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Brand New Chapter, Same Old Values

A s part of a third-generation, family-owned business, Steve Elefant grew up believing that everything was done on a handshake - the old school of doing business with your word as your bond. Today, that belief still holds true for this veteran of the payment-processing industry.

Throughout his long and interesting career, Steve's philosophy has been to conduct business ethically and treat people right. Now, after taking time off for the last year to travel and fly his private plane, he's looking to apply his beliefs to a new venture.

"I'm going to take all my experience and put it to good use," he says. "I'm tired of playing with toys, like my planes. I like building companies. I've learned a lot over the years - the fundamentals of running an honest, ethical business is still the key. What was true 30 years ago is still true today."

At an early age, Steve was immersed in his family's wholesale jewelry and manufacturing business in Northern California. He was just a little kid when he started sweeping the office floors.

During high school, Steve spent his summer vacations going from department to department, learning all aspects of the company started by his grandfather. Upon graduation, Steve headed to UCLA and earned a degree in political science in 1980.

Returning to the family business, Steve continued to hone his professional skills, skills that became valuable when his folks decided to retire. But Steve made a decision to change course as well, and he started a software company.

Now, you may wonder, "jewelry to software?" But it was the smart choice for Steve. He had gained technological expertise in design and implementation of software during his many years working for his family's distribution and manufacturing business.

Having worked with systems that originally cost a half-million dollars or more to set up, Steve pioneered in hardware sales to support software. Originally, he looked at manufacturers and distributors of a variety of products and decided to start taking credit cards.

"It just seemed silly to buy a box from VeriFone for a communication function that a PC could handle," said Elefant.

But it seemed he was the only one who thought it was amusing. At the time, Steve was working with Wells Fargo. When he shared his idea of doing credit cards on personal computers, they laughed at him. Call after call, Steve was met with "no way." After more than two dozen calls, he finally found someone who said it was possible technically, but highly improbable, in part because of the company's security concerns.

Steve didn't give up. He got their specs so he could talk to their systems. He had done extensive work with other communication systems in the past, and in 1991 his tinkering led to an internal product that was not just useful but marketable. ICVerify was born.

"We reinvented the company," said Steve. "We phased out of hardware/software and phased in credit cards, completely changing our business model. Our biggest challenge was that we were inventing a new industry. No one had done it before. We were creating a paradigm shift from credit card box to PC systems."

Steve began telling the world about that new industry. He did a lot of traveling, attending trade shows and joining fledgling bankcard services organizations like Bankcard Service Association, now the ETA.

At first, vendors and financial institutions were skeptical about a completely horizontal product. It presented a different philosophy. Undaunted, Steve persevered. He met with banks, ISOs and software developers. "We had over 2,500 developers and showed them our value-added product," says Steve. "We would help them with integration, and they would become our eyes and ears on the streets."

Always adding functionality, Steve was careful not to step on the toes of ICVerify's partners. "Our partners were the POS specialists. We wanted to become their specialists for the bank card industry," he said. Under Steve's leadership, ICVerify added debit, ATM and check guarantee.

Processors started taking advantage of the functionality of ICVerify's product. The banks' response was positive, but the terminal manufacturers weren't so warm and fuzzy toward Steve's new concepts. "Our value proposition was so much more compelling than theirs," he said, "and it was so easy to sell."

Steve said that once ISOs understood the technology, they got excited about it, and ICVerify was in a class by itself. "Our competition didn't arise for a number of years," said Elefant. "We really were creating the industry in such a big marketplace that we would rarely run into any competition." It was certain to change.

By 1995, Steve realized that even though ICVerify was the market leader of an immature market, to maintain that leadership he had to ensure his company kept a big piece of the expanding pie. Steve started researching venture-capital avenues and secured $5 million in his first round and an additional $5 million in the second round, an amazing feat considering that venture capital money rarely went into the payment-processing arena.

"We maintained our leadership through the funding and grew substantially from 12 to 125 people in all departments, including research and development, engineering and sales," he said.

Business was great for Steve's software development/technology company, which provided alternative payment-processing solutions. Sales were in the black, and the company was headed toward an IPO.

Unfortunately, the market took a downturn. Rather than going on another venture capital search, Steve joined forces with another industry visionary, Bill Melton. Melton's company, CyberCash, complemented ICVerify with great technology, great people and a whole bunch of money in a public marketplace.

For Steve, it was like taking the rocket into outer space. The $75 million merger in 1998 turned into a $350 million company. Steve became Vice Chairman of CyberCash, which was headquartered in Virginia. With Steve's invaluable input, CyberCash ultimately rolled out products to more than 250,000 customers in 21 countries, translated into a half-dozen languages, and European headquarters were set up in Germany.

There was one problem for Steve: taking the rocket into outer space meant taking the airplanes across the country. He spent long hours commuting from his home in California and decided it wasn't for him.

"I didn't want to live on an airplane," he said. "It was a good time for me to take some time off."

Steve left CyberCash, but not before befriending a fellow board member, Steve Kahn. The two executives forged a partnership, and with Kahn's venture capital and Elefant's acumen, a new company was created. This time it was in the online auction world, and it was called Price Radar.

As Executive Vice President in charge of sales, service and business development, Steve brought to the job years of experience in dealing with thousands of retailers in a myriad of industries. From restaurants and hotels to amusement and entertainment, Steve was privy to all of the major retail industries that used credit cards, from mom-and-pop stores to giant hotel chains.

Price Radar's original vision was a consumer site - a blue book for Internet users to know not just where things were but, most important, what they were worth. Steve's software secured data from the big three - eBay, Yahoo and Amazon. Steve and his partners had developed a proprietary software that sifted through the auctions and broke down data into more than a million categories from the hundreds in existence.

Price Radar partnered with the big three sites as the dot.com revolution continued to change the playing field. Steve geared his company toward change as well.

"We changed our business model from a consumer to a merchant model," he said. "We took technology and modernized it to make sense for companies wanting to sell stuff."

Sharper Image was one of the first companies to take advantage of Price Radar's complex system. Reader's Digest followed suit. Vendors were charged a flat fee for software. Price Radar actually ran auctions and provided completed orders with their data numbers to merchants.

"We created a gravy business for merchants, a new channel for them to sell their merchandise," Steve said.

That business continued to be well received as Steve expanded the staff to 60 employees. Ever aware of the need for capital, Steve championed funding for Price Radar and raised $10 million in angel investors.

From its start in '99, Price Radar matured to acquisition by eBay in 2001. "We wanted to take Price Radar to the next step, but the stock market wouldn't support it," said Elefant. "eBay made us an offer not to be refused."

So Steve Elefant, successful entrepreneur, noted business leader and veteran of the payment-processing and software/technology industry, finds himself once again at a crossroads. After his time off, Steve's inner battery is recharged, and he's ready to get back into the game with a new team.

"I'm looking for the next great opportunity," he said. "I'd like to find something where I can help an existing team on the verge of breaking out and becoming the next superstar company."

Where is he actively looking? Steve still likes the payment-processing world a lot, with his more than 10 years in that industry coupled with more than 20 years in technology. He sees the market heating up.

"The government is putting in money, and the Internet is a reliable industry," he said. "I see it taking off again."

However, Steve does acknowledge that the payment-processing industry is somewhat dependent upon the general economy. "It will become more and more profitable as the economy picks up, and I want to take the next step," he said.

Steve has invested in several VC firms. He continues to look at a lot of deals and start-ups, though a pure start-up is not his first choice because he knows the market won't support it at the moment.

His favorite pick would be an organization in its intermediate stage with secured VC money and at least $10 to 20 million in sales. A company ready to blast off . with Steve in the commander's chair.

Steve has learned he needs to move quickly, act quickly to take advantage of opportunities. According to Steve, the old rule of doing a lot of analysis and months of strategy doesn't work anymore. His formula involves raising the money, building the team and getting out the product to take advantage of the market. His business philosophy today is a combination of the old and the new school.

"You can't sacrifice quality for speed," he said. "But you need to be speedy. Lose the paralysis of analysis."

He doesn't see doing it alone, though. Having enjoyed incredible teams of really smart people, Steve believes that working with a good staff is highly rewarding.

"Working with people who are operating on all cylinders, it's fun," he said. "That's why I want to get back in - to make and have fun. One of the byproducts of our recent downturn is that there are so many great people out there. It's easy for me now to put together a great team. There are a lot of super people out there today, and I'm eager to connect with them."

Steve is eager to bring in not just the right people but smart VC money and put it to work efficiently and effectively, whether in payment processing or a related technology space.

"Technology is still sorting itself out, like smart cards," he said. "Biometric technology is very interesting as well. Internet security also is another area that is moving ahead."

Steve also sees the whole retail POS market becoming more and more sophisticated. If he can put together the right team with the right product, he knows he'll have a home-court advantage -- an advantage that he envisions will finally take him to an IPO, an experience he has yet to enjoy.

He raised over $20 million dollars in venture capital equity financing and completed a successful $75 million merger with CyberCash. He forged strategic partnerships with American Express, Intel, Visa International, IBM, JDA, First Data Corp. and others. He currently serves on several technology-company boards of directors and advisory boards and is a limited partner in several venture capital firms. But he has never been part of an initial public offering.

For any savvy and selective company looking to throw a party on Wall Street, send Steve Elefant an invitation at steve@theelefants.com.