Web start-ups almost always fail. So why are these guys launching one?

The story of America's greatest idea.
April 21 2010 7:05 AM

Risky Business

Web start-ups almost always fail. So why are these guys launching one?

Click here to launch the slideshow "Red Beacon"
John Dickerson John Dickerson

John Dickerson is Slate's chief political correspondent and author of On Her Trail. Read his series on the presidency and on risk.

Ethan Anderson, Yaron Binur, and Aaron Lee are in the failure business. Not explicitly—they don't run a pawnshop and they're not repo men. But they run a Silicon Valley start-up, Redbeacon, and as such they are statistically endangered. Depending on whose data you believe, the chance of their venture succeeding is between 10 percent and 30 percent.

For the privilege of waking up every day to those odds, each man has worked for a year and a half without salary, depleted his savings account by $50,000, quit a job at Google—the closest thing there is in this life to a Golden Ticket—and traded prosperous security for anxiety and the likelihood of failure. At Google, they enjoyed free gourmet food. At their headquarters, the only food I found on the day I arrived was a nearly empty box of Wheat Thins.

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Redbeacon's office of 15 months is located down a dim hallway from a travel-book writer and Zena's Secret of Beauty spa in a San Mateo, Calif., strip mall. The suite consists of two offices and a conference room. There are more desks per office than a fire marshal would probably like. Phone lines cross the floor. Shirts from the dry cleaner hang on a lamp. To keep costs low, Ethan and Yaron and Aaron didn't buy professional whiteboards. Instead they picked up bathroom tile at Home Depot and drilled it into place with drywall screws. It feels like a hastily constructed bookmaking operation. If the cops got wise to them, they could wipe down the whiteboards and meet up in a cafe in Aruba.

Starting a company like Redbeacon is paradoxically risky. It exposes Anderson, Binur, and Lee to enormous financial risk, and yet the three are the opposite of swashbucklers. They are as cautious as they are frugal, rarely proceeding without typing out an agenda first. They spend hours scrutinizing even small product modifications on their vast flat-screen monitor. They embody the theory of the cautious entrepreneur outlined by Malcolm Gladwell in a recent New Yorker article. Redbeacon's founders took one gigantic risk to start the company, but they have spent every moment since attempting to minimize and manage risk.

Step 1: Find the Idea

The idea for Redbeacon was the result of a methodical search. Anderson and Binur had become friends at Google, where Anderson was the product manager in charge of launching Google Video outside the United States and Binur led the product development of Google News. Both were itching to start their own business. They got together twice a month to discuss what kinds of companies they could start. Each had to put together a presentation and pitch.

In June 2008, they finally found an idea that had enough potential to make them take the leap. At a Harvard Business School reunion a month earlier, Anderson had run into a friend who told him about a just-in-time labor service in Japan. Anyone who needed a part-time worker could contract immediately with available workers in the vicinity of the job. Anderson and Binur didn't think American labor laws would allow them to duplicate that, but they wondered if they could use the same concept to help consumers find local service providers faster and cheaper.

The co-founders of Redbeacon are buoyant and cheerful for people who work such long hours and face such long odds. All in their mid-30s, none of them cashed out with a big fortune from Google. They don't drive fancy cars. Binur lives with his girlfriend in student housing at Stanford, where she is a Ph.D. candidate. Money isn't nearly as important to them as the thrill of being under the steam of their own idea.

They talk about being entrepreneurs as a psychological trait, not something tied to a specific venture. "As an entrepreneur, you're always looking," says Anderson. Just a few years after graduating from Duke in 1998, he tried to start a service that that helped people who bought products from e-retailers return them quickly. It never launched, but the subsequent years in which he worked for other companies were merely a pause before his next venture.

While earning his masters at MIT, Binur helped launch a nonprofit that helps Israeli and Palestinian students learn computer science via joint classes in Israel. A citizen of Israel who spent part of his childhood in New York, he served as a staff sergeant in a paratroopers unit of the Israeli Defense Force. He traces his entrepreneurial roots to the immigrants of his home country. "Those who survived the Holocaust were the ones who left early and took quote-unquote risk. Those who stayed and wanted the good life and didn't want to take the risk actually died. Those who left took a lot of risk and came to this place that was a desert and built something. That really drives me."

Soon after Binur and Anderson conceived their plan, they brought in Lee, a Ph.D. in computer graphics, who was one of the founding engineers on Google Video. In August 2008 Anderson quit Google. The other two quit shortly thereafter. For the first three months they brainstormed before Lee sat down to start building the site and the analytic tools they use to measure its performance. Binur, who is also an engineer, lent a hand but his primary task is product management and strategy—understanding user behavior and luring service providers. Anderson took charge of sales and marketing.

To convey how quickly people would be able to summon professional help, they named their company Redbeacon, inspired by the police signal in Batman. When the authorities need Batman, they illuminate a beacon in the night sky. Just tell Redbeacon you need help, and assistance will arrive just as fast.

Here's how Redbeacon works: If I need a plumber Tuesday at 4 p.m., I type that request into Redbeacon.com, and shortly thereafter I get price quotes from plumbers who can make that time. I pick the one I like (based either on price or their quality ranking or a combination) and schedule the job. I haven't had to talk to anyone, and the job is at exactly the time I want. (No more waiting between 2 p.m. and 6 p.m.) Redbeacon intends to make its money by taking 10 percent from the plumber of every completed deal.

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