Value Added: Second Chances
Here's Tom Heath's latest column on Washington's entrepreneurial set:
When Arman Eshraghi's representatives pitched me on a story about his Reston-based start-up, I thought to myself: another software company that loses money but is valued at millions of dollars. I thought most of those went boom with the tech bust of 2000. And besides, those companies bore me. Remember, I am over 50 and am challenged by my cable-TV clicker.
But I listened. And I liked what I heard about Eshraghi's love for the United States and our culture of giving people a second chance. I can relate to second chances, as I have had my share of screwups.
Eshraghi, 41, is a math whiz, born in Tabas, Iran, a city of 10,000. A self-proclaimed "software guy," he pursued programming and software in high school. You have to pick out your career early in Iran. This led him to electronic engineering at Ferdowsi University, in Mashad, Iran's second-largest city.
He worked with punch cards and main frames and fell in love with the old Commodore computers, which connect to televisions. He sold his Persian-made car for $10,000 to start his first computer company, which software and hardware work and sales, as well as computer training. He grew it to 60 employees and returned 40 times on his investment. He sold his share to his fellow shareholders. He started a second company in 1993, and named it for his newborn son. The company was a pure software play called Aryasoft.
He and his wife, Kathy, emigrated to the United States in 1996 after winning a green card lottery. He gave his interest in Aryasoft to fellow employees and left for the United States, where he settled in Fairfax County.
Eshraghi couldn't understand more than four of five words of English, so he spent hours in the library at George Marshall High School learning the language.
That same year, he got his first job through a help-wanted ad in The Washington Post. It paid $40,000 to develop software. Less then a year later, a headhunter contacted him and he got a new job that paid quite a bit more.
"I said, 'I am happy with what I am doing, but I will go if you can double my salary,'" he recalls. He still had a rough time with English, so he drew diagrams on a white board to answer interview questions. He was hired, but the company was soon after bought by Wang Global. It was tempting to wrap himself in Wang's corporate blanket, but Eshraghi's entrepreneurial bug surfaced and he left to start his own company.
LogiXML was born in 2000.
He was going against the prevailing headwinds.
"A friend introduced me to someone who said they wanted to see who is the crazy guy starting a tech company after 2000," Eshraghi said.
LogiXML is a business intelligence software provider that helps clients from the U.S. Army to universities to small companies keep track of information. If a consumer-product company wants to know how many of its shirts are flying off the store shelves or how many aren't, they can use LogiXML. Its competitors in the business intelligence field include Business Objects, owned by German firm SAP, and Cognos, owned by IBM.
"It helps companies increase their sales," he said.
So how is LogiXML doing? Sales last year were $5 million. Eshraghi expects sales this year to hit $8 million. He has 70 full-time employees and 10 part-timers and consultants. He has 400 customers around the world, including in Austria, Britain and South Africa. Local clients include Harmony Systems in Reston and Spectrum K12 in Baltimore. The company has opened a London office and bought a 10-person company in Los Angeles.
Eshraghi said the company swings between being cash positive and cash negative. He estimates that his and Kathy's one-third of LogiXML is worth $10 million. That makes the company worth $30 million? I asked him if we were back in the bubble days, where companies could just declare revenue and say they are worth a fortune.
Eshraghi said Updata Partners, a Northern Virginia venture capital firm, last November invested $5 million in cash in LogiXML. It also bought up another investor's shares, giving it about a third of the company. Eshraghi also owns a third. Angel investors, stock options and employees make up the rest. Eshraghi said his back-of-the-envelope estimation of the company's value is $25 million to $35 million.
"We are close to break even and we want to grow fast. As we make money, we reinvest in the company."
Updata partner Carter Griffin called Eshraghi "the classic entrepeneur who came here 10 years ago and sort of on his own has figured this thing out and has a company with a ton of momentum. We saw and opportunity to add some fuel to the fire with the investment. They have been able to do it the old fashioned way: to build a real company."
Eshraghi said his stake may be worth $10 million on paper, but he doesn't have a plan to cash out. He began taking an annual salary of around $100,000 the last couple of years. He lives in a townhouse with Kathy and their 15-year-old son, and putters to work in a politically correct Toyota Prius Hybrid.
I asked him if being Iranian in the United States, which isn't on the warmest terms with his native country, was a problem. Here is his response:
"I have never experienced anything negative. Everything I had was help and support. I don't think it was just a matter of luck. We are talking about more than 12 years. It's part of this country. I have a lot of respect for the values here and I resonate with that kind of culture - giving people a second chance. In the U.S., people don't dismiss you just because your software isn't working. They give you a chance to prove yourself. And I thrive."
June 24, 2008; 4:31 PM ET
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