw consumers to.

The insight, the principles, the values, the strategies — a lot of that came from when I was feeding my son at two o'clock in the morning, having a lot of time to think about these things. It makes you become much more philosophical. I don't know if I would have started this company had I not had Alex. It was just kind of sequence of events: I had my son, and I had time to reflect on my time at Microsoft. I had that time to really think about what it was that I wanted. It felt like the right thing to do.

Looking back, having spent three years on it, I've learned so much. It is unbelievable how different life is outside Microsoft. You can't explain to somebody what it means to be a dad. It's one of those life experiences you just have to do. It's kind of the same thing here. I've always considered ViAir to be my second baby. Now it's my third, because now I also have a daughter.

For related sidebars to this story, please read IM Impressed, Taxicab Confessions, Weather Unwired and < href="http://www.industryclick.com/microsites/Newsarticle.asp?newsarticleid=2672327&srid=11393&instanceid=31355&pageid=5980&magazineid=9&siteid=3">True Hollywood Story.