After the gold rush Featured

8:00pm EDT May 29, 2003
Chat with FreeMarkets Inc. founder and chairman Glen Meakem for a short while, and it grows apparent that he has a passion not only for business, but for politics and history as well.

He is every bit as animated and enthusiastic when he talks about geopolitics and world affairs as he is when he's telling the FreeMarkets story.

The windows of Meakem's office in FreeMarkets Center offer a striking vista of the Allegheny Valley. Given his perspective, the generous view of the landscape could be more than the usual corner office that so often comes as an executive perk.

One could argue that it stands as a metaphor for the way he views the world and his company's place in it.

"We don't have too many deals where there isn't an international component," says Meakem.

Which comes as no surprise, given that FreeMarkets' business is built around arranging reverse auctions online for its clients, often large international companies. In just eight years, FreeMarkets has gone from an idea to a public company that serves clients like Eaton Corp., Cooper Industries Inc. and Heinz Inc.

What might be surprising to some is that while lots of dot-com start-ups came, raised millions and flopped, FreeMarkets has survived. That survival, says Meakem, has come out of a culture that demands performance and a desire to create value for customers, not extravagant fortunes for its founders.

"People started businesses during the bubble not to serve customers but to try to cash out quickly and make billions on the stock market," Meakem says. "I've never heard of a successful company that was around one, two, three, four, five years later that was started on that basis."

FreeMarkets, a company that provides its customers with software, service and information to assist them with every phase of supply chain management, could have been just another dot-com fizzle. By contrast, FreeMarkets, founded in 1995, posted revenue of $170 million in 2002 and employs more than 1,000 people in 14 countries.

Business at the speed of light

Meakem, who earned an undergraduate degree at Harvard University and then went on to get his MBA there, got the entrepreneurial bug early. He started a lawn cutting business as a youngster, and later, a house painting company.

"I always wanted to start my own company," Meakem says. "I'd always seen myself as an entrepreneur. I'd always felt that the way to make a lot of money and have an impact on our society and the United States was to not just work for a corporation in the ranks somewhere but to actually start a company."

Meakem was looking for an idea for a business when the Internet was just beginning to show promise as a tool that would transform business. He spent time with the marketing arm at Kraft-General Foods Corp. and with consultant McKinsey & Co.

At General Electric Corp., he worked on a team that was looking at the concept of Internet auctions, then left in February 1995 to start FreeMarkets with partner Sam Kinney.

"Once I conceived of the idea that we could have people from businesses from all over the world bidding against each other in real time at the speed of light for business with other companies, I realized that the whole world was going to change," says Meakem.

FreeMarkets went about restructuring the procurement system, attempting to replace golf games, relationships and manual negotiations with an online marketplace that proposed to pit bidders against each other in real time online transactions conducted on the Internet. A company would put out for bid commodities or services, and a group of vendors, pre-screened by FreeMarkets, would vie for the contract.

The model proved successful, and FreeMarkets went public in 1999 in a highly anticipated IPO that found the stock at $370 a share at the end of the first day of trading and raised $200 million. The stock remained high for a time, but ultimately plummeted, dropping in value as the dot-com bubble burst.

Although its market capitalization is nowhere near the $8 billion it reached at one point, Meakem points out that creating a company that is valued in the hundreds of millions of dollars is no small feat. And, he adds, cashing out wasn't the object for him.

"I wasn't worried about getting rich fast," Meakem says. "I wanted to get rich in the long run. We designed it to go public, but I didn't know if that would take five years or 10 years, and it didn't matter to me."

While the dot-com gold rush helped FreeMarkets raise millions with its IPO, in other ways, it hurt the company. Competitors scooped up cheap venture money and burned it quickly. Many ultimately crashed, but they created competition in the marketplace nonetheless.

"It would have been a lot better for us if the bubble had never occurred," Meakem says. "Any crackpot person who put together 10 pages of PowerPoint could get $10 million in 1999. Most of the competitive entities along the way have failed, but a lot created a lot of noise for a long time."

The historical data tends to back up his assertion. According to research firm VentureOne, venture-backed IPOs in information technology numbered 175 in 1999. In 2001, that had dwindled to just nine.

By the second quarter of 2002, there were just three.

A culture of performance

If a dedication to providing value to the customer is the first objective at FreeMarkets, then the way to deliver it springs out of a culture based on individual performance.

"When I started FreeMarkets, I was 31 years old," Meakem says. "I believed that I had a unique capability to hire great people."

Now, he says, he's learned that hiring the right people isn't as easy as he once thought.

Holding onto those high performers is accomplished through getting people into the right roles, frequent evaluation of performance and a combination of financial incentives, professional opportunities, job satisfaction -- and a willingness to cut loose those who, for whatever reason, aren't cutting it.

"We evaluate performance every six months, everybody," Meaken says. "As people get feedback and they get career direction, we get a feeling for how strong or weak we are in different parts of the company."

At 39, it would seem that Meakem has opportunities at least as wide as the global market where FreeMarkets does business. He says his top priority is raising his five children and not allowing them to become "a bunch of lazy rich kids."

As for FreeMarkets, "I intend to be at FreeMarkets for years to come. There's a lot of work left to do here."

Clearly, the downside of the tech bubble hasn't blunted Meakem's enthusiasm for technology-based businesses and their potential to earn fortunes for their founders and investors. He's launched a venture capital fund, Chamberlain Investments, which led a $2.25 million investment last fall in Akustica Inc., a South Side-based provider of advanced-design speakers and microphones for wireless communications and consumer electronics.

Says Meakem, "I've got a lot more money to make." How to reach: FreeMarkets Inc., www.freemarkets.com