Michael S. Egan, the 57-year-old chairman of Alamo Rent-a-Car Inc., is a consummate entrepreneur. His turnaround of ailing Alamo ranks high among his business triumphs, and earlier this year he sold the company for $625 million to H. Wayne Huizenga's Republic Industries Inc. (Egan converted the 94% Alamo stake controlled by his family into $527 million of Republic stock.) He also founded a package-tour business in 1980, and folded in an unprofitable sideline business from Delta Air Lines to create Certified Vacations, with revenues of more than $100 million.
While remaining active in Alamo and Certified, Egan pursues another passion: angel investing. He recently made headlines investing $20 million in Internet startup WebGenesis Inc., founded in 1995 by Stephan Paternot and Todd Krizelman, then students at Cornell University, Egan's alma mater. Based in New York's Silicon Alley, Web-Genesis operates The Globe, an online community with 750,000 members.
But long before that, in 1993, Egan took a chance on another promising young duo, Tom First and Tom Scott, who were selling their Nantucket Nectars juice off the back of a boat. His $500,000 investment and mentoring helped turn Nantucket Allserve Inc. into a $60 million company. Egan talked with staff editor Edith Hill Updike about investing, company building, and the role of the angel investor.
Q: How did you hook up with the two owners of Nantucket Nectars, and what led you to invest in their business?
A: They showed up out of the clear blue. I guess they were cleaning my boat. Their story was so charming that on that alone I was hooked. I never thought that juice in a bottle was where the action was. But then the two boys showed this almost Michelangelo-like creativity in designing these juices.
Q: It strikes me that you're someone who invests very much in people.
A: I suppose that's true. I don't want it to sound as if somebody could walk in the office with a box of crushed graham crackers and get me interested in the business because they have a good personality. In both cases I was attracted to the youth, vigor, foresight, inspiration, work ethic, and already proven success. They started with nothing and had spent a couple of years building the business.
Q: Nantucket Nectars made a lot of mistakes, even after your involvement. Weren't you concerned?
A: When you are 23 years old, if you get into any competitive business, you've got to go through the learning curve. You make a few mistakes and you make a few genius moves. In the case of Tom and Tom, I have never in 57 years been associated with two people who learned faster or more thoroughly. They were extremely disciplined in getting something turned around. And nothing is more false than thinking a boss can snap his fingers and things change.
Q: Do you get a lot of pitches from money-hunting entrepreneurs?
A: Opportunities come on my desk at the rate of no less than three a week. Wayne [Huizenga] probably sees three a day. Sometimes the investment might be attractive, but you've got other things to do. Investments in entrepreneurial companies don't only require money, they require time. First there's the mentoring, then there's the hands-on time as a board member, and most of all, there's the thinking time. To make any business a success, you've really got to be able to step back and think.
I have made very few investments in my life. After I made one investment as a minority shareholder that didn't work out, I would only invest in a startup if I could be the majority shareholder. In another tranche of my investing, I can rely on funds or stocks that are traded on the markets to be a good, safe, and profitable investment.
But if you don't control the management, you're subject to the business skills of the other principal investors. Often, they become very emotional. Not to say emotion is only for others--if you aren't passionate, you aren't going to go anywhere in business. But that mirror has two faces. A lot of people's lives are involved, yet at the same time, it's a business. You have to make businesslike decisions.
Q: Are you looking to make other startup investments?
A: No, no. Please, I've got enough people knocking at my door. I have left all of my [Alamo stake] with Republic, and applied a small pool of my resources to this new venture, The Globe. There are a couple more investments that I am looking at, either closely associated with the travel or the Globe business, that would be folded into one or the other and enhance them.
Q: What do you think of the rivalry between Silicon Valley and Silicon Alley?
A: Comparing Silicon Alley and Silicon Valley is like comparing Ft. Lauderdale and the Green Bay Packers. Most of the things that have happened, have happened in Silicon Valley. But it's very much the technical side.
Q: You were somewhat famous during the Alamo days for an unconventional attitude toward hiring executives. Will that be true at The Globe, too?
A: With Alamo, as with life, necessity was the mother of invention. When you're a small entrepreneurial company against big giants who have entrenched market share, you have to be unconventional. My first impression is Todd and Stephen have done a marvelous job of recruiting and directing a group of extremely bright and motivated young people, and New York particularly attracts people who want to strike out on their own, want to do something different.
Q: Do you see yourself as mentor to The Globe and at the same time a mentee of Wayne Huizenga?
A: Yes, mentee is a good word. I never thought I'd be a mentee again. My best years were always when I had a mentor who believed in me. Steve [Berrard, co-CEO of Republic] and Wayne have been so skillful at some things that I never learned to do: consolidate businesses, handle public financing. It's like getting a master's degree, working with them.
Q: What's the essence of an entrepreneur?
A: I think entrepreneurship is to seize an opportunity and drive it and build it. You can do that in a big company like General Motors, and in a small company like Montase Candy Store. I don't limit entrepreneurship to owning. But I do think an essential ingredient is risk. It's easy to understand risk in terms of money. But there are other types of risk, and the reward isn't always money.
Q: Do you have a goal for return on your WebGenesis investment?
A: I would like a big return. I can't define that. This is a lot more fun than Las Vegas, and I really think Vegas is a hoot. But I prefer this type of risk because I can have a great deal of influence over the outcome.
Q: Do you also have that sense of personal risk with WebGenesis?
A: My opportunities to do something in business that amounts to a hill of beans are getting more and more limited. So in a sense, this might be looked at as my last or maybe my second or third last hurrah. There's also an element of personal pride. I didn't do this thinking I don't care if I fail. I don't want to fail. But I didn't exactly pick a downhill slide for this effort. This is going to be a real mountain climb.