Not everyone should lead traditionally. Joining can be just as fun and lucrative, especially when it comes to startups.
At least that’s the takeaway from Internet pioneer and entrepreneur David S. Rose, a native New Yorker who’s personal rolodex includes Shark Tank’s Barbara Corcoran—who stopped him to say “hi” and remind him of her name—right after our interview.
In a continuation of Grit Daily’s in-depth and personal coverage of people of creativity and interest we caught up with David for a full take on his journey and insights on why—in a culture presumptive that being first is always best—joining might not be a bad idea after all.
On with the unconventional wisdom.
Grit Daily: We’re here with David S. Rose. That’s David Semel Rose. He has a fascinating backstory.
He is the founder and CEO of startup-funding platform, Gust, and the founder and current Chairman Emeritus of New York Angels.
David, one thing people haven’t touched on extensively is your entrepreneurial history.
Let’s go way back.
David S. Rose: Twelve years old. I started my first company when I was twelve.
Grit Daily: Perfect. Tell us about that.
DR: Rose Productions, a multimedia organization. My brother was a magician who did birthday parties and magic shows for kids in school.
Grit Daily: He was older?
DR: Younger actually. A couple of years younger.
And so, when I was twelve, the Rose Productions marketing department helped him to understand that every good performer requires marketing collateral: headshots, business cards, posters, programs for his shows, and so forth.
I was thus engaged by my first revenue-producing client. It was a very good symbiotic relationship until—after about a year—my one client realized that the sum total of his revenue was equal to the sum total of my revenues. I lost my client at that point but still had my business cards and so the company was still in operation. We did some freelance design work here and there all the way through high school.
Back in the old days, high schools used to be strictly back-to-back classes, but my school was just introducing flexible schedules and free periods. Some kids would wander around and get in trouble, which led me to help the school administration understand that it would be a good idea to give these kids something to do instead of running around the halls. So with their support I created a daily film series.
I convinced the school to give me the part-time services of a janitor and a spare room, where I showed some of the free industrial films that you could order from a catalog.
Grit Daily: Did that generate revenue?
DSR: No. That was pro bono!
I took biology as a subject and soon realized that I wasn’t very good at it. I also knew that a really classy cover could give me an extra half point on my biology paper so I ramped up my graphic design activities.
Then I got to college and when I walked in the door on the first day—this was back in ancient history when there were actual fireplaces in our college dorm rooms—I realized there was no firewood. So I decided to buy a truck load at wholesale and sell it to the freshmen at retail.
I was still doing graphic design work on the side at this stage. Rose Productions was now doing freelance graphics and I realized that my undergraduate college had a print shop. The guys who were in charge at the time were upperclassman and they were running a commercial business in competition with what was the local equivalent of Kinkos back then.
They didn’t want to let anyone else in on their little racket. So my interest was sort of unrequited. Those upperclassmen graduated the next year, and since I was the only one interested in the press, I was put in charge.
So here was an entire print shop and that’s when I fell in love with printing. I took over as Chief Printer of the Pierson College Press at Yale and taught myself how to print. These were big printing presses—old fashioned, handset, letterpress printing. I started teaching printers courses, and at one point I had 75 apprentices while simultaneously running five classes. I even got Yale to offer for-credit seminars in the Art of the Book and letterpress printing.
At the same time there was this thing called Bladderball, a tradition that has since been lost to
history as a legendary event. Every Fall someone would put out this giant inflatable canvas ball and drop it in the middle of campus. Teams would try and get the ball back to their respective colleges.
Over time it developed so that everybody entered teams—from the college newspaper and radio station, to all the residential colleges, the football team…even the debate team.
The event took place on a weekend so everybody would start drinking screwdrivers and Bloody Marys at six o’clock in the morning. By the time this ball was released at ten o’clock in the morning, you basically had 3,000 completely drunk students all trying to push one giant ball in sixteen different directions. Of course, nobody in history ever managed to finally get the ball back to their base, because you had 3,000 other people pushing against you. Frankly, it’s not a surprise that the event was eventually banned.
This gave me an idea. I thought we should charter a helicopter to come down and pick up the ball from the air! So I founded BALL (the Pierson Bladderball Attack and Lifting League), started selling shares of stock to my classmates, and thus raised enough money to charter a helicopter. At that point I belatedly realized that it might be somewhat dangerous to have a helicopter attached to a ball that 3,000 drunken students were all fighting for, so I had to revise the plan.
Because I had the power of press (literally) behind me, I printed out thousands of propaganda leaflets and together with the Master of the College flew over the event in the helicopter and dropped all these leaflets saying “Surrender! Pierson has won Bladderball!”
Of course, as a journalist, you know that nothing actually happens unless it is recorded by the press. Fortunately I had the idea of bringing along a movie camera in the chopper, so I filmed the entire event from the air and turned in the footage to Channel 8 news as a stringer, with an accompanying script noting that Pierson had indeed won the game.
Grit Daily: From my lens — from the 30,000 foot view — you seem more of a creative type given this background. You were in film and you were working with magicians.
DSR: Right but I was essentially an entrepreneur.
I’m actually a fifth-generation entrepreneur. My great-great-great-great-great grandfather left Poland when the religious stuff got a little too touchy-feely and ended going to Corfu to grow etrogs (a type of large lemon).
When the Jews got expelled from Corfu [editor note: a Greek island in the Ionian Sea] he ended up going to Palestine where he became a player in the citrus industry. Eventually he decided that there were more opportunities in the US so he sent his kids to America.
My grandfather and great uncle grew up in the Lower East Side of New York, initially starting a clothing company called Brooklyn Better Bleach. They later founded a construction company in 1928. Eventually that grew to become one of the largest real estate development firms on the East Coast.
When I say I’m a multi-generational entrepreneur—to jump ahead a little bit—in 1997 during the dot-com boom I was a finalist for the Ernst & Young Entrepreneur of the Year award here in New York. My father won it in 2003!
Grit Daily: He leapfrogged you.
DSR: Yes indeed!
Anyway, back to the story. When I graduated from college, all my friends knew what they were going to do. Some were going into the corporate training program at large retail stores, others were going to become heart surgeons, lawyers or professors.
As for myself, I was an opportunistic entrepreneur and had no idea as to what I was going to do. I was torn between going to work for Disney as an Imagineer (I said on my application that I wanted to help design rides at Disney World, which I thought would be very cool) or getting a Master’s degree in typography.
As I was debating between those two paths I got a call out of the blue from US Senator Daniel Patrick Moynihan, for whom I had done some volunteer work. I had majored in Urban Planning at Yale, and the Senator offered me a job as his Special Assistant for Urban Affairs. So my first job out of college was in government, working for Pat Moynihan.
That was an enormous amount of fun: here I was at the age of 21 writing Op Eds for The New York Times and sitting on boards of directors with the mayor, conducting congressional investigations and writing speeches for the senator—I was having more fun than you could imagine.
Grit Daily: A great opportunity at that age.
DSR: Unbelievable. I believe that everybody should do a stint in government service for all kinds of reasons.
In any event, it was wonderful. Moynihan was an extraordinary person. After a couple of years I was having so much fun, I thought I might get stuck in politics, but really at heart I was an entrepreneur and I wanted to be in the private sector.
To me, government is merely a reflection of what is happening with the population but the
private sector is the engine that drives it forward. I wanted to be part of the engine and not guiding at edges only.
Grit Daily: Interesting viewpoint. I haven’t heard that before.
DSR: So I left Moynihan and went into the private sector. I went back to Columbia, got an MBA in real estate finance before joining the family business, which was in real estate.
Grit Daily: Was that at the urging of your award-winning father?
DSR: No. That was me. I decided that I really wanted to get into the private sector. I had an amazing role model and mentor in my father. My father was (and is!) one of the legendary real estate developers in the United States. He did Pentagon City in Washington and One Financial Center in Boston. At that point our firm was the largest developer of condominiums in New York.
I was succeeded at Moynihan by my brother the magician..who later became the youngest chairman of the New York City Planning Commission.
I’m actually the underachiever in my family.
Grit Daily: Sounds like it.
DSR: So there I was in real estate development and construction, which started my whole real estate technology career. It sounds ludicrous to say, but I’m actually one of the fathers of the PropTech industry [technology applied to the real estate field, -ed].
I got my first Apple II in 1979, before Steve Wozniak had even invented the disk drive controller software, so my first Apple used a cassette tape recorder to store its programs on, wayyy before there were disk drives.
We also used computers in the days of Moynihan so I brought that knowledge with me into real estate. Our company was one of the first real estate development firms to use spreadsheets (Visicalc!) for real estate funding pro formas. Along the way I created the world’s first computerized real estate sales office, for which I got a full page in InfoWorld in 1984. (I programmed that on my honeymoon, as a matter of fact.)
I later created the first computerized punch-list system for construction sites. We did the first location-based social area network. I did the first multiple listing platform for real estate in New York.
All of this stuff early on has continued, and I now serve on the Technology Committee of the Real Estate Board of New York and am Chairman of its Real Property Database Sub-Committee.
During this time I was very active online. There wasn’t Internet back then but there were some early online services like The Source and CompuServe. I was a SysOp (System Operator/Moderator) on the Apple forums on CompuServe and when the Mac came out in 1984 I became a moderator on the Mac forum.
I was very active in that community in the early years, and by 1986 there was enough of critical mass of people who actually owned Macs that a trade show bloomed…and that’s how the Macworld trade show started.
When I went to my first Macworld trade show there were big booths from Adobe, Apple and other major companies, but around the edges there were booths for what are now known as “start-ups”; all these companies doing cool, innovative software and services. It turned out I actually knew most of them because these were the guys who were online as early users in the community.
Then I realized that all those exhibitors got to attend the good expo parties—the exhibitor parties—but I was just an attendee, so I wasn’t invited.
The next year, in 1988, I said, “OK, I’ve got to be an exhibitor this year.” So I got a booth as an exhibitor.
Grit Daily: What was it that you would exhibit?
DSR: Aha! You’re thinking like a journalist, not like an entrepreneur. An entrepreneur would say, “Ok, I want to go to the party so I’ve got to get a booth. And now that I have a booth, what am I going to put in it?”
In a catalog of remaindered electronic equipment I saw a digital watch that Seiko had
developed that had a serial port, a little two-line display and 2K of RAM. Apparently in 1987 nobody was interested in buying a computerized watch.
My plan was to do a version that synced with an Apple Macintosh computer because (a) that’s what I had, and (b) the original software for the watch worked only with a PC. I called it the WristMac. (That was back in the day when people (including both me and Apple) didn’t worry too much about trademarks.)
So the WristMac was a digital watch. You could plug it into your Mac and upload, download display data from your computer into your watch, 28 years before the Apple Watch.
The first guy who came over to the booth at MacWorld and bought one was Bill Atkinson, who had written much of the Mac operating system. The second guy who bought one was an entrepreneur named Fred Smith who had started a small delivery company called Federal Express. With that kind of launch I figured there was actually a potential business, so I went back to Seiko to acquire some more of these watches, and ended up buying the remaining inventory for pennies on the dollar.
They sent a whole container full of these back to me in New York. Meanwhile, I’m still in real estate, developing buildings as my day job and doing software on the side. I get all these watches in, and began creating fancier packaging and better software for the Wrist Mac. It was getting a lot of press, going into all the computer catalogs and it was very cool.
In the early online days there were a manageable number of connected people, not the billions there are today. I wouldn’t say I knew everybody on the Internet (although my friend Nicholas Negroponte can and does make that claim!) but I did know a whole lot of people in the early stage world because they were all in these online communities in which I was participating.
So I got my team together again and we did a fancier version of the WristMac because now I had multiple colors and styles.
Grit Daily: What ultimately distinguished their inability to sell it versus yours?
DSR: Seiko’s version was for PC only. They had developed a lot of portable technology back then that was way ahead of its time. Nobody was mobile. Nobody had computers. Who had computers in 1988? Nobody right?
I ported the watch to the Mac—today, everybody’s got a Mac—but back then nobody had one. Macintosh had a tiny market share compared to PC and it was mostly for creative, “nerdy” types. I knew that whole world; I was part of it. So we positioned it as a Mac accessory. `
The pick-up team I had pulled together included Richard Reich, who had written the HP 12c calculator program for the Mac, who wrote an API for the watch so now you could have your accounts from QuickBooks loaded into your watch and you could have your calendar program load your diary in there.
Soon I got a call from NASA saying, “Hey, we’re taking a Mac Portable along on the Space Shuttle as a test. One of the problems that we’re having is that the astronauts cannot hear the annunciators in the craft because of all the ambient noise. Do you think you could do a version of the WristMac for the astronauts to wear on the Shuttle?”
Say what?! Of course, I said “yes!”
And so the WristMac actually flew on Shuttle mission STS 43. Luckily I hadn’t yet started selling the silver version of the watch. So now we had The Space Shuttle watch, which was our silver version.
During all of this time I’m still building buildings and I’m doing the computer stuff on the side. And that was the start of my fledgling tech career.
By then some time had passed and Moore’s Law led to faster and more powerful hardware. I wondered what my next version of the WristMac was going to be, so I called Seiko and asked them to build me a custom version that had more RAM. To which they responded “Sure. The tooling costs for that will be $2 million”. I thought to myself, “Right, that’s not going to work.”
But then, while thinking about my next version, I found out that Motorola had just introduced a wrist watch pager. I thought “great, we can do a wireless WristMac!” So we figured out how to get into the paging dispatch systems with the computer connection that the paging companies used, and Richard came up with some software that allowed you to send a message from your computer into the system. Then I realized that the wrist watch-pager was actually the size of a saucer and nobody was going to wear that thing. Besides numeric pagers just displayed numbers, not text, which made them pretty useless for our purpose.
But not long after, Motorola introduced the first text pager. And we had software that would let you send a message from your computer to a pager.
So I got my little team back together and we did software that was way advanced for this world because that was right when Apple and IBM had both introduced inter-application communication. For the very first time, one program could talk to another program behind the scenes.
We thought, “Cool, we’ll take our watch software, use our paging software as a back-end server, and now any program could now make use of the wireless link to this wearable device”. I went back to all the developers who had written interfaces to the previous version of the watch and I said, “Hey, I’m going to let you make your program wireless and mobile!”, way before anyone was talking about wireless or mobile.
For example, your compiler could send an alarm when it finished a long compile, or your calendar program could send you alerts and updates and so forth. We introduced our software for paging and called it “Notify!”.
Grit Daily: All this time you’re still in real estate?
DSR: Still in real estate. At that time I was actually building a building in Park Slope, Brooklyn, for which I was the construction super as well as the developer.
Grit Daily: And that means you’re on site.
DSR: Yes, it was a gorgeous little building and I was on site 12-14 hours a day.
Meanwhile, I figured that now that I was in the paging industry, there must be a paging industry group or something that I could join to meet people. It turned out that there was, and it was called Telcator, the trade industry association for the paging industry based in Washington, DC. So I joined that as an associate member and I immediately get a call from them saying, “Welcome to Telcator. You’re a technical guy, so we’re putting you on the Technical Committee.” I was surprised but I said, “Ok, I guess I’m on the Technical Committee.”
At this time, Motorola was dominating the pager device market and they had just released a data version of their pager. For the first time you could send not just beeps and numbers but data to a device that would connect to a portable computer. The only problem was—at the time—that there was no protocol to get eight bit data to this pager. Which is how I became the editor of the paging industry’s technology protocols for eight bit data, and for connecting pagers to the Internet!
By then I had to hire more people to help me develop and market the products and I was paying them out of my own pocket. This was during the time when the property market had been on a bit of a vacation and I couldn’t really afford to pay people a lot so I offered prospective employees free apartments.
I said, “Come work for me and stay for free.”
Grit Daily: Wow. That extreme of a market.
DSR: I couldn’t get anyone to buy apartments, so as long as the market was soft, I gave my employees free rent and moved my business into the building.
Soon afterwards I received a call from a gentleman named David Coursey, who said, “There’s a new conference that’s starting out, called Demo. We pick the best new products of the year and demonstrate them out in Silicon Valley to major press, corporates and so forth. We saw your product, Notify!, and we think it’s one of the best products of the year. Would you like to come out to Demo and show it off?”
Grit Daily: You’d never been to the West Coast at that point?
DSR: I’d been to the West Coast but Silicon Valley wasn’t on my radar. It wasn’t a “thing” back then.
So I went out to California to the Demo conference to present our product. People would come over to our booth and look at demos of our paging software. People like Ray Rothrock (Venrock), John Door (Kleiner Perkins) and Esther Dyson (PC Forum). They said, “Hmm… interesting communication software here. So how much are you looking for?”. To which I replied, “How much what am I looking for?”
They looked at me with confused expressions and answered, “How much money are you looking to raise?”, which is when I first realized that there is this world in which people would actually invest in your company.
Grit Daily: You’re like Mister Serendipity out there. Clueless.
DSR: Totally, an opportunist.
I said, “I’ll get back to you on that.” I came back to New York where I talked to my father—who to this day remains my mentor and primary role model—asking advice on how much money to ask for. Now, he is about the least technical person in the world but he referred me to our family friend Alan Patricof, who, unbeknownst to me was CEO of the second largest venture fund in the world. I went to see Alan and showed him what we’re doing and he said, “Oh, this is a very interesting thing you’ve got here. You know, our firm only does large investments, but I do something called ‘angel investing’ and I’m willing to invest $75,000 in your company.”
When I brought that back to my father, he said “Ok, that sounds great, but why don’t you get a second opinion from another friend of ours, Lionel, who does that kind of stuff also?” So I went to see Lionel, who turned out to be Lionel Pincus, the CEO of Warburg Pincus, the largest venture fund at that time.
To make a long story short, I ended up being probably the only person to ever raise venture capital without realizing I was raising venture capital. Warburg Pincus did my Series A without me being aware that I was raising money in the first place.
Soon, along came the Atlanta Olympics and Bell South—a major telecom company based in Atlanta that owned the second largest pager company in the country—was a sponsor of the Olympics and decided to do a major technology showpiece project for the event.
I proposed that we connect all the journalists’ computers wirelessly with the Olympics press room and share results directly to their computers without them having to go to the press room. So they gave us a major contract to develop the ultimate Wireless Press Room for the Olympics. But before the Olympics started, Bell South sold the paging company and the new owners didn’t want to pony up more cash to be an Olympic sponsor. They had just spent a million bucks on us to develop the software and now had no use for it. I therefore asked if we could have it and they said “sure!”.
Meanwhile, time is passing, we’re now in the mid 90’s and the Internet is rearing its head. All of our software was dial-up and we knew that since dial-up was becoming obsolete we were going to be destroyed by the Internet. We thought, “Hmm…can we do something to connect the Internet to wireless devices?” We figured out how to do that and we ended up creating all the software for all the major wireless carriers for mobile phones. Nextel’s devices came with our software to send messages.
That led us to create a specialized data pager for desktop computers, connecting through the serial port, that could pull data out of the air using the paging network. We filed some patents on that and started developing software that we showed people under NDA and generated a great deal of interest. We ended up doing deals and technology licenses with Hewlett-Packard, Compaq, NEC, Phillips, Global Village and other major firms. More money came flowing in. More venture capital. Multiple rounds of VC.
Grit Daily: Lionel Pincus is very happy at this point?
DSR: No. Early on they were happy, but along the way when we pivoted a bit (and before the Internet stuff took off) they weren’t quite sure where we were going. So with our approval they amicably sold their position to another venture fund that wanted to take a little more risk. By that time I had CitiBank involved, I had Symantec, I had SK from Korea and all kinds of other interesting folks.
In 1997 we came out with our new product, called the NewsCatcher, which operated as a receiver for the AirMedia Live Internet Broadcast Network. The NewsCatcher was a black, pyramid-shaped device that plugged into your computer and was always listening to news coming in over the air. AirMedia Live was the first wireless Internet broadcast network because we plugged back-end servers into all the then-existing news sources, which gave us a feed of hundreds and hundreds of Internet sources—basically every news site that was available. We had Seth Godin’s Yoyodyne, CompuServe for email, Reuters news, major league sports scores, and much more. You could plug this device into your computer and subscribe to any channel…wirelessly.
The NewsCatcher was a smash hit. It was on the cover of PC magazine. It was named a Best Product of the year by the Smithsonian Institution, which added it to their permanent collection. It won a dozen awards, including coming in second (behind only Microsoft’s Internet Explorer) as Best Software Product of the Year. More investment cash came in with all the accolades.
There was only one small problem: nobody bought it.
The receiver—not to mention the whole concept of “wireless Internet news”—was wayyyyy ahead of its time. We had this spectacular piece of hardware and software and we had about 128 people working on it – but nobody bought it. No one at all.
Total disaster, way ahead of its time.
Everybody loved it, nobody bought it and we thought, “Well there goes the company.”
So the question was, what can we do to salvage the company?
I thought, “Ok. How about we re-purpose our back-end to create a wireless hub for the whole mobile industry?”.
The idea was that we would then connect all the source content from the Internet to our hub, which would then feed all the mobile devices: cell phones, pagers, cars, HTML and so forth. We would bring in ads for the first ever mobile advertising into this amazingly complicated system–again, years ahead of its time…but really cool.
It was a long, complicated pitch, but when I explained to my investors that our first plan was a disaster and we’d lost all our cash, but if we restarted the company with this new idea, we could make it work.
Grit Daily: In some ways you ended up — in a circular way — much like Seiko did. Where you took something to market that was ahead of its time.
DSR: Right! Well, my investors had one of three reactions. The first group thought it was an interesting idea; “it’s not quite our thing so we won’t put in any more money, but go do whatever you need to do to make this work, and we’ll support you.”
CitiGroup, who had a very far sighted view at that point, said, “Ok, we’ll give this a shot and fund the new plan.”
But on my cap table I had one teeny, nasty investor who wanted all their money back—and knowing who I was and knowing my background they thought I wouldn’t dare file for bankruptcy.
However, I don’t give in to extortion. So with the support of Citibank and my other major investors we filed for a Chapter 11 reorganization. And since the last money that went into the company was an unsecured loan from me personally and Citibank, the effect of the nasty VC was to hand over the company to Citibank and me.
All of a sudden the Internet boom was happening and now we have this really cool technology company. Money starts pouring in and the next thing I know is that after filing for Chapter 11 in April, by June we began to have term-sheetss.
A month after we came out of Chapter 11, the patents that we had filed four or five years previously finally issued, and were eventually appraised by PriceWaterhouseCoopers at $120 million. Talk about timing!
We soon signed a term-sheet for a $60 million raise at a $120 million pre-money valuation (those were the boom days!) We started hiring again and we started acquiring companies, including one in the UK, which gave us a base of operations in Europe. We soon had offices in London, France and Germany, Southern California and New York City.
Grit Daily: What did this business do?
DSR: Air Media Live—later renamed as Air Media Corporation—was the back-end service and wireless hub for wireless mobile services.
Things were going really well until the summer of 2001. We were just about to close our $60 million round when two weeks before the closing I get a call from my lead investor letting me know that the market had turned and they were not going to be able to deliver on their term sheet. They said: “Sorry, the market has just disappeared.”
Grit Daily: Were there revenues?
DSR: Minimal. I mean this was early stuff. There was minor licensing revenue but nowhere near enough to keep a multi-million dollar operation going.
Keep in mind, this was the season when Amazon lost 98% of its value. People don’t understand today how bad the dotcom crash was. At that point there was no coming back, so we ultimately closed our operations in the US. We were more successful in Europe for a while because they were ahead of the US in mobile phone technology.
Grit Daily: Did your intuition go off? Did things seem too good to be true at the time?
DSR: No. It’s like how people were buying cryptocurrency last December and when it looked like it couldn’t go anywhere but up. You feel like you would have to be a moron not to buy. Back then, we all knew that the Internet was here to change the world…it was just that nobody quite knew how.
So that time it was Chapter 7. We had to shut the company down, at which point the Spousal Authority revoked my entrepreneurship card. I was no longer allowed to start companies.
Grit Daily: She demoted you back to real estate?
DSR: Yup. I was grounded and told to go and do something useful for society. So I helped my kids get into college and meanwhile I still had another life in the arts world.
Yale was doing a billion-dollar renovation of the university, so I took on the restoration of all the college letterpress print shops at Yale. I wrote a book on letterpress printing and created what was at that point Google’s #1 ranked website on Letterpress Printing.
But wait, let’s rewind a little bit. Back in the dotcom boom, a website called SixDegrees.com
launched. It was the first ever, patented, social networking site created by a young entrepreneur named Andrew Weinreich, with whom I became good friends.
SixDegrees.com did pretty well during the boom and Andrew (who was smarter than me) sold the company at the very peak of the boom for $120 million. Good for him!
Unfortunately, he received his payout in stock…which ended up being worth nothing by the time SixDegrees.com went down three months later. So here, the guy who had invented and patented the social network ends up back on the street with nothing to show for it.
Grit Daily: Now what was your relationship to SixDegrees.com and to Andrew?
DSR: At that point, nothing. I was simply a friend and a mentor. Except that he’s an entrepreneur, too.
So Andrew calls me a couple of months later and tells me that he has another idea. “It’s in the wireless space and you’re into wireless. So let’s do this startup.” The idea is for a distributed public access WiFi hotspot network. There were already 10,000 WiFi hotspots in Manhattan at the time but there was no public access WiFi. So the idea was to piggyback off existing infrastructure, and let everyone re-sell their own WiFi to passersby. It was a great idea but because I wasn’t allowed to start a company again, I couldn’t be his co-founder, all I could do was to invest.
So that’s what I did. I became his first investor, and then eventually brought in Nicholas Negroponte and a number of other investing colleagues. Andrew and his team developed the technology and it worked quite well. It was safe, secure and anybody passing by—who subscribed to the network—could connect to local WiFi.
It was so cool, we actually went out and got a term-sheet from a Fortune 100 company to lead a $4 million Series A round at a $10 million pre-money valuation. Unfortunately, this was during the “nuclear winter” winter for venture capital. No VCs were touching anything Internet-related. So even though we had a signed term sheet from a lead investor in hand, we couldn’t find a VC to take the rest of the round.
Grit Daily: And this was in a trough. In 2002 – 2003?
DSR: Correct. Even witrh great technology, up and running, and happy customers, we couldn’t get financing. So that company went down as well.
At this point I’ve lost money as an entrepreneur and I’ve lost money as in investor, but I’ve really been bitten by the early stage investing bug and so—since I was now an angel investor— figured there must be an angel group to join.
Meanwhile, here in New York was the New York New Media Association, effectively the precursor to what is now the NY Tech Meetup. NYNMA was the trade association for all the Internet (then called “new media”) companies in New York, and I had actually been one of the founding members back in 1995.
With the rise of the Internet, NYNA had grown and one of the programs it had was the NYNMA Angel Investment Program, where once a month industry leaders and cashed-out founders would get together to hear pitches from—and invest in—promising startup companies. Since I was now an angel investor, I joined the program.
But then the dot com crash got so bad that NYNMA woke up one morning and realized that it had 8000 unemployed members, all of whom were looking for jobs from the other 8000 members. As you can imagine, that was not conducive to a functional trade association so…the trade association went bankrupt!
Ultimately NYNMA ended up being acquired by the Software and Information Industry Association, based in Washington, DC, which essentially said, “We don’t really want to manage an angel group”, which was fine because the angels didn’t want to be run by a trade association in DC either. So I wrote a business plan to create a new angel group and spun out the angel program, thus creating the New York Angels.
I began doing more and more early stage investments and got pretty good at it. Among the companies I seed funded have been ones that were eventually acquired by Amazon, Google, Facebook, Intel, Uber, CBS and other major firms
Since I still had more spare time than I knew what to do with, I also became involved with the
founding of Singularity University. My friends Peter Diamandis—I had invested in a couple of his companies—and Ray Kurzweil announced a new super-duper think tank to identify the next generation of global leaders, expose them to the accelerating pace of technological change, and save the world. That sounded good to me, so I signed on as an Associate Founder, and Singularity U’s Founding Track Chair for Finance, Entrepreneurship & Economics.
Grit Daily: Around that time Peter was with XPrize right?
DSR: Correct. He was and still is.
So now, with this background—a serial entrepreneur, a well-rounded investor, with actual investing with experience, managing an Angel Group and with a clear view of the future through SingularityU— I had an epiphany. I realized that if you started with enterprising young companies and facilitated their set up and operations, you could positively affect the world for good. So I went back to the Spousal Authority on hands and knees and she finally said: “Alright, alright. Get the heck out of the house and go start a company!”
So that’s what I did: I started a software company to support angel investors, called Angelsoft. Software for angels to help them invest in these companies.
Grit Daily: Looking forward a bit, is there a next ‘Internet’—or at least some giant change—that everyone should see or take advantage of?
DSR: There are two ways to think about this. One way is to ask “back in the early Internet days, should everybody have taken advantage of the Internet and started a company?” The answer is clearly “no”. Entrepreneurs should start companies, because that’s what they do. Other people should not.
But if the question was “Should everyone make use of the tools and services that other people are developing on the Internet? Then the answer is “Absolutely!”
The world is changing. So the whole essence of the Technological Singularity is that we’re living in a world of exponential technological change. With Moore’s law extrapolated, we see humans and computers converge around the year 2045.
Grit Daily: Are you involved with Kurzweil’s 2045 project?
DSR: It’s not a project per se but clearly this stuff is happening. The key thing about the Internet, was that it connected everybody. Probably the biggest single new development is the concept of the blockchain, which is again going to change the world. Not because of any specific currency, but because the fundamental, underlying principles of blockchain are really critical.
Grit Daily: So you do see some analogies? You’re an internet pioneer. Certainly right in the thick of it, in the late 90’s during the boom and bust. Do you see some analogies in the blockchain space today?
DSR: Yes and no. On the one hand, there are what—2,000 or 3,000—cryptocurrencies out there today—f which 2,980 are outright scams and nobody in their right mind would invest in those. The people who invest in those kinds things are the Bitcoin billionaires who picked up a Bitcoin 10 years ago and ended up multi-millionaires.
For them, that’s play money. But in the real world there is a lot of serious stuff that is happening with the blockchain, and it has very little to do with Bitcoin. All the crypto currencies combined cap out at less than $120 billion in valuation. That’s not much more than the size of SoftBank’s Vision Fund. And that’s for the entire world.
The importance of the technology is in the underlying idea of distributed ledgers and blockchain, integrating payments and balance stored in there. The serious money today is going into what you can do with it, not into random currencies.
That said, there will be a few tokens that will be really useful.
Grit Daily: Some of the next “Amazons” of this space?
DSR: Yes. This Summer you saw that the New York Stock Exchange, Microsoft and Starbucks are deploying their own blockchains or implementing it as a way to pay for goods or services. NYSE introduced a custodian platform for cryptocurrencies.
So you see, a lot of these are beginning to go mainstream. But it’s not going to be Bitcoin per se that’s going to be a magic bullet.
Grit Daily: Right, and we appreciate your insight, on the subject David. Thank you for speaking with GritDaily News!
That wraps up this part of our series with David S. Rose, serial entrepreneur and angel investor.