The entrepreneur evangelist – iiNet founder Michael Malone’s start-up lessons

You don’t get many firebrand preachers operating out of their mother’s garage. But then Michael Malone was never the standard entrepreneur.

The iiNet founder happily describes himself as an “evangelist” for the internet. In many ways, he has had no choice – he started up the company at a time when the internet was barely in its infancy.

‘Get connected’ is a phrase that Malone is prone to using, which isn’t surprising given that he spent years urging people to get online.

The company’s growth, therefore, is not only testament to Malone’s belief in his product, but his belief in the internet and its ability to change the world.

In setting up his business, Malone had to convince customers they needed a product they had no concept of. In doing so, he’s created a business that has gone from humble beginnings in WA to a 12.4% national market share as of March 2010. The last financial year saw revenue climb to $473.8 million, with a total broadband customer base of 539,000.

Malone describes going into business as a “default decision”, having grown up in WA around his parents’ contracting business.

“If you’d said to my dad, you could earn a bit more money working for someone else, it would have been an alien concept to him,” Malone says.

“I was therefore always thinking ‘what’s the next bright business idea? What’s the one that’s going to work? What’s the next big thing?’”

“The next big thing” presented itself to Malone when he was 23. At the time, the internet was only available in certain academic environments including universities.

“I was graduating from university and I was going to lose my internet access. I looked at the cost of getting a link for myself and it was about $25,000 a year – this was in 1993 – to run my own link. It was a 14KB link to the US, so a very slow dial-up modem,” he says.

“There was no way I would’ve been able to afford that so I asked a few other students at uni if they would chip in. That was my market research. Two hundred customers paying $25 a month would cover my costs, so that was my business plan.”

Fellow uni student Michael O’Reilly asked Malone if he could come on board, offering his technical skills, forming an ideal partnership of entrepreneurial spirit and technical knowledge.

“Michael was the techie guy. Relatively speaking, I’m a bit technical but my degree was in maths so I didn’t know much about computing or IT,” Malone explains.

In order to fund the equipment and connection for the first six months, Malone combined $15,000 of his own money with a $10,000 loan from his parents. He says applying for a bank loan wasn’t an option.

“I had no assets. I was living at home operating a business that banks didn’t understand. There’s no way a bank would’ve loaned me money,” he says.

“The first hundred customers – half of them would’ve been people like me. People who had just graduated from university, people who had been in the hard sciences or people who were in really niche areas like language studies and genealogists.”

“No one had heard of the World Wide Web yet, but that changed in October 1994. A year after we started, there was a piece of [web browser] software released called Netscape, which changed everything.”

“When Netscape got released in late ’94, it had taken us a year to put on a few hundred customers and then we put on 1,000 customers in three months.”

The business began in Malone’s mother’s garage, which meant installing multiple phone lines. For every customer that called the company, there needed to be a phone line.

According to Malone, he took every opportunity between 1994 and 1995 to “evangelise” the internet.

“I spoke at education conferences, the local rotary club – any opportunity to stand up in front of a group and tell them ‘you’ve got to connect’,” he says.

“I’d always hand out brochures, with every ISP in the state that I was aware of in alphabetical order, so I made sure it wasn’t about joining iiNet but just getting online.”

“With each session, I’d come up with a bunch of applications or websites or chat channels or news groups that were relevant to that sector.”

“I wasn’t out there telling everyone to buy my product. I was out there saying ‘this can transform your life’.”

“Like any new technology, if you can inspire one or two people in each audience to give it a go, their words when they start telling everyone else what they’ve done are far more powerful than mine.”

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