Online Extra: Q&A with Sky Dayton

The EarthLink founder talks about his start in business and how break-dancing Koreans led him to create his new venture, Helio

If Sky Dayton ever needs to be reminded of the stress of a startup, all he needs to do is look at the wall of his Westwood (Calif.) office. There sits a framed copy of the business plan for his first public company—stamped "CONFIDENTIAL" with a rubber stamp he bought on his way to see his first big-bucks investor.

The ploy worked, and Dayton, at the time a coffeehouse owner with a nose for the latest "hot new thing," got the money he needed to start EarthLink (ELNK ), one of the first Internet service providers. Starting with 10 modems that he linked together in 1994, Dayton built a company that today provides Internet access for more than 5 million subscribers.

Now 35, Dayton has turned entrepreneur once more, serving as chief executive officer of Helio, a startup phone service designed for under-30s, with a potpourri of extras that includes videos, games, and access to the MySpace (NWS ) social-networking site. These days he's not hitting up investors for money—the company is financed with $400 million from joint venture partners EarthLink and South Korean phone company SK Telecom (SKM ). He's also chairman of Boingo, a company that's linking wireless "hot spots" in hotels and airports to sell to computer users who need to connect to the Internet on the go.

Dayton recently sat down with BusinessWeek's Los Angeles bureau chief Ron Grover to discuss the life of a serial entrepreneur. Edited excerpts of their conversation follow:

You've got a lot of money. Why not sit back and enjoy it?

I like to build. To take something that didn't exist and start from scratch I find really rewarding. I like the math of creating something from nothing. Like EarthLink, we started with 10 modems that we got from CompUSA. I remember we took a single ad in MicroTimes. We got 10 accounts the first week, then 300 accounts the next, and 800 accounts within a month for a little dial-up business that was under the radar. How much better can it get than that?

Is that what you wanted to do all along?

Well, I wanted to be an animator and I applied at CalArts (the California Institute for the Arts) and got turned down. I was too young at the time. So I worked for a while as an artist at an ad agency.

And your first startup?

It was a little coffee shop in West Hollywood, Café Mocha. Drew Barrymore used to work behind the counter. I gave Alicia Silverstone her first job. She was working for me when she got her first call-back after an audition. I started with $10,000 from my grandmother. And I paid it back; not every relative would do that.

Boingo Wireless is a service that takes EarthLink the next step, doesn't it? Linking folks wirelessly. How did you come up with the idea of creating a nationwide network of hot spots?

I went to a Credit Suisse First Boston conference in Aspen, and I couldn't get a decent connection at the hotel where I was staying. I couldn't get a signal even though the place said it had a wireless connection. Same thing happened to me at a hotel in New York, and I started to figure that I'm not the only guy who needs to get connected when he's out of his office or house.

You incubated that at eCompanies, the startup fund that you launched with former Disney Internet chief Jake Winebaum?

We started it with $15 million in venture funding from Sprint, New Enterprise Associates, and Evercore Ventures about a year or so later. We ran it under a stealth name called "Project Mammoth."

Project Mammoth?

It's a place where I like to ski.

You're chairman, but you handed over the CEO job to David Hagan, the former president, about two years ago. Why?

I worked myself out of a job, which is really the point. I don't want my businesses to be so dependent on me. There are better people than I am to work on running a business, and David is great at that. That leaves me to focus on what I think I am really good at—creating a product, branding, and the future of where the business needs to go.

Where did you come up with the idea for Helio?

I went over to South Korea in late 2004. (EarthLink) was in discussions with SK Telecom about doing some work with us in the U.S. I was there with my wife, and we were just amazed to see kids break-dancing in the middle of the streets with their phones dangling from their wrists. It was jewelry, with two earphones for the music. And by the way, they were also making telephone calls. I figured there was a market here for that, too.

Is there? You started selling Helio in May. Any numbers yet?

Not that I can share. But we think that younger kids in the U.S. want more than just a phone. They want to be connected every moment of when they are out, and they're out a lot more than they're inside these days. They want to be connected to MySpace—which they can be with Helio—connected to their music and to games, and to have the ability to share those with their friends. They can do all that with Helio. And they can make phone calls, too.

A lot has been written about your belief in Scientology. Does that influence you in your business?

When people ask about Scientology, I tell them that they can learn about it in a book. Not from me.

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