Teen Internet Moguls

Web-savvy kids are turning their fun and games into million-dollar businesses

Business Week

When Michael Furdyk and his partners sold their Web site for more than $1 million last spring, Furdyk got a pile of money, gushing publicity–and work-study credits toward his high school degree. Furdyk, now 17, still doesn’t have his diploma. But he got enough venture capital for his new startup to lease a spacious office suite and employ 20 staffers–including his father, who just quit his job as an executive at NCR Corp.

Bouncing in his chair, Furdyk stares at his blue laptop, scrolling through reams of e-mails, looking away just long enough to glance down at the caller I.D. screen on his ringing cell phone. All the while, he’s rattling on so fast about the virtues of his latest venture, BuyBuddy.com, a comparison-shopping service, that he’s almost impossible to understand. He hardly mentions the big-bucks sale of his first dot-com company, MyDesktop.com, an online computer-help service, before launching into his business philosophy. Finally, he breaks into a broad smile as his new secretary appears in his office. “Cool! Having a receptionist is cool!” he says.

As Internet entrepreneurs go, Michael Furdyk, dressed in baggy black pants and a gray flannel top, doesn’t seem all that unusual these days. But at 17, with a year to go before graduation, he’s still really just a kid. Too young to vote, buy a drink, or get a credit card, he’s in the improbable position of running a promising business venture, not to mention working as a consultant for Microsoft Corp.

Furdyk is no fluke. A small but growing army of teenaged entrepreneurs is making a bundle online by turning what began as hobbies into money-making ventures. The first generation ever to grow up in front of a computer screen, these teens are working late into the night hatching business plans, hiring employees, and lining up customers.

“Teens are becoming world entrepreneurs,” says Nicholas Negroponte, founding director of Massachusetts Institute of Technology’s Media Lab.

For these kids, business deals are just an extension of what they love most: interacting online. And never before have teens had the knowhow, the access, and the tools at their disposal to pursue business on an equal footing with adults. No degrees required, no dues-paying necessary. Just log on and go. And with time to burn, kids spot business ideas that adults don’t. Says Don Tapscott, author of Growing up Digital: The Rise of the Net Generation: “Children are an authority about the biggest revolution in society.”

The number of teens doing some kind of business on the Net is already a lot bigger than many grownups would ever expect. For every teen millionaire, there is a veritable swarm of regular kids who routinely earn pocket money doing software work via the Net. It’s impossible to pinpoint exact numbers, but they are large. Researcher Computer Economics Inc. in Carlsbad, Calif., estimates that 8% of all teens, about 1.6 million in the U.S., are making at least some money on the Net. “There’s not a period in history where we’ve seen such a plethora of young entrepreneurs,” says Nancy F. Koehn, associate professor of business administration at Harvard Business School.

For about half of these kids, the work entails little more than collecting small commissions for links to larger sites, such as Amazon.com Inc. But for countless others, it’s a lot more involved–and the money is serious. In its first annual ranking of the top 100 entrepreneurs aged 8 to 18, YoungBiz magazine found that its four highest-earning junior tycoons each had six-figure incomes averaging $432,500. All four are Internet entrepreneurs who have made their money in e-commerce or Web design.

With kids earning that kind of money, there are some proud parents out there. But others worry about the toll their kids’ obsession with doing business on the Net is taking on their grades, social development, and their ability to experience a normal childhood. “This economy is going to create a few lifetime winners and a lot of human wreckage,” says Michael Jolkovski, a psychologist in Falls Church, Va., who treats adolescents.

Janet E. Cosner, a writer of educational materials in Rocky River, Ohio, has curtailed her 18-year-old son’s computer time to a maximum of five hours a day. “There’s more to the world than being up in his room on the computer,” she says of her son James, who has a Web-page-design business. “I want to make sure that he’s a well-rounded person. I have insisted that he join clubs at school.”

Workaholic teens pursuing the big score is hardly the image of adolescence lodged in the collective memory of grownups. In the 1950s, it was cool for teens to be rebels, driving hot rods and cranking up their rock ‘n’ roll tunes. Then, in the ’60s and ’70s came hippies and the drug culture. Teens dreamed of healing the environment and working toward world peace. In more recent decades, media-saturated kids have aspired to become celebrities, as teen tennis, skating, and basketball stars ruled. But business? No way. That was boring stuff for old guys in suits.

Boy, have times changed. Fifteen-year-old Cameron Johnson, whose idol is Dell Computer Corp. CEO Michael S. Dell, says his dream is to “sit in an office building all day and work.” Johnson, a freshman at an Orange (Va.) boarding school, says he hopes “the market settles down soon.” His Web startup, SurfingPrizes.com, pays users to surf the Web and collects revenues from advertisers. “We will hopefully be able to file for an IPO very shortly,” says Johnson.

Johnson’s advertisers include Ask Jeeves, Discover Card, Warner Brothers, Tickets.com, and iVillage, according to Bobby Berna, who heads business development for L90, a Santa Monica (Calif.) advertising firm that specializes in the Web. On one recent day, SurfingPrizes displayed 4.5 million ads. That translates into about $13,500 in revenue, says Kristin Glennie, an L90 project manager. That’s why Johnson can pay his 25,000 “member” Web surfers 20 cents for every hour they are logged on.

MISCHIEF. Lots of kids, of course, are still as rebellious as ever. No one has caused more of a ruckus on the Net than Shawn Fanning, the 19-year-old who launched Napster, now the subject of legal battles with the music industry over copyright laws. The more mischievous they are, the worse the pranks. It was a 15-year-old Canadian, nicknamed “Mafiaboy,” who was charged with causing the meltdown of such sites as eBay Inc. and CNN.com earlier this spring.

While some kids have struck it rich, in the go-go world of Internet investing it’s often unclear who’s calling the shots and who’s winning. Rishi Bhat, a 15-year-old from Chicago, and his parents are thrilled with the deal he struck. Last year, he sold his security-software program to a Canadian mineral-exploration company for $40,000 in cash and some stock. He could get a big windfall if the company takes off. But after a brief surge, shares have plummeted. Meanwhile, the businessman who bought the software has already made a bundle via some skillful selling after a flurry of publicity about the teen entrepreneur prompted a spike in the stock.

For many kid tycoons–who invariably are boys rather than girls–all the frenzy takes its toll. Pulling all-nighters has become routine–not to cram for finals but to work on business plans. Brad Ogden, a 17-year-old high school junior, logged so many hours putting together his Sterling Heights (Mich.) Web-page-design company that his girlfriend broke up with him. And though he earned $540,000 last year, according to YoungBiz, Ogden won’t confirm that number, saying he worries what his friends at school would think. “The worst thing is to be liked because of your money,” he says.

It’s not just a social life that goes by the wayside. School often becomes a daytime nuisance to be endured until the real work begins at night. Ogden, for instance, got into Web-page design when he was 13 years old. Now 17, with spiked blonde hair and braces, he spends his class time doing paperwork to keep his company, Virtual Web Pages, going. His teachers, who say Ogden is bright and well-adjusted, don’t seem to mind. In fact, the school’s principal, James Bannon, says the faculty looks forward to the stock tip sheet that Brad and a friend post weekly in the school’s audio-visual room. But Ogden’s mother, who says she rarely sees him, worries a bit that Brad isn’t challenged enough. “He’s just spinning in school sometimes,” says Pamela Ogden.

Other kids just give up on school altogether, lured by high-paying jobs. Paul Dinin, 19, of Marietta, Ga., dropped out when he was confronted with an unusual choice. He could repeat his senior year, or he could go to work for Atlanta-based Interland Inc., a Web-hosting company. His salary: $90,000 a year for “configuring routers and switches.” He took the job. “School wasn’t for me,” says Dinin, who now owns a house and four cars, including a Jaguar, a 1981 DeLorean, and a vintage Plymouth. His ambition is to become a standup comic, but for now, “it’s all about money,” he says. “All those guys who say they just want to make a difference in the world, that’s bull.”

Maybe. But a lot of kids, unaware that their skills and knowledge are valuable to grownups, stumble into the business world almost by accident. Three years ago, when Michael Furdyk launched a help line from his family’s suburban Toronto basement to explain how the Net works, the site was just for fun. A chat-room fan, Furdyk also became pals with a 16-year-old who was living in Australia, Michael Hayman. The two like-minded kids decided to become business partners in 1997 to run MyDesktop.com, a help site that Hayman had already launched in Australia. At first, the site focused on helping people with Windows problems, but later, it expanded to include information on games and other topics.

It never occurred to the boys that being on opposite sides of the globe would pose a problem, and it didn’t. Upfront costs were minimal: $100 to register the domain name, and they got Web-site storage for free in exchange for placing the host’s ads on the site. Never meeting and only occasionally speaking by phone, the two were rarely awake at the same time. But they were having a blast all the same, reviewing software and the latest computer games, which they got to keep.

By 1998, their site was attracting 10,000 visitors a month. On their own, the teens hired advertising firm Doubleclick Inc. and began taking in thousands of dollars’ worth of ad revenue each month from companies such as Microsoft and WinZip. “We had to learn something new at every turn, and that made it fun,” says Hayman, who moved to Toronto in August of that year.

THE CALL. The move paid off for both boys. By May, 1999, MyDesktop.com had grown to include six e-mail newsletters, attracting about a million visitors a month and generating some $30,000 in revenues. The pivotal call came last spring from Alan M. Meckler, the CEO of internet.com in Darien, Conn., an online-publishing company. Meckler says he wanted to buy MyDesktop.com for its content and vast readership. “Five million page views a month, even by today’s standards, is an extraordinary amount of traffic,” says Meckler.

Furdyk, Hayman, and a third partner split more than $1 million upfront, according to Meckler, and could “easily have well over $4 million by the time this is done.” Future payments depend on the site’s growth. In the past year, the site’s audience has nearly tripled, to 13 million page views a month. And the payouts to Furdyk and the others don’t include the thousands of shares in stock options each of the partners received in internet.com. “We all lived in shock for the first few months,” recalls Furdyk’s mom, Marcia. “It was totally unreal. It didn’t really sink in.”

Life got even better for Furdyk. Hitting the lecture circuit after the deal, he caught the eye of Microsoft executives. He and his girlfriend, Jennifer Corriero, who specializes in getting girls more involved in technology, are now working in Seattle for six months. There they are running focus groups with other teens to help Microsoft study what kinds of products teens like. Although Microsoft won’t disclose how much it is paying Furdyk and Corriero, such input is invaluable to the company since it “allows us to get a glimpse of what it will be like when his generation gains more business-savvy,” says Bart Wojciehowski, a business-development executive at Microsoft.

Back in Toronto, Michael’s father, Paul, 45, is now running the show. Last month, he left his job as NCR’s managing partner for product marketing in Canada to work for the teens as BuyBuddy’s CEO. He believes he can bring business experience to his son’s fledgling empire and claims to have no qualms about his new role. “I’m sure I’m not going to be the last father doing this,” he says.

One place where most fortysomething dads would never fit in, though, is the fast-evolving world of online music. Angelo Sotira’s obsession with his music Web site propelled him from Poughkeepsie, N.Y., to Hollywood right after his high school graduation last year. Sotira, 19, clean-cut with short dark hair and a supremely confident manner, now works with one of Hollywood’s power brokers. Michael Ovitz, head of Artists Management Group, bought Sotira’s site last year through his investment company, Lynx Technology Group.

Sotira created the Web site when he was a 15-year-old high school sophomore so that his girlfriend, Sarah, could have a place to write and chat about music. At first, the site was a flop–hardly anybody signed on. Then, “somebody mentioned this MP3 thing, and I was like, well, O.K., I’ll check that out,” says Sotira, who first cut his online teeth as a 13-year-old running a multiplayer video-game Web site.

MUSIC BOOM. He spent $100 to reserve dimensionmusic.com as a domain name and posted a story about the hot new technology, and suddenly, 150 people were clicking in each day. Before long, his site had become the top MP3 clearinghouse, with links to about 500 sites where people could download and swap their favorite music. The only problem was that he had no permission from record companies or artists to allow people to download the music. “We were doing a lot of illegal stuff because we didn’t know what illegal stuff was. I was 15. I didn’t think I could get in trouble,” he says.

Life changed quickly for Sotira after a conversation with Jim Griffin, the technical head of Geffen Records Inc. who is also a consultant to an industry trade group. Griffin’s threats of legal action had successfully persuaded 300 Web sites to close down, but Sotira wasn’t so easy to cow. He proclaimed Griffin “Satan” on his Web site, writing that Griffin wouldn’t have the guts to contact Sotira. But Griffin called his bluff, phoned Sotira, and spoke to him for four hours. The conversation convinced Sotira that what he was doing was wrong, so he pulled all his links to sites that carried copyrighted works.

Sotira’s conversion quickly led to connections in high places. An agent for Ovitz’ newly created agency asked Sotira to come to Hollywood to work. Sotira, having a good time, wasn’t all that eager to sell at first. But the truth is, he had put himself at the epicenter of a huge transformation in the way the music industry delivers its product, and he was in demand.

Today, Sotira works out of Ovitz’ Wilshire Boulevard offices as the CEO of Dimension Music, a music portal with online disk jockeys. Neither he nor the company will reveal the terms of his deal, but he says he couldn’t be happier with the way it has all turned out. Sotira and his mother now live in a comfortable two-bedroom Beverly Hills (Calif.) apartment. That’s quite a switch from their life in Poughkeepsie, where his mom worked behind the cosmetics counter of a department store.

Sotira is a lot like other teen tycoons: If anything, many teen Netrepreneurs and their parents underestimate the extent to which their skills are in demand right now from all corners of a business community that is hot to cash in on the Net craze. It’s not just Microsoft and Michael Ovitz on the prowl. There’s an insatiable hunt for the brightest, and that’s leaving some kids and their parents vulnerable.

Just weeks after launching his online privacy-software business, 15-year-old Rishi Bhat sold it to David Hodge, CEO of Rocca Resources Ltd. in Vancouver B.C., a mineral-resources company. But so far, it’s Hodge who has made a killing, not Bhat. Rishi got $40,000, 30% of first-year profits, and the right to 1.5 million so-called performance shares, based on the number of hits the site attracts.

While that may sound good, Hodge sold 79,900 shares, then worth $179,219, on the days Rishi appeared on CNN and ABC’s Good Morning America. The shares were trading at nearly double the $1.22 they were trading at six weeks before–and more than 10 times the 20 cents they were trading at last October, shortly after Hodge struck the deal to buy Bhat’s software.

Hodge says: “I sold these shares because the stock was trading at a good price level, and I have a few expenses to pay…. For anyone to suggest that I have unduly profited from Rishi’s appearances on television is unfair because we’re a team–Rishi, the company, and I. Rishi profited from his appearances on television, as did all of the shareholders.”

It shouldn’t be a shocker that a 15-year-old math whiz might not be the shrewdest businessman. Many teens, in fact, call it quits after they hit $100,000 or so, says Jennifer Kushell, 26, who runs the Web site youngandsuccessful.com. Why? In the end, it isn’t always so fun being a teen tycoon. Melissa Sconyers, 16, of Austin, Tex., a Web designer and one of the few female teen entrepreneurs, cut back after she realized she was on the verge of serious burnout a few months ago. “I had lost touch with my friends,” she says. “I had to remember I am a teenager.”

LONG VIEW. Every teen entrepreneur should be so smart and so lucky, because when the dust settles and the Internet boom times are over, a lot of burned-out kids with no college or even high school degrees may wonder what hit them. That’s why Amar Goel, 23, who stayed at Harvard University while creating chipshot.com, a golfing Web site with millions of dollars in financial backing, says he now tours colleges, urging students to stay in school. In the world of Internet businesses, “we’re barely at first base,” says Goel. “There are a lot of opportunities to come.”

Even Michael Furdyk, with his million-dollar-plus deal, Microsoft gig, and bright prospects, has decided to complete his education. Why? Because his father says so. It’s good to know that some grownups are still in charge, even if they may end up working for their teenage kids.

By Rochelle Sharpe in Boston, with Ann T. Palmer in Chicago, Joann Muller in Detroit, Elizabeth Hayes in Los Angeles, and Deborah Rubin in Atlanta