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Q&A: Mark Cuban Talks Indy Startup ZergNet
In conjunction with our October feature on tech startups in Indy, we interviewed billionaire IU grad and Dallas Mavericks owner Mark Cuban about ZergNet, a local company in which he has invested. Here, Cuban recalls getting ZergNet owner Reggie Renner’s initial e-mail pitch for the traffic-sharing website.
So, a guy named Reggie emails you in the middle of the night with an idea for a business and you e-mail back. Why?
I loved the idea and he was very detailed in his response.
He tells me you initially said no. That your adviser also told you not to invest. What about Reggie’s reply convinced you otherwise?
That was more about the valuation. I’m cheap. It had nothing to do with my perspective on the company.
How often do you get people e-mailing you cold with investment pitches? And how many of them do you actually pursue?
People contact me with pitches every day. I only respond to about five percent of them. And to five percent of those, I ask follow up questions.
What do you enjoy about investing in small companies like ZergNet?
I don’t necessarily enjoy investing in small companies. I enjoy investing in smart people with big ideas.
Do you think Reggie would have won over any of the other investors if he had gone on Shark Tank? He’s a pretty shy guy.
No idea. I’ve never even met him.
Yeah, Reggie tells me that the two of you have never even spoken on the phone. Do you prefer to do business by e-mail?
Questions are questions and answers are answers. E-mail gives me documentation to refer to. So if something comes up, it’s easy to search my e-mail and get what I need. I’m not organized enough to have a call and spend all the additional time transcribing all of our conversation so I have it for reference.
What advice are you giving the guys at ZergNet right now?
Don’t worry about revenue. Every now and then, a company has a chance to dominate its market and become ubiquitous, all while knowing it won’t be difficult to generate revenue once it has reached critical mass. ZergNet is one of those companies.
Reggie doesn’t seem in any hurry to monetize the site. At what point will the exponential growth be enough to start thinking about a business model?
We already know what the model can be, so generating revenue shouldn’t be hard at all. The challenge is dominance—getting to that point and keeping the happy customers they have is far more important.
Do you think it’s any easier for Reggie’s generation of tech entrepreneurs than it was for yours now that some groundwork has been established?
It’s certainly a lot cheaper to start a tech firm. A laptop, a broadband connection, and a cloud account on the right host and you can start a company for under $1,000 that might have cost millions in the past. No one has to buy servers or hire administrators to get started anymore.
There seems to be a growing startup culture in Indiana that’s getting a lot of press locally. How aware are investors outside the state of what’s happening here?
I went to IU, so I try to keep an eye on what’s happening in Indiana. Any state with a great school like that is going to have a solid startup culture. I know it worked for me!
This article appeared as a companion piece to the startup feature in the October 2013 issue.