Technology
Can the E-mailman Deliver?
By By Randy Woods September 18, 2008
Ron Wiener wants to open your mail. He doesnt want to read it, but hell scan it, track it, forward iteven shred it if you ask him to. As CEO…
Ron Wiener wants to open your mail. He doesnt want to read it, but hell scan it, track it, forward iteven shred it if you ask him to.
As CEO of Seattle-based Earth Class Mail, Wiener has a vision to drag the worlds postal services into the 21st century by digitizing them. Trying to transform such an established, complex systemthe oft-ridiculed snail mail of the U.S. Postal Service (USPS)may seem like a Herculean task, but Wiener has a way of winning people over.
Just ask Rajeev Dujari.
In October 2006, Dujari, a 15-year Microsoft veteran, attended a Keiretsu Forum angel investment presentation from Wiener about an early version of Earth Class Mail, then called Document Command.
Before I heard him speak, I thought it would be the most uninteresting presentation in the bunch, honestly, Dujari now admits. I thought the postal industry was a dull subject.
But as Wiener spoke, Dujari became intrigued with the business model: For a fee, postal mail is sent to a facility, where it is scanned, digitized and sent electronically.
A little more than a year later, Dujari joined the company, serving as senior vice president, products. It took Ron a little while to persuade me to sign up, he adds. But I liked the sheer audacity and boldness of his vision. At Microsoft, I got hooked on doing things with big impact, and it seemed like there were so many ways to take [Wieners] technology.
In January 2008, Earth Class Mail completed a Series A financing round worth $13.3 million, most of which came from members of the Keiretsu angel network. Wieners board now includes chairman Chris Kwak of 2K Advisors LLC, Jonathan Roberts and Robert Headley of Ignition Partners, and document-scanning whiz Kenn Dahl of Prime Recognition Corp.; his board advisor is Ken Lynn, former assistant postmaster general of the USPS.
How did a serial entrepreneur, whos had only mixed success with five other venture-backed startups, convince this high-powered lineup to take on the mighty postal service?
This is one of the most potentially life-changing companies Ive seen, says M. Todd Dean, president of Keiretsu Forums Northwest chapter. Ron is an excellent communicator. He is able to present very effectively to his investors.
If anyone can take on one of the worlds biggest bureaucracies, the supremely confident Wiener thinks hes the guy to do it. He seems to enjoy the spotlight. He challenges his critics by responding to negative blog posts. On his business cards, he lists his title not only as CEO but also as Postmaster General. Hes even a cable-TV star, as the subject of the MOJO networks Start-Up Junkies series (see sidebar).
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When Startups Meet ‘Reality’
Those who have gone through the process of launching a startup know how grueling it can bethe months of 18-hour days, the unexpected crises, the constant scramble for the next dollar. Now, imagine it with a camera in your face every day. Thats what Earth Class Mails Ron Wiener had in store last year when he agreed to be the subject of Start-Up Junkies, a reality-based miniseries that ran from late January to mid-March of this year on cable televisions MOJO HD network.
Though some have criticized Wiener for hogging the spotlight, he says he was the one who was approached by Screaming Flea Productions, which produced the show. They called us out of the blue, he says. They had gone to [Seattle P-Is] John Cook and asked him for the most likely company to get venture backing.
After the network chose Earth Class Mail, the cameras started rolling for a test reel in April 2007, while Wiener was still looking for venture capital. Start-Up Junkies was an instant hit (by cable standards, anyway), generating loyal fans. People still keep asking me when the re-runs will come on again, Wiener says. Some found it pretty addictive. While no major disasters occurred on camera, there were some tense moments, including a scramble to get the website running for a presentation in Barcelona and the nearly fatal exit of venture capital firm Maveron from the Series A round.
All in all, Wiener says the experience was a net positive for the company and helped bring attention to Earth Class Mailand maybe a new contract. Wiener could give very few details at press time, but he did say that because of the exposure from Start-Up Junkies, a large set of government agencies have shown interest in his digital mail system.
However, the show took a few liberties. They edited some scenes to come up with fake conflicts and added a music track. Real life is never that exciting.
The show was tough to do, Wiener says. Theres a reason no one else has done it before, he adds, but, in the end, were glad we took the risk. R.W.
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In characteristic fashion, Wiener sums up his competition: There are some small ankle-biter competitors out there who do document scanning, he says from his modest, sparsely appointed office in Pioneer Square. But they cant scan the large amounts of small items like we canand even if they did, theyd have to overcome our patents. Nobody is doing what we do.
Freight Train A-comin
The concept of Earth Class Mail looks simple, at first, but questions start creeping in: Do we really need this service? Why should we pay strangers to open our mail? Isnt mail going to be all digital someday?
Wiener has heard these criticisms and understands investors trepidation. But hes also ready with a list of reassurances and will happily explain each point to whoever will listen. The biggest misconception about us is that people think were advocating the continuation of paper mail, he says. What we do is convert paper into an electronic format.
Although much of its operations are now based on the processing of mail, the long-term goal is to license his patented sorting and scanning technology to enterprise customers and postal services worldwide. We had to develop a physical operation to get the vendors interested, he explains, but we dont want to be in the physical operations business for very long.
One of the big questions I had before I signed on with Ron was Is this about software or is it about bending metal? says Dujari. The labor component was an initial concern. But a lot of that cost goes away through the automated [sorting] equipment.
Within about three years, Wiener says the USPS will face a historic crisis of fuel costs and pension burdens for the agencys 800,000 workers. Its coming like a freight train, he says. Each time the price of a stamp goes up, the increase usually only covers inflation. The USPS, which handles about 55 percent of the entire worlds mail, spends $6.5 billion each year on energy alone.
While mail may be going digital in the near future, it wont happen overnight, Wiener says, and Earth Class is poised to handle this long transition. For 20 years, people have been saying mailers will go paperless, and volumes are shrinking each year, but they still shipped 212 billion pieces pieces of mail last year, he notes.
Some people get confused about whether Earth Class is a business-to-business or a business-to-consumer model, but the companys COO Carl Hicks says it is actually both. Ron describes this model as deliberately unfocused, Hicks says. Everybody you look at is a potential customer. They can be individuals; they can be entire countries.
Currently, Earth Class Mails main customers include American expatriates, soldiers stationed in Iraq and Afghanistan, and at least one Fortune 100 company that Wiener would not disclose. Others include Hollywood clients, IT consultants, bankers and sales executivesbasically, anyone who has a mobile lifestyle, he says. The average customer spends about $400 per year in services and membership fees.
Earth Class Mail is also in the process of digitizing mail for a large corporate client. (While Wiener could not comment on official plans, The Seattle Times reported in June that a possible deal to provide mailroom services for Sprints internal operations was being discussed this spring.)
This really is about breaking a whole paradigm, Hicks says. Mail is really the last analog form of communications.
How It Works
For between $10 and $60 a month, depending the amount of mail received, Earth Class Mail users have all or part of their mail forwarded to one of the companys 23 receiving points across the United States.
The main processing plant, in Beaverton, Ore., is a football-stadium-sized windowless former robotic warehouse that can store up to 600 million pieces of mail. Because the 60,000-square-foot building had been idle for several years, Wiener was able to lease the facility for less than it costs to rent the firms tiny office space in Pioneer Square.
As mail arrives, workers send it through an EcoSystem mail processing machine, record the weight and dimensions of each piece, and stamp every one with a unique bar code that will be used to track the envelopes through the system. Then, the outsides of the envelopes are scanned on both sides, in color, and the images are sent to the customers inboxes.
Once customers log onto the website to view their mail, they have three basic options: open and scan, shred or recycle and forward or archive. On average, 46 percent of incoming mail in the system is scanned, about one-third is shredded and the rest is forward-shipped or archived.
Earlier this year, Earth Class teamed with Wells Fargo to offer a service that automatically deposits mailed checks into customers accounts. We believe that individual entrepreneurs should enjoy the same direct-deposit benefits of those in larger corporations, Dujari says.
To protect privacy, Earth Class complies with national and international data privacy laws. All the sorters at the Beaverton plant, many of whom are disabled military veterans, receive a rigorous background screening that is equivalent to a Department of Defense clearance check.
Each person who receives mail is different from the person who opens the mail, Wiener says. Soon, well have the ability to let customers watch their mail get opened [via video], just to give them peace of mind.
For small businesses that seek a little extra clout that only a street address can provide, Earth Class has set up a physical office in downtown Seattle and recently opened three other premium addresses in San Francisco, New York and Los Angeles. So, when a new business starts, it can have a Park Avenue address even though its located in Bellevue, Wiener explains.
History on Paper
Wiener may have revolutionary ideas about saving energy and reducing paper usage, but hes hardly a tree-hugger. He is first to admit that part of the motivation for Earth Class Mail is karmic atonement. As he describes it, I ran two catalog companies; I killed trees for a living.
The New York native, educated at Carnegie Mellon, held several marketing positions at various computer hardware firms and ran a San Jose, Calif.-based avionics company, Azure Technology, until 1991. A few years later, he settled in the Portland area and began to flex his entrepreneurial muscles. In 1994, he created Distribution Sciences Corp., which published JetStream, a catalog that served the aviation industry. Nearly four years later, he founded PrintBid.com and PaperDeals.com, two online commercial printing firms, which were later sold to ImageX.com. In 2000, he launched a secondary domain-name marketplace called SnapNames.com.
One of the motivators in the creation of Earth Class Mail was his own unpleasant experience dealing with mail. I found I spent too much of my day running back an forth between various P.O. boxes for my businesses, he says. I thought how nice it would be to just handle all this online.
Wiener and a team of engineers began working out the logistics of merging postal mail with e-mail at his own Portland-based business incubator, Venture Mechanics. With the help of angel investors in the Portland area, Wiener put up most of his own money to launch an Earth Class Mail prototype called RemoteControlMail.com in 2004.
Wiener, a licensed pilot, even sold his beloved Beechcraft Bonanza airplane to get the business off the ground.
Soon, however, he grew frustrated with the lack of investors in Portland and began looking north to Seattle and Keiretsu Forum. Theyre one of the reasons we decided to move to Seattle, he says of Keiretsu, which he signed onto in 2006; the switch to the name Earth Class Mail came in early 2007.
Life With Ron
Wiener definitely hit it off with the Keiretsu members, but that success hasnt always happened in his various business deals.
Keiretsus Dean clearly remembers one of the first times he spoke one-on-one with Wiener. He met me in my officeIll never forget this, Dean recalls, laughing about it now. He had his arms crossed and had defensive body language. I remember thinking This entrepreneur is probably on his last dollar. Ron then says, Why should I have to pay you for me to present my company to your [Keiretsu] investors?
These days, Wiener has toned down his brusque manner. Although Ron can come across as stubborn, hes just very focused on growing his company, and sometimes that rubs people the wrong way, Dean says.
Part of his confronational reputation comes from his experiences with staff turnover in his other startups, Wiener says. Its really important to get the chemistry right, he says. I have picked the wrong investors and the wrong board members before. With [Earth Class Mail], Ive been extremely diligent about people taking a ride.
Although feelings may get hurt in the process, Wiener says, CEOs must continuously weed out those who are not aligned with their vision. Entrepreneurship requires high turnover, he adds. If a startup has flamed out, usually its the one where the original founders stuck together.
In the online world, however, its easy for grudges to fester. Usually, whenever Wieners name shows up in John Cooks Venture Blog on the Seattle Post-Intelligencer website, a litany of mostly negative comments spew forth from anonymous posters, who criticize Wieners business model, question his leadership skills and claim that he is widely disliked among the Portland business community. Ive learned not to take the comments of unregistered users too seriously, Wiener notes.
During the due diligence process at Keiretsu, however, Dean found Wiener to be very congenial and responsive to investors concerns. Each month, he says, Wiener sends out what he calls angelgrams to let Keiretsu members know the latest developments in his company.
I watched over time how Rons pitches got better, Dujari says. Each time he would spend less time talking and more time fielding questions. Audience participation became a bigger part of the presentation each time.
Forwarding Address
While the USPS would be the fattest target for Earth Class Mails technology, Wiener says the greatest opportunities are abroad. We never expected to partner with the U.S. Postal Service, he says. The rest of the world has been a lot more favorable place to privatize postal services.
Norway, for example, doubled its revenues by privatizing its postal service, he says. The Swiss made a billion-dollar profit last year by relaxing, or liberalizing, its postal regulations, despite costs that are two to three times higher then they are in the United States.
According to The Seattle Times, Wiener will establish residence in Switzerland next year to be closer to the European postal markets. Wiener, however, would not confirm the rumor and says there are no plans to uproot the firm from Seattle. We have a close relationship with Microsoft and Ignition Partners, and we want to continue that, he explains.
Today, Earth Class has more than $20 million in investment funding, Wiener says, and is planning another venture round. We could be cash-flow positive already, but we want to grow more, he says. In the next two years, he says the Beaverton plant will showcase the firms proprietary MegaSorter machine that can process millions of pieces of mail per day.
Meanwhile, in August the USPS reported a $1.1 billion loss for its fiscal quarter, ended June 30. Total mail volume for the quarter was 48.5 billion pieces, a 5.5 percent drop from the same period last year.
Until the USPS starts calling him back for help with its troubles, dont be surprised if you see Ron Wiener on the shores of Genevas Lac Leman, trying to change the worlds postal habits, one country at a time.
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