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Special Report (Enterprise) COMPANIES -- ENTREPRENEURS
TO BE YOUNG, GIFTED, AND GEEKY
Michael McCue: From computer whiz to millionaire at 28
As a youngster, Michael McCue dreamed of becoming a space-shuttling astronaut. He rushed off to science fairs, built cardboard robots, and even created a spacecraft simulator out of tinfoil, paper, and model railroad tracks. "Everyone thought I was a little crazy because I didn't spend a lot of time out of the house," recalls McCue. "But I was too busy building things and dreaming. In some sense, I thought I was training to become an astronaut."
Now a lanky and boyishly good-looking 28, McCue is truly in orbit. As chief executive officer of Paper Software Inc., he has just become a multimillionaire by selling his company, located above an Indian restaurant and a New Age bookstore in Woodstock, N.Y.
The young entrepreneur, moreover, engineered the estimated $20 million sale of his virtual-reality software outfit to perhaps the hottest company in years, Netscape Communications Corp. The deal, announced on Feb. 12, instantly made four of Paper's dozen employees millionaires--all from a company that has never earned a penny of profit, headed by a onetime computer geek who never went to college, and whose oldest employee is 33.
For McCue, the journey began in the first grade at St. Columbus' Elementary School in Hopewell Junction, N.Y., when he penned a report on his passion to become an astronaut. Wide-eyed at the notion of walking on the moon, he later became so captivated by the Star Wars hoopla of the late 1970s that McCue and a friend fashioned their own four-foot-tall version of R2D2, which could project slide images on a wall.
As a freshman at Cornwall (N.Y.) Central High School in 1981, he built a calculator for a science fair and wrote his first software program, called Shuttle Flight, on a TI-99/4A computer that belonged to the school's computer club. His fascination with technology turned into an obsession when his father, who ran his own local advertising agency, developed colon cancer, and Michael needed somewhere to escape from the turmoil at home. Within a year, McCue emerged as the leader of the lab. "I ate, drank, and slept computers," he says. "I became a total computer geek. I'd sit in math classes with a programming book hidden inside my math textbook."
In his junior year, McCue authored his third computer program, Night Mission, a game based on President Carter's abortive attempt to rescue hostages by helicopter from Iran. He sold it to a distributor for a 25% royalty. Yet another game, Jungle Jim, was published in 99er Home Computer magazine, eliciting a pile of fan mail from across the country. Deciding against college, he worked in a software store after graduation before landing a temporary job at IBM, where he created computer graphics for executive presentations.
IBM didn't permanently hire people without college degrees. But McCue had other ideas. He wrote an innovative computer program, Graphics Management System, that soon became used internally by thousands of IBMers. Established as something of a wonder boy, he landed a permanent job. But he quickly became disillusioned with IBM's bureaucratic culture and quit in late 1989 after a 3 1/2-year stint.
KUNG FU. Captivated by the vision and idealism of Apple founder Steve Jobs and his successor John Sculley, the high school nerd transformed himself into a Jobs wannabe. He went to International Toastmasters to improve his public speaking. He began taking kung fu lessons to gain greater confidence and balance. And he began to think of technology as a means to something else: "My goal is to create the next medium for human expression, communication, and thought," he says without a trace of immodesty.
In his worn white sneakers, ripped jeans, black turtleneck, and a faded denim jacket, McCue at least appears to be a '90s reincarnation of an earlier Jobs. He gleefully tosses off such phrases as "cool," "incredibly awesome," and "nifty." He speaks about technology with a perpetual smile and kinetic energy. "He conveys excitement similar to Jobs," says Danny Rimer, an analyst with Hambrecht & Quist. "He shows a genuine passion for what the World Wide Web can provide."
Like Jobs, he launched his company in the garage of his mother's house, writing a business plan for a software startup that failed to get off the ground when he couldn't raise any money. McCue dug ditches and carried shingles up roofs for $250 a week until getting a more lucrative position as a computer consultant at Merck & Co.--at $50 an hour. In every moment of spare time, he worked on a new product, SideBar, an icon bar that sat on the side of the computer screen and simplified Microsoft Corp.'s first version of Windows. He packaged the product in a glossy black album sleeve, with white type that simply said: "Intensely Simple," a throwback to Jobs's famous "Insanely Great" line. McCue also spent $10,000 on an elegant logo for the company, Paper Software.
In 1991, with SideBar in hand, he raised $100,000 from eight investors--$15,000 from the parents of a high school friend. But instead of giving them a stake in his company, he structured the investments as loans and agreed to pay royalties on sales. McCue created 1,000 copies of the program, hired a public-relations agent, and went on a press tour. Trade newspapers gave him good reviews, but sales were few. As luck would have it, however, in 1993 he licensed it to IBM for $250,000 and later sold the marketing rights to another company for $500,000.
FREE OFFER. He quickly paid off his investors and sank the remaining cash into the business. McCue set up in Woodstock, hiring a coterie of programmers, including some ex-IBMers, who could help him carry out his vision. Instead of using overlapping windows and scroll bars as the user interface, McCue envisioned a simulated 3-D environment in which users zoomed in and out of information. "It would let you fly through information, zooming down to the tiniest of details and zooming all the way up to see how these things relate to your life," he says. "When you start dealing with massive quantities of data, you need a new metaphor. Zooming got to it."
By mid-1995, McCue and his band had their first major product: WebFX, a program that enabled a user to display and manipulate 3-D objects over the World Wide Web. The software let developers of Web pages map multiple layers of data onto a 3-D model of the earth so users could zoom in on greater detail. McCue gave out the product for free via the Internet, and within six weeks, more than 100,000 people downloaded it.
No less crucial, McCue later modified the product so it could be easily plugged into Netscape's software for browsing the Web. "We didn't do 3-D for 3-D's sake, but to improve information management," says McCue. "So we knew it should be a part of Netscape Navigator. That is what separated us from the pack of 20 other companies."
Last fall, when Netscape released an updated version of its Navigator that allowed for plug-ins by other developers, McCue served up his new version within a week. He knew that to succeed, the company had to grow fast, so he thought an alliance of one kind or another with Netscape--the dominant player on the Web--was critical. Frustrated by his inability to attract the attention of Netscape officials, in October he sent E-mail messages to 70 employees there. "They wouldn't give us the time of day," recalls McCue. "So I carpet-bombed the company. I wanted them to take notice."
His strategy worked, allowing him to gain the ear of Alex Edelstein, Netscape's senior product manager for Navigator. Edelstein put up a notice for the software on Netscape's opening Web page in early November, and Paper Software got over 200,000 hits in less than three hours. The upshot: By giving away its product to nearly 3 million users, Paper Software became a hot virtual-reality software company. Venture capitalists began calling up. Analysts sat up and took notice.
"SLIM RESOURCES." Finally, in early December, McCue got an invitation from Netscape. He and his colleagues stayed up all night before the meeting, writing new code to "push the limits" of their product for the demo the following day. "We coded our guts out in a hotel room in San Diego, while our content engineers worked through the night in Woodstock to send us stuff via the Internet," says McCue.
On Dec. 16, he met Netscape's Marc Andreessen, inventor of the pioneering Mosaic software for browsing the Web. After a six-hour discussion, Andreessen was so impressed by McCue and his product that he suggested a possible acquisition. It took until midnight on Feb. 11 for McCue finally to sign the contract to sell. "Mike built a really excellent company with slim resources," says Netscape's Edelstein. "His 3-D technology was the best, but what excited us the most was the chance to acquire this top-flight group of guys who were eager to keep working and who shared our vision for where the Internet is going."
Under the deal, McCue and most of Paper's employees will move to Netscape's headquarters in Mountain View, Calif., where they will work with the company's programmers. The prospect of working alongside Andreessen thrills McCue. "Marc is like a hero to me," he says. Yet he felt mixed emotions when he signed the deal. "I hadn't slept in three or four days," says McCue, who negotiated the stock deal with Netscape Chief Financial Officer Peter Kenney. "My emotions were mixed because I wouldn't head up a company anymore. The logo, the company name and brand will go away. But I knew I was getting an excellent deal. I'll be able to help design the next operating system for the future." McCue may not have turned out to be an astronaut, but he seems intent on flying far from home.BY JOHN A. BYRNE IN WOODSTOCK, N.Y.