The Legend of the Key: A Short History of Farstar

 

Tonight I’m going to a private concert at Farstar’s new offices in Frisco, so I’ve been reflecting a bit on the history of Farstar.  It’s a long story, but it’s a pretty good one…

Kevin Lofgren and I founded Farstar in the summer of 2002 based on an idea I had while working at Claria.  The concept was to combine direct mail and the Internet to create marketing campaigns that are incredibly intriguing, personalized, and trackable.  We were certain it would work — all we needed was a paying customer.

Somehow, KL managed to get us in the door at Oracle.  So we put together a PowerPoint deck to pitch a product that didn’t exist (we called it “ResponsePlus”) to one of the world’s largest companies.  Abracadabra — they bit.

Oracle:  “We love it.  How much does it cost?”

Kevin & Kevin (looking at each other in dismay): “Uhhhh… fifty thousand dollars?”

Oracle: “Sold.  Who do we make the check out to?”

Kevin & Kevin:  “Uhhhh… let us get back to you on that.”

The folks at Oracle wanted to use ResponsePlus to generate leads for their buisness software.  Great, all we need to do now is build the actual product (oh, and open a bank account).  We called our friend Shane, who agreed to build the technology for a piece of the action.

 To make this first campaign a smashing success, we needed a killer creative concept for the direct mail piece. 

If you’re lucky, you may come up with 4 or 5 of truly great ideas in a lifetime.  I think the idea we came up with for the first Farstar campaign was one of those.  Like all great ideas, it was incredibly simple:  For our direct mail piece, we would send each person on Oracle’s mailing list a short note:

Bob:

Here is your key.  Learn more at http://www.UseYourKey.com/BobSmith.

The personalized note was printed in Courier font on plain typing paper.  Along with the note, we included a real key — one of thousands of miscuts that we talked Home Depot into giving us.  To each key, we attached a paper tag that was hand-labeled “E26”.  What’s the significance of E26?  Absolutely none — but it adds to the mystique of the key.

The idea was to use this intriguing direct mail piece to get folks to visit their own personal web site where they could be tracked while they learned about Oracle’s products.  To top it all off, we used some sneaky mailing tactics to make sure that the notes and keys were hand-delivered to each person on our list.

So we sent out the direct mail pieces and waited.  But we didn’t have to wait long — the response was immediate and overwhelming.  The response rate on the campaign was an astounding 75%, and we generated over 200 “hot leads” (folks that came to the web site, read about Oracle’s products, and indicated that they wanted to learn more).  I have never heard of another marketing campaign that put up numbers even close to these.  Farstar would go on to run hundreds of campaigns with lots of great creative concepts, but the success of the original key concept was never duplicated.

With a hit product on our hands, we (meaning mostly KL) were able to parlay our initial $50,000 Oracle contract into over $500,000 within 6 months.  To keep up with the workload, we needed all hands on deck.  Megan, Shari (KL’s wife), and a bunch of our friends pitched in, stuffing envelopes late into the night.  We even hired our first full time employee:  Elsa (a college friend of Megan’s).  It was chaotic, but fun — and by Christmas we were able to write ourselves some nice bonus checks.

It was at this point that the two Kevins’ paths diverged.  Despite the early success Farstar was having, I accepted a salaried position at another company.  I guess I just didn’t have the guts to turn down a steady paycheck and step into the unknown with Farstar (what can I say, I’m a risk-averse entrepreneur).  So KL took the reigns and ran with it while I remained an active board member.

And run he did.  The company continued to explode.  KL began to build an impressive roster of clients and started hiring employees to keep up with demand.  The really neat thing about the product (which we eventually renamed “The Lead Machine”) was that we used the Lead Machine to sell the Lead Machine.  Prospective customers experienced the very product that they’d be buying!  It’s like those billboards along the highway that say “Do billboards work?  Just did!”.  KL quickly became a master at selling The Lead Machine.  Before long, Farstar had 20 employees on the payroll and the future was looking very bright. 

But alas, this is where the story takes a turn for the worse.  KL one of the most talented and driven people I know, but he was thrust into a role in which he (or I, for that matter) had little experience – being the CEO of a high growth start-up.  To his credit, he was smart enough to recognize this early on and tried to surrounded himself with “operators” to help him run the day-to-day business while he focused on selling and strategy.  With the right team, I think this plan would have worked.  But this wasn’t the right team.

To make a very, very long story short, the company started to unravel.  There are many reasons for this, not the least of which are greed, incompetence, and perhaps even a bit of unethical behavior on the part of some of KL’s top lieutenants.  At one point, there was even an attempt to oust KL from the company by convincing me (a major shareholder and the “swing vote”) that he had basically lost his mind.  I won’t go into the details, but the whole thing got pretty nasty and several friendships came to an abrupt end.  The company began losing customers and spinning out of control, racking up debt as fast as it had racked up profits in he early days.  Eventually, several folks left Farstar to start a direct competitor.

In the end, KL had two choices:  Cut his losses and shut the company down or “double down” in an attempt to turn things around.  Most people would have chosen door number 1.  But KL is as persistent as they come and he decided to buy out all shareholders (including me), go back to basics, and re-start the company.  At the time, it didn’t seem like a wise decision to me and I told KL as much.  If he failed, the financial consequences would be pretty bad.  But this had become a personal mission – KL had something to prove to those who had betrayed him and, more importantly, to himself.

Fast forward two years and I’m happy to report that this story has a happy ending.  Farstar survived – and is thriving once again.  By keeping expenses down and focusing on customers, KL has made Farstar a great company again.  In fact, the company is doing so well that they bought a cool new office building in downtown Frisco.  Which is why I get to go to a private concert tonight.

Congrats, Kevin, on turning Farstar around.  You deserve every bit of the success you’re having.   My only question is this:  When is that dividend check going to arrive?