Alex Algard was a student at Stanford University in 1997 when he started Whitepages.com in his dorm room. He began his entrepreneurial journey trying to run the dotcom while holding down a first-year analyst job at Goldman Sachs, quit banking to focus full-time on his startup, moved it to Seattle, left the CEO post to start a website for car enthusiasts, and returned years later to buy out his original investors for $70 million.
Today, Whitepages.com is the biggest identity data curator in the U.S., offering consumers caller ID apps and major brands access to accurate data, security, and fraud protection. With just 160 employees, Algard says it’s a top-40 website with over 50 million unique users every month.
The 41-year-old success story spoke with Yahoo Small Business about his experiences and lessons learned.
Why did you create Whitepages.com?
In the late ‘90s I was a summer intern on Sand Hill Road for Morgan Stanley. Mary Meeker had just released The Internet Report. I was having trouble keeping track of my friends with email addresses, so I got excited about idea of an online people directory. I was researching a good domain name to host a service to be an online contacts management tool or an email directory when I found the Whitepages.com site. I bought the URL for $900 from a squatter.
How did you fund the startup?
The plan was to raise capital at some point, but I was lucky enough to be able to bootstrap it while working at Goldman. I was only working a couple hours a week on Whitepages as a hobby operation, but was making decent money off of ads. I kept reinvesting the money that came in thinking that once I stalled out I’d go seek venture capital. But that point never came.
We incorporated in 2000 and that’s when the growth began to accelerate. When the dotcom bubble burst everything crashed, but our company trajectory continued to show remarkably steady growth. We never were a multibillion-dollar valued company, but we managed to stay in business and grow every year. Being one of the few players left standing was a boon for the company.
But your original idea for the business wasn’t what you pursued?
I realized that the email directory wouldn’t be commercially feasible. I pivoted to data I could license such as telephone listing information. The first couple years I licensed the same information that you find in the public phone books. Over next few years we did a really good job of making it all easily searchable and accessible. Then we started aggregating and sourcing information from a whole lot of other places such as driver’s license databases and public records. Today we ingest and source over 2 billion contact records every month. The phone listing data is still there, but it’s a small portion of the overall contact database we build and maintain.
There’s an ocean of data out there. Our challenge is to organize it and make it accessible to users. In the same way Facebook has sought to map out how the whole world looks in social connections, or LinkedIn has built a professional graph, we seek to map the world based on real person or business identities and how people are connected through phone numbers and addresses.
What’s an example of how a user taps Whitepages.com?
One use case is “Card Not Present” fraud detection. If you’re a merchant accepting credit cards online, you don’t actually have a customer walk up with a stripe to swipe. You run the risk of complete financial loss if that customer is using information fraudulently. Merchants have a need to verify that the customer is who they say they are.
Account openings are another use. When consumers register for a financial services account of some type, we help businesses know if the person is signing up with a legitimate name, address, and phone number.
Or, we can help businesses prioritize incoming sales leads by flagging the fictitious signups. It’s about verifying and helping businesses understand who they’re transacting with.
Our caller ID app helps power call centers so customer service agents know who is calling in to make the customer experience smoother. Our service enables those types of experiences that delight the consumer.
Why did you leave Whitepages.com?
I wouldn’t say I entirely left. I hired a CEO. I was Chairman. I was focused on CarDomain.com, an online community for car enthusiasts. That worked well up to a certain point, but it was to the detriment of the company that I was going back and forth. Early in 2007 I jumped back into Whitepages.com with both feet, and I sold CarDomain in 2010. I should have done that all along. I learned one life lesson: you’re better off focusing on one thing and doing it well.
Why did you return to Whitepages instead of keeping CarDomain?
Car Domain wasn’t as big a market opportunity. The opportunity at Whitepages was what drew me back. After private equity investors bought shares of our business in 2005 I saw our incentives becoming increasingly focused on short-term profits. We’d start and end board meetings with discussions about the P&Ls instead of about delighting our customers and users.
I wanted to maintain a longer-term perspective on innovating. In 2013 I made an offer to buy out our shareholders. We increased investment in our own employees and in creating a workplace environment that was a lot more comfortable and geared toward innovation. You might think that would be a profit-destruction exercise—“the investors were trying to maximize profits and Alex comes in with rosy thinking”—but within 18 months of making these moves our company profits doubled. These days I’m happy to report we have great board meetings with members who have domain expertise and can give really good sound operational advice to me and the senior team.
How were you able to buy out the investors for $70 million?
We had been nicely profitable all along. We had a real nice balance in the bank account. But we had to empty our whole bank account and take a loan from the bank. It’s easier talking about it now, but that was a very stressful period for me. It was a high-risk move to go from having a big fat bank balance to emptying that and taking on debt to buy these guys out. It was a move that could have been a real disaster.
Your greatest lessons learned through all this?
I believe very much in focus. It’s better to do one thing really well than to spread yourself too thin and do a mediocre job, especially online where you cannot get away with being anything less than number one. I really believe in doing fewer things and doing them real well.
I also believe in chasing big ideas and doing big things well. If you believe you can only do a few things, then you’re better chasing big ideas.