Digital-age flaming star

Sequoia: Launched in a Columbia basement 10 years ago, the software company faces a premature end this week - with its founders as millionaires and some stockholders very unhappy.

April 29, 2001|By Andrew Ratner | Andrew Ratner,SUN STAFF

Mark Wesker and his partners in Sequoia Software Corp. had little money for a presentation to impress a potential client. Their solution in 1994, after they maxed out their credit cards to finance the business: Buy some fancy equipment from Computer City in Columbia, which offered a 30-day money-back policy, use it for their presentation, then return it for a full refund.

That was then.

This week, they will become multimillionaires when Citrix Systems Inc. of Fort Lauderdale, Fla. acquires their company for $184.6 million. The deal is expected to close as early as Tuesday. Sequoia develops software so that organizations ranging from General Electric Co. to Johns Hopkins' Bloomberg School of Public Health can create interactive sites on the Internet to serve their customers, suppliers and employees.

Sequoia's 1991 launch in the basement of a Columbia townhouse, its near collapse several times and its meteoric rise at the decade's end is the story of the digital age. Or at least it is the one that captivated the public once "techies" like Bill Gates became billionaires developing the personal computer.

Likewise, the company's premature end reflects the turbulence roiling the technology sector. A half-year after going public, the company was forced to find a way out as capital lenders and stock investors became less forgiving of companies bleeding cash.

After the Citrix deal was announced last month, small investors who felt cheated cried "foul." Citrix is paying $5.64 per share for Sequoia stock. That's a third less than the $8 share price at which the stock opened nearly a year ago and about one-quarter of its $21.75 peak in July. Meanwhile, the original investors and venture capital firms who own 80 percent of the company stand to win big.

Wrote one of scores of irritated traders on a stock chat room after the sale was announced: "Mark Wesker on AMW: America's Most Wanted, that is."

Wesker, the 39-year-old company president, is unapologetic.

"For us, it was 10 years of sweat and putting houses up as collateral and venture guys eventually taking a gamble on us," he said. He'll continue as a vice president for Citrix and make $10.6 million on the transaction. "The people who took the bigger risks reaped the bigger rewards. That's capitalism."

"Think back to the Nasdaq, and the companies that were spewing millionaires who put in far less effort than these people did," said David Schreiber, the company's public relations director. "Microsoft was holding retirement parties on an almost weekly basis for people who were instant millionaires."

Added Anil Sethi, the founder of Sequoia: "We were an overnight success - 10 years in the making."

A decade ago, Sethi hired Wesker, an attorney who is his brother-in-law, to help him dissolve an earlier business partnership that went awry. Before that venture, Sethi had worked for Apple Computer Inc. He left the pioneering computer manufacturer after two years, disgruntled that engineers got short shrift in the profit-sharing. He believed that he could build a viable business developing commercial software.

Wesker, an admitted "closet computer geek," liked his relative's idea enough to come aboard. Family and friends thought he was crazy to leave a large, respected law firm, Miles & Stockbridge.

"I was a pretty strong voice against it," said his father, Barry Wesker, a federal administrative law judge in Sacramento, Calif. "He always had an entrepreneurial spirit. He'd try to talk the other kids in the neighborhood out of their toys. But he was a good litigator. Why would he walk away from that? I told him it was probably a poor idea."

Sethi also hired a University of Arizona engineering graduate named Jack Schuster, who had worked for Sethi's previous small business.

In 1991, through a broker, they hooked up with the Christian Children's Fund, the international charity perhaps best known for its television commercials with actress Sally Struthers. The agency was looking to shave from three weeks to a matter of days the time it took to send potential donors a photo and biography of a needy child. That would greatly improve the rate of donations. Sequoia competed against giants International Business Machines Corp. and Oracle Corp.

Schuster got his hands on an early version of a high-definition television camera to record digital images of the children. That impressed the clients, the partners were convinced. They won the $250,000 contract.

"It was," Sethi recalled, "all the money in the world."

Two years later, with annual revenue up to about $400,000, Sequoia was offered a $500,000 contract from the Christian Children's Fund for a larger project. Sequoia - up to seven employees by then - went to celebrate over beers.

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