Tapping into a winning model

TECH MATTERS | Echo Logistics takes page from cousin en route to IPO

If a business model is successful in one industry, than it makes sense to reproduce it over and over again in others. The founders of Echo Global Logistics, which filed for an initial public offering Wednesday, are going for a hat-trick in this regard.

Echo, which was founded in 2005, generated nearly $100 million in revenue last year making transportation and logistics processes more efficient via the Internet. The company manages a network of 16,000 transportation providers on behalf of 4,600 customers via a proprietary web portal. Sam Skinner, a former White House chief of staff and transportation secretary for George H.W. Bush, chairs an impressive board of directors.

Echo is headquartered at 600 W. Chicago Ave. and employs nearly 500 people. Proceeds from the offering, which may reach $100 million, will be used for acquisitions as well as sales and technology investments.

If you recall a different print of this movie released two years ago, don't worry, you're not seeing double. In 2006, two of Echo's founders and their primary venture capital backer took a company called InnerWorkings public using a similar attack to market. Founded in 2001, InnerWorkings manages an online, proprietary network of more than 6,000 suppliers of print and promotional products for more than 4,500 enterprise customers. The company's market cap is north of $600 million and last year generated nearly $300 million in revenue.

Anticipating a third bite at the apple, this time in the media space, serial entrepreneurs Eric Lefkofsky, Richard Heise and Brad Keywell (who was not involved in InnerWorkings) during the last year have raised more than $40 million from preferred venture capital provider New Enterprise Associates for their company MediaBank. In all, these companies have raised more than $90 million from NEA, a Silicon Valley-based firm that is an early investor in scores of public companies including Vonage, TiVo and Salesforce.com. A fourth company founded by Lefkofsky and Keywell, community-oriented Web site ThePoint.com, raised an additional $4.8 million from the firm.

The arrow has not always pointed up with this group's business endeavors. Shortly after selling their first company, Starbelly.com, to Ha-Lo industries for $240 million in early 2000, the market soured on all things Internet. By 2001, Ha-Lo, once a powerhouse in the promotional products industry, wrote off its ill-fated Web venture and shortly thereafter declared bankruptcy. Depending on your vantage point, Ha-Lo either gutted itself with poor management decisions in an overheated market, or the Starbelly gang sold the company a bill of goods.

Of course, much has changed over the past decade. Starbelly had only generated a few hundred grand when it was acquired. That was a time when Internet companies were valued more for their potential than their profits. Not so today. Just as Starbelly was the poster child for all of the excesses of the dot-comedy, InnerWorkings, Echo and perhaps MediaBank illustrate how the Web can be used to really transform old school industries and make a lot of money along the way.

Echo is part of a trend that deserves to be repeated.

In the competitive world of nonprofit fund-raising, many young organizations take an entrepreneurial approach towards securing and deploying their resources. Donors, meanwhile, increasingly play the part of venture capitalists looking for measurable returns on their investments. The Urban Students Empowered Foundation based in Lake View is a program that bridges the education gap between inner-city high school students and their more affluent suburban counterparts. As US Empowered draws much of its support from OCA Ventures and other venture capitalists in the community, there is a heavy premium on demonstrating value with each new initiative.

"It's been evident since day one that measures of success will drive everything we do," said US Empowered executive director Jeff Nelson. He added that the technical backgrounds of the VC donors have helped bring US Empowered's curriculum online.

"Our board has grown US Empowered as if it were a venture-backed portfolio company," said Eddie Lou, a principal with OCA. "We focused on a large problem with a scalable business solution that is being led by a driven entrepreneur and team."

Steve Miller from Origin Ventures and Kapil Chaudhary of the Illinois Innovator Accelerator Fund also serve on the US Empowered board.

Brad Spirrison is a local technology reporter and president of MidwestBusiness.com.