It took five years for Mark Powell to turn the handwritten business plan he scribbled on two sheets of notebook paper into a company worth nearly $50 million in annual revenue.

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It took five years for Mark Powell to turn the handwritten business plan he scribbled on two sheets of notebook paper into a company worth nearly $50 million in annual revenue.

On Dec. 10, Kirkland-based HouseValues went public, selling $93.8 million in shares, making it the biggest initial public offering by a Washington-based company in three years.

But Powell’s story is hardly about a dot-com that raised gobs of capital during the boom. Rather, it’s more about how Powell struggled to get attention in a market that went from burning hot to ice cold.

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At one extreme, it took him four months to find an available lawyer. At the other, he had the honor of saying he had been denied financing by every venture-capital company in town.

Today, at the Northwest Entrepreneur Network’s venture breakfast, Powell, 45, plans to share his tale of success and the lessons he learned as a first-time entrepreneur.

He came up with the idea for HouseValues in 1999 as a real-estate agent with Windermere.

As a former direct marketer, he tried everything to attract clients. He sent mail and cold-called potential customers. The most success came with a Web site he built that allowed people to gain more information about specific neighborhoods.


HouseValues



The Kirkland-based company creates lead-generation and contact-management tools for real-estate agents.


Management:
Chairman and founder Mark Powell; Chief Executive Ian Morris; Chief Operating Officer Clayton Lewis; Chief Financial Officer John Zdanowski.


Employees:
266, with 50 job openings.


Customers:
About 11,000 agents.


Service coverage:
Thousands of neighborhoods in the U.S. and Canada.


Major brands:
HouseValues.com and JustListed.com


Financials:
In 2004, $7.5 million profit, or 34 cents a share, on revenue of $47.7 million.


Today’s company is based on the same premise: HouseValues generates leads by offering Web-site visitors a free estimate of their home’s value.

With each request, the user is referred to an agent who pays to be part of the network. That agent can then cultivate the relationship until the customer may want to look for a new home.

Beginning with five agents who signed up in 1999, the company today serves about 11,000 agents across the U.S. and Canada.

Powell is HouseValues’ chairman, having stepped aside as CEO less than two years ago.

Of the many lessons he learned as an executive and entrepreneur, three in particular have stuck in his mind. Here is a summary of the advice he would give others starting a company.


On raising venture capital:

The key, Powell says, is networking.

The critical point in the company’s life came when it had launched in Seattle, Portland and Phoenix. It projected about $200,000 in annual revenue, but needed money to grow.

“I had an anxious feeling,” Powell recalls. “I had no success finding investors, and it was clear that we would need more money.”

He frequently e-mailed potential investors he met about the company’s achievements — new customers, higher revenues or technology advances.

In March 2000, he gave a presentation at an investment forum, where entrepreneurs pitch investors. Powell spent two weeks preparing for 10 minutes, memorizing every slide and word.

It paid off. The morning after the event, a man walked into his office with a check for $100,000.

After that, he was introduced to Second Avenue Partners, a group of Seattle investors who would end up injecting $1 million to start, and to this day serve as mentors and advisers to Powell and the company.

Other tries saw zero results.

Second Avenue referred Powell to every venture-capital firm in town. During one of those meetings, Powell realized he would be turned down by all.

One potential investor interrupted him during his pitch, and said: “I get it, this is an execution play.” The investor meant that HouseValues didn’t have any unique technology, that the company’s business was easily reproducible by anyone.

The “execution play” line is a mantra that continues as a joke at HouseValues today.

“HouseValues is one of those companies that’s looks simple, but there’s thousands of details under the hood. It’s an execution play to the nth degree,” Powell said.

Instead of raising capital, the company survived off revenues.

“The key lesson there is that potential investors are naturally skeptical of entrepreneurs who they’ve never heard of before that have no track record. I cultivated a relationship via e-mail.”

On realizing you need help:
Although Powell knew everything about the company, he was only one man. In early 2002, signs appeared he couldn’t handle all the work. The company had about 75 employees, launched in 34 cities and had about 3,500 agents.

“It outgrew me and my ability to manage it,” Powell said. “I have learned that managing is not my strength; it’s not in my DNA or wiring.”

But Powell was stubborn. He didn’t want to spend additional money on more executives.

Pete Higgins and Nick Haunauer of Second Avenue Partners kept trying to show him that he needed help, but for the most part let Powell figure it out “60 to 90 days after it was too late,” he admits. “They let me feel the pain.”

Soon after, Powell started recruiting for two executives, not one as originally suggested.


On hiring good talent:

Once Powell decided to hire executives, he wanted to do it cheaply. He would recruit and interview the executives himself. A headhunter would be too expensive.

“In hindsight, that was a bad decision,” Powell said.

When running a small, nimble company where each employee has to wear multiple hats, he said he can’t overemphasize the need to hire people for specific skills but who can handle rapid change.

“If I look back over the five years, that is the No. 1 thing that has caused more stress and anxiety,” he said. “The personnel issues are hard. It’s hard to sleep when you know you have to wake up Friday morning and fire someone.”

In all, while Powell was chief executive, HouseValues raised $4 million in financing and used $3 million of it. When it turned profitable, there was still $1 million left in the bank.

For his time, he and his wife have been highly rewarded, together owning a large percentage of the company that is worth roughly $37.3 million today.

“I don’t feel much different than I did five years ago,” he said. “I’m still not comfortable with this position of financial success.”

Next up, Powell hopes to help entrepreneurs trying to start a company. For now, that will take shape as a blog at www.MarkPowell.com.

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com