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Life of Riley
Wharton Grad Gets Yahoos out of Entrepreneurial Adventure.
When Jerry Yang, a co-founder of Yahoo!, offered Rich Riley $5 million for his little internet company, Log-Me-On.com, Riley was — outwardly, at least — impassive.
"We were thinking of something closer to $50 million," responded Riley, who at the time was 25 and only three years removed from the completion of his undergraduate degree at the Wharton School.
Inside, a debate raged between his practical side — "Take the money. We never expected to see this much." — and his prideful one — "They've got nothing like our technology, and it'll push them ahead of competitors." In between sessions with Yang and other Yahoo! executives, Riley would retire to a nearby room to confer with his two partners, and they'd try to hash out what to do.
In the end, it was Riley's dad who advised him to settle for something closer to Yang's figure, rather than holding out for more. "He said, ‘If you sell for $10 million, you're not going to look back and ask, ‘What if we'd sold it for $20 million?' But if you get zero, you're going to wish you'd sold it for $10 million. That was great advice. It was hard because a lot of people were whispering in our ears that we could get even more."
After the sale, Riley elected to stay at Yahoo!, figuring that he'd hang around for a year or two to help integrate his little firm into its new parent. Log-Me-On had devised a way for computer users to retrieve their passwords and bookmarks on any internet-connected computer. Six years later, Riley still works at Yahoo!. And he's still waiting for it to become "too big and bureaucratic" and drive him out. Today, he's the head of Yahoo! Small Business, which aims to provide all of the online services that America's 26 million small businesses need.
When Riley graduated from Wharton in 1996, he seemed destined for a career on the Street, not in the Valley.
The son of a tax accountant and a consultant, he'd been fascinated by investing since high school in Austin, Texas. He still looks much like the football player he was back then — square jaw, broad shoulders, blond hair cut conservatively short. He displays none of the dishevelment or insouciance so common among the technoratti.
He chose Wharton for his undergraduate work because he believed it was the best place in the country to study finance. "I first learned about it in reading a Donald Trump book in high school," he says. After his Wharton graduation, he took a job in New York with the Donaldson, Lufkin Jenrette investment bank. "On Wall Street, you're surrounded by some of the smartest minds and hardest working people, and you're working on high-impact stuff — M&A transactions and leveraged buyouts. I really enjoyed it and thought I'd stay an investment banker or move into private equity."
Soon enough, he switched to private equity, taking a job at J.H Whitney & Co., a venture-capital firm. Meanwhile, he began begun toying with the idea of entrepreneurship. Like so many entrepreneurial journeys, his began of frustration, of the sense that, "There's got to be a better way to do this." Specifically, Riley wanted to find an alternative to toting around a slip of paper on which he'd scribbled all the bookmarks, user names and passwords for the websites that he used at work. Every time he found himself on a new computer, he'd have to key in his information anew.
"The initial concept was, ‘There's got to be a way to keep all of this in one place,'" he recalls. "I reached out to one of the IT guys at the bank I was working at. He liked the idea, so we grabbed his brother and tried to set out to solve the problem."
At first, they devised a website where the information could be stored. That soon evolved into what Riley calls an "instant toolbar." "We started to think about how to get it embedded in the browser. You'd just click it, install it, and it was there. We filed a patent on the technology behind making that happen, and that's what we ended up selling."
Attracting Yahoo!'s interest took a little crafty marketing on the part of Riley and his partners. They wrote letters to the top executives at Yahoo! and two of its competitors, Excite and Lycos. A friend at a venture-capital firm put them in touch with the chief executive of Excite, who liked their technology. For months, though, they didn't hear from Yahoo! Eventually, through another channel, they were able to apprise the folks at Yahoo! of Excite's interest. Suddenly, Yahoo! began calling, too.
Within a few months, they'd closed the deal, and Yang had invited Riley to join Yahoo!. "He made of a joke out of it, saying, ‘Based on what you've gotten us to pay for your company, we'd like you to do that for us, too.'" When Riley signed on, Yahoo! had 800 employees. Today, it has about 10,000.
Riley doesn't rule out pursuing another entrepreneurial venture, but for now he finds working for a company with Yahoo!'s heft and brand name liberating. "I get to focus on the business strategy and not how much an engineer with ten years of experience should be making. A lot of the infrastructure is taken care of."
That's not to say that his professional life is easy. Like many Silicon Valley firms, Yahoo! values risk-taking and expects its staffers to experiment with new ventures, even risky ones.
"Our culture is that there's a lot of learning in something failing," he explains. "You're expected to deliver your numbers. But it's also understood that a lot of stuff in our industry hasn't been done before, so as long as you have your plans B and C and don't make repetitive mistakes, it's OK to fail. It's better than not trying."
One of Riley's big bets at Yahoo! Small Business — he refuses to identify it more specifically — failed to deliver the 40 percent growth rates that he'd led his bosses to expect. "Their response was, ‘This is critical for your making it to the next level — how you manage through failures, how you keep your team motivated, how you react.' It ended up being a painful but positive experience."
As a division leader, Riley's job involves plenty of entrepreneurial management and marketing. But he finds that his finance training from Wharton helps him in unexpected ways. "I've been able to really understand what our P&L says, what drives it and where our costs are. I've found that a lot of people really don't have a strong command of finance, so that's been a nice differentiator for me. A lot of people wish they had a better command of it."
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