From the January 2003 issue of Entrepreneur

A former computer programmer develops an underground sprinkler system that makes it easier for suburbanites to water their lawns. An ex-CFO finds success designing high-end stationery for people who still enjoy writing letters by hand. A one-time broadband salesman partners with a friend to form an investment banking firm. A former marketing executive decides to open an interactive arcade. An ex-Enron sales lead starts a retail energy company.

These are just a handful of the businesses former employees of Enron Corp. have formed since the high-flying energy company imploded in a wave of accounting scandals in October 2001. And if there is one thing the entrepreneurs learned during their tenure at the infamous Houston-based company, it's to think outside the box.

Enron hired the best of the brightest--the top graduates from the most prestigious business schools--and fostered an entrepreneurial work ethic during its heyday. Great ideas, such as creating a market to trade weather derivatives, were quickly turned into businesses run by the employees who dreamed up the concepts.

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Some former employees admit that when Enron collapsed, they found it difficult to land similar jobs at other companies because the scandal left them tainted. People in the corporate sector did not want to associate with people who may or may not have played a role in Enron's financial shenanigans.

Other ex-employees say Enron's demise created opportunities to fulfill lifelong dreams of starting businesses from the ground up. In that respect, working for Enron--known for its cutthroat competitive environment--gave these former employees the confidence to be their own bosses.

Stepping In to Help

On December 4, 2001, the day Enron filed for bankruptcy and laid off 4,500 employees, John Elder was having lunch with some of Houston's top business executives. "The conclusion was that the most valuable thing at Enron was the employees," Elder says. "We feared Houston would lose major talent, and we wanted to keep these people working in Houston."

So Elder, a principal at Devine & Christopher, a recruitment firm that specializes in the power industry; Mark Slaughter, a private investor and former president and CEO of Reliant Energy Communications; Dan Sudduth, CFO for RoadShowMedia.com and Teligistics; Randy Stilley, a private investor and ex-president of Weatherford International's completion and oil-field services division; and Barry Smotherman, managing partner of Tatum CFO, came up with a plan to help talented former Enron employees get their businesses up and running. The executives started a nonprofit incubator called Resource Alliance Group, a temporary venture showing former Enron employees the ins and outs of running a business. Within just three months, the group helped 25 ex-Enron employees become entrepreneurs, according to Elder.

Resource Alliance Group's first success was Mobius Risk Management, a company that helps large businesses cut energy bills by replacing light bulbs and by scouring the marketplace for low-cost electricity and natural gas contracts. Mobius is headed by two former Enron executives who worked at the company's retail energy services division. Elder says Resource Alliance provided Mobius with mentoring services from experienced business executives, business plan review and development, access to funding sources and office space.

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Eric Melvin, Mobius' 39-year-old CEO, says his firm has turned a profit of just under $1 million since opening in March and was hired to evaluate the energy consumption of Harrah's Entertainment, which operates 25 casinos nationwide. Mobius, which started with three employees, now has a staff of 10.

Resource Alliance Group fulfilled its mission and shut down in October, says Elder. But Elder still mentors former Enron employees looking to start businesses.

Starting Over

There are plenty of sob stories about the thousands of Enron employees who have been unsuccessful landing new jobs since the company's collapse, and those who were locked out of their 401(k) plans and lost their life savings when Enron's stock plunged to pennies a share. But there are also people like 34-year-old Eric Eden, who started his own lawn-watering business after finding it difficult to secure a new job.

"People I interviewed with would think I was involved in the scandal at Enron," says Eden, who worked at Enron for eight years and did some conceptual drawings for Enron's controversial Dabhol Power Plant in India.

Eden said being judged a "criminal" hurt him emotionally. He was depressed and wasn't sure what to do with his life. Eden tinkered in his garage developing home-improvement appliances. When he decided to start his own line of sprinklers three months after Enron imploded, it was a way to prove to the Houston community that he had nothing to do with Enron's failures. "By starting my own business, I could show how an honest person would run a company," he says.

Building Trust
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"After watching Enron do it right, and then do it wrong," Eden says, "my philosophy is, truth persists and cannot be denied or ignored. I believe in Enron's old values that they lost sight of around 1999: 'Respect, Integrity, Communication and Excellence.'"

Eden came up with an idea for a cheaper version of the underground lawn sprinkler for people who can't afford automated systems or consumers who have to move their sprinklers to various parts of the lawn. Eden's product, Watering Made Easy, is a sprinkler that's buried in the ground and attached to a hose.

The sprinkler is sold on Eden's site and at independent hardware stores in Houston. Eden plans to approach national retailers about carrying his product.

"One thing I was asked when I interviewed at Enron eight years ago was whether I was a risk-taker. I had to remind myself that I am," says Eden.

So far, Eden has spent about $5,000 advertising his product on TV and has yet to turn a profit. But he says he learned early on during his career at Enron that perseverance pays off. "Enron gave me confidence and helped cultivate my creativity," says Eden. "I felt like what I was doing affected the future of Enron. The message was 'Be bold and be creative.' The managers were behind the employees, helping them make ideas happen instead of telling them why they wouldn't work."

Nicole Brown-Steed, 51, started as a Web developer temp at Enron in early 2000. A month later, she was offered a full-time position as a marketing executive. She took the job because "Enron was the type of company that provided stability." During the next 18 months, she became aware of Enron's true financial condition and watched "disgustedly" as executives lied about it to Wall Street. When she was laid off in December 2001, she vowed never to work for a corporation again. "My goal was to establish a business where I work for myself, not for another big company," Brown-Steed says.

With a bank loan and $4,500 in severance, Brown-Steed, a self-described video game junkie, opened a computer game center in June 2002 called NicksLand. The arcade lets players compete against others. "This has been a dream of mine for years," she says.

NicksLand is struggling, Brown-Steed says, as consumers cut back on entertainment spending in the ailing economy, but she is betting that the Christmas season and holiday parties will help her turn a profit.

Seeking Fame and Fortune

The possibility of being rich and driving a luxury car was what attracted Evan Betzer to Enron. He was also competitive, a trait needed to survive there.

Betzer, 35, took a job at Enron fresh out of business school in 1998, then left after its downward spiral in October 2001. Rather than entrust his future to someone else again, Betzer, who put together multimillion-dollar deals for Enron's broadband division, decided to test his entrepreneurial skills.

In January, Betzer teamed up with Charles Harris, 32, who worked in corporate finance in Enron's industrial markets division, to form Stoneworth Financial LLC, an investment banking firm that helps small energy and telecom businesses sell or restructure their companies to gain more value. They also help businesses raise capital from banks and investors.

"Starting our own business wasn't an option; it was a necessity," Betzer says. "It took us two months to pool our money and business contacts to start up Stoneworth Financial." In mid-January, after just two weeks in business, Stoneworth had three deals under its belt, far exceeding Betzer and Harris' expectations. "We're no longer worried about getting paid back on our investment," Harris says.

Watching Enron file what was the biggest bankruptcy in U.S. history, Betzer and Harris have learned valuable lessons from their former employer. One key: "Cash flow is more important than earnings," Betzer says. "Enron sacrificed cash to make earnings. I won't ever do that."

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Moreover, Betzer and Harris say it's crucial to listen to their clients and not preach to them what they should do. "It's important not to make the customer feel stupid," Harris says. "I don't want to make my clients think I'm better at running their businesses than they are."

Despite the allegations of fraud at Enron, Betzer and Harris say their success is due largely to the Enron culture, which pushed employees to be innovative. "It was an amazing learning experience," says Harris. "The possibilities were endless."

Getting It Right This Time

As the former CFO of Azurix, Enron's troubled global water company and the company's first big financial failure, Randy Dutton has learned what it takes for an entrepreneur to succeed.

Dutton spends most of his time these days making sure the accounting books are in order at Atelier du Papier, the company he started with his wife, Deborah, 47. Atelier du Papier designs custom stationery and invitations for weddings and other occasions. The fraud at Enron haunts him and also keeps him on his toes.

"My involvement in the paper company is setting up checks and balances. The biggest challenge is managing growth and spending," says Dutton.

In launching the paper company, Dutton drafted a business plan, set up its accounting system and secured a line of credit. Between personal investments and loans, Atelier spent $60,000 getting started.

"We're doing well," says Dutton, who worked at Enron for more than four years. "We've grown nationwide and signed with Neiman Marcus to carry the line." The company also sells directly to retailers at trade shows.

"We make decisions and take risks that you don't often make on the corporate side," says Dutton. "We're creating a market for a product, which is exactly what my job at Enron was."

Live and Learn
Enron's downward spiral drove a stake through the heart of the corporate sector, causing a ripple effect that put other high-flying corporations under the accounting microscope and resulted in casualties such as Adelphia, Qwest, Tyco and WorldCom, to name a few.

The malfeasance by these corporations has already resulted in the passage of federal laws designed to make sure history doesn't repeat itself. But more important, many of Enron's former employees learned some valuable philosophical lessons on how to run a business as a result of their former employer's collapse, and they have some advice for people starting out.

"I think if you treat people fairly and respectfully and give them a good career path, you can build tremendous loyalty," says Phyllis Anzalone, 45, a former Enron employee who started Powering Texas, a retail energy company, in early 2002, just as Texas began opening its electricity market to competition. "Integrity is important to us," says Anzalone. "We're building a name and reputation for ourselves, which means a lot more than money."

Eric Eden, a former Enron employee who developed a sprinkler system called Watering Made Easy, says honesty is a key ingredient to remain in business. "If your integrity is called into question, you're finished," Eden says.

He adds that, like Enron, he wants to empower his employees to succeed-but not at the expense of his ethics. "I place the utmost importance on allowing the people actually doing the work to influence the product and business process," Eden explains.

"I want to align my company's goals with my employees' goals." Ken Rubeli, ex-Enron employee and vice president of Mobius Risk Management, says it's important not to try and spread yourself too thin. "That's what really hurt Enron financially," says Rubeli. "The company believed that everything it would touch would eventually turn to gold. Enron was an energy company, but it wanted to also be a water company, a broadband company, a paper company and anything else it could do to make money. If you get too greedy and lose sight of who your niche market is, you can destroy yourself."


Jason Leopold is the former bureau chief of Dow Jones Newswires. He left Dow Jones in April 2002 to write a book on California's electricity crisis.