Beyond Their Years

Cloud Star Corp.
Company description: Healthy pet products and food
Founders: Jennifer Melton, 29, and Brennan Johnson, 29
Year started: 1999
Location: San Luis Obispo, California
2003 projected sales: $6 milllion

A trip to an animal shelter changed the lives of Jennifer Melton and her husband, Brennan Johnson. After adopting an 8-month-old shepherd mix, Melton discovered that the dog had severe allergies and a very sensitive stomach. "I started making her food because I couldn't find anything on the market, either food-wise or treat-wise, that could satisfy all her allergies," says Melton.

Their passion for their dog's health inspired Melton and Johnson to create their own line of bake-at-home dog treats that were free of the soy, corn and dairy often found in most commercial products. They started selling the treats in 1999 and soon expanded their offerings to include dog shampoos and conditioners, pre-made treats and dog food. "Most of our growth and our decisions for which area we wanted to go into have been from listening to our customers and what they want from us," says Melton.

Selling strictly wholesale, San Luis Obispo, California-based Cloud Star Corp. is set to hit $6 million in sales for 2003. And with all three of their dogs having come from shelters, they regularly donate both dog products and a portion of their profits to shelters and humane organizations. Says Melton, "We knew that was something we really wanted to emphasize." -N.L.T.

Success Secrets
Entrepreneur: Did you face any skepticism when you first brought your products to market?
Jennifer Melton: Brennan and I still joke about it. Absolutely, people thought we were crazy. One of the first calls I made, a guy told me, "What makes your dog bone the best dog bone out there? Everyone's making the best dog bone." I think if you listen to what your skeptics are saying, it gives a little bit more of a [target] in which to respond to that skepticism. For us, it was truly having a unique product in the [area] of allergies for dogs.

Entrepreneur: How did you start selling and distributing your products?
Brennan Johnson: We attempted to go national from the beginning. We created databases of health-food stores, gift stores and pet supply stores across the country and started doing targeted mailings quarterly. And we still do mailings quarterly to a pretty extensive database of retailers.

Entrepreneur: What would you say have been the biggest rewards of opening Cloud Star?
Melton: For me, [it's when] we get these great letters from customers who've been using our product: "Thank you so much. Your dog treat is the first treat my dog's been able to have in five years." Things like that are really nice to hear.

Alienware Corp.
Company description: Customized computers for gamers
Founders: Alex Aguila, 36, and Nelson Gonzalez, 38
Year started: 1996
Location: Miami
2003 projected sales: $135 million

Attention, all gamers: The mother ship has landed. Alex Aguila and Nelson Gonzalez aren't extraterrestrials, but the story behind their business, Alienware Corp., is out of this world, considering they project 2003 sales of $135 million-after starting out in a garage with only $13,000 in 1996 and, to this day, never taking outside financing.

A longtime gamer, Gonzalez disliked changing his computer hardware to optimize PC systems for games. Finding no company offering PCs designed for game enthusiasts, the IT manager decided to use his tech skills to offer customized computers. He asked his childhood friend Aguila to join him. "He's intelligent, aggressive and extremely obsessive," says Gonzalez. "That's the kind of personality I needed."

Alienware computers-often called the BMW of computers for gamers-are sold direct and via online electronics store Ebgames.com. With PCs resembling colorful alien heads, "ours tend to be more mean, more aggressive," says Gonzalez. "We introduced sexy colors in a hot-rod environment." The alien theme is apparent: The flagship model, Area 51, and the company's Miami headquarters, dubbed the Mother Ship, are just a couple of examples.

Alienware plans to continue offering technology to power- and performance-hungry gamers, while also courting the growing market of computer users who appreciate a better-quality product. They're taking over the PC world, one user at a time. -A.Y.P.

Success Secrets
Entrepreneur: What is special about your PCs?
Nelson Gonzalez: We assemble a machine specifically for performance, using the best parts available. Then we tweak the operating system so it's very vanilla, not loaded with stuff you don't really need, but optimized for gaming and performance. Dell recently got into this business, but we are very competitively priced, probably less expensive. Because we're dealing with the high end, we're able to leverage those relationships, and now we're very comparably priced at the higher-end ASP.

Entrepreneur: Who's your typical customer?
Gonzalez: It tends to be male, but actually the majority of the people who buy our machines are probably wives or mothers for men age 18 to 50. These men are professionals making over $70,000 or so and have multiple computers at home. They've bought off-the-shelf stuff, have built their own machine, and find that we bring a lot of value for what we give in terms of performance, upgradability of a box and support.

Entrepreneur: How is your marketing different?
Gonzalez: We're very honest with our customers first and foremost, so it's a completely different approach than what is being done out there in the PC industry. If you see an advertisement from us, you'll see a $3,000 price-tagged system. We put down all the details of what components you're getting. It's almost like we're selling a turnkey solution vs. a $999 computer that will upsell you on everything else.

Entrepreneur: You haven't ever had outside funding?
Gonzalez: Our business has grown organically. We're very proud of that accomplishment, probably that more than anything else. It's so tough to expand operations and grow a business organically; it takes a strong management team to do it effectively.

Liquidation.com
Company description: Online marketplace for corporate asset liquidation
Founders: Bill Angrick, 35, Ben Brown, 30, and Jaime Mateus-Tique, 36
Location: Washington, DC
2003 projected sales: $60 million

Started during the Internet boom, Liquidation.com is an online emporium where corporations sell their excess assets to the highest bidders, typically generating higher returns than conventional liquidation methods. Co-founders Ben Brown, Bill Angrick, and Jaime Mateus-Tique knew from the beginning that the simplicity of their business plan would spell success. "Sellers always have assets to sell in our economy," says Angrick. "So we provide a very simple business that fills that need."

It was Angrick's vision for an efficient, one-stop online shop that moved investors in the early days. But Liquidation.com set itself apart by avoiding the excess of other dotcoms. It was bootstrap city-to the point that Angrick and Mateus-Tique shared a 300-square-foot studio apartment near their Washington, DC, office.

Those days are behind them, as the trio expects $60 million in sales this year. And revenues come not just by serving the sellers' needs-Liquidation.com is a prime resource for smaller start-ups to find wholesale merchandise that they can resell via stores or online outlets like eBay. Says Angrick, "We understand we're a service business [first] not a Web site, not a tech company." -N.L.T.

Success Secrets
Entrepreneur: As someone who ran a dotcom throughout the trying times of 2000-2001, what was your philosophy in terms of getting through that time?
William Angrick: It was an exceptional period, and the assumptions in place for creating value and attracting investment capital and being perceived as a success-those assumptions have all changed. Back then, it was awkward to start a business in a bootstrap fashion and then be patient and build on a small scale as you got profitable. People required you to scale the business rapidly to show you had market share or presence and could discourage competitors from coming into your space. And all the advice we got from VCs was to raise as much money as possible, grow as fast as possible. "Don't worry about profitability; we'll deal with that later." Well, that was bad advice.

Entrepreneur: How did companies looking to liquidate view you when you first started?
Angrick: I think early on, most of corporate America was circumspect about using the Internet. There were issues of trust, quality control and whether the dotcom service provider was going to have staying power to provide that service on a long-term basis.

Entrepreneur: What are the reactions of the smaller start-up companies that buy this inventory off of the Web?
Angrick: There's a constant flow of inventory coming into our market, so there's a wide breadth for buyers, ranging from consumer electronics, computer and technology equipment to apparel, vehicles, and a variety of medical and electronic equipment. This is all very relevant to our buyers. A small-business buyer traditionally didn't have access to this product. They couldn't call up Mr. Fortune 100 company and say, "I want to buy your surplus." They now have a channel where we create a very open, efficient marketplace for the buyer. And if he's the high bidder, he gets it. It doesn't matter if he's a large, medium or small company, so long as he meets the terms and conditions of the sale, which is essentially paying for the merchandise. That's a fundamental enhancement for that marketplace. So in a symbiotic relationship of sorts, we are facilitating entrepreneurship with small-business buyers.

This article was originally published in the November 2003 print edition of Entrepreneur with the headline: Beyond Their Years.