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ENTERPRISE—Providing High-Tech Services Produces a Case of MassHysteria

Scott Phillips has a problem, but it’s one that any CEO would love to have.

“We have about 30 job openings right now. We should be at 125 people,” said the president and CEO of MassHysteria Inc., a Downtown based high-tech firm. Like everyone else in high-tech these days, Phillips is looking for engineers , at least 10 of them. But he’s also looking for production people, marketing folks, and a slew of managers.

It’s almost an impossible task right now to find the right engineers, he laments. “We’re finding that we almost have to hire five in order to get three good ones,” he said. MassHysteria is a “content application service provider.” Think Internet, and think infrastructure. These are the people who take information , sports scores for example , and design the system and distribute it to Web sites and other communication channels. “We’re sort of the guys behind the guys,” Phillips said. “We’re the content provider and developer. We’re not trying to create a brand around MassHysteria. You’re never going to find a “MassHysteria.com sports site.”

While that is true, the company’s links with sports is undeniable. Among its biggest clients are America Online Sports, the National Basketball Association and the National Hockey League. It’s also done work for the World Wrestling Federation, Gateway, Digital City and Qualcomm Inc. Phillips and his partner, Chuck Mitchell, now the vice president for product marketing, launched the company in 1997 soon after leaving their former employer, NTN Communications in Carlsbad. While at NTN, Phillips headed up its Home Services Group, managing the firm’s content and business development areas, and signing up such prestigious clients as AOL, GTE, AT & T;, Bell Canada, the New York Times and MTV.

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Going Solo

Of NTN’s four business units, Phillips’ was the only one making any money, a fact not lost on NTN’s board. “They asked me, ‘Why don’t you take over all four?'” Phillips thought it over and decided he’d rather form his own company, doing much the same thing, and presumably, gaining a heftier share of the profits. To launch Sycamore Studios in 1997, Phillips and Mitchell pooled about $50,000 in savings and operated the business from Phillips’ Vista home. They had clients and work, but soon realized they needed help to deliver their services, and to do it fairly quickly. Their solution was to buy an existing company that had the technical expertise, but not a great deal of financial success. Phillips described the firm, EchoLink, as a “job shop,” where computer programmers would produce Web sites for customers. A project might generate between $10,000 to $20,000, but after the work was completed, so was EchoLink’s revenue stream with the client. Merging the companies in 1998, Phillips and Mitchell took a two-thirds ownership; the rest went to the principals of EchoLink. At the time, EchoLink was doing about $1 million annually in sales, but within about a year, that figure jumped to more than $5 million. From a staff of about 20, the company expanded to about 50 by the end of last year. Today MassHysteria has 80 employees, but Phillips wants to be at 135 by the end of this year.


Changing Face Of Information

Driving business is the trend to outsource their content to firms that have the technical know-how in getting it not only on the Internet, but across other types of communications modes, including interactive television and wireless devices such as cell phones and palm computers. “To call them Web designers and developers is too simplistic,” said Bruce Ahern, a local high-tech consultant. “They’re pushing the envelope on the content side by developing methodologies for integrating and constantly updating rapidly changing stream of information.” One of MassHysteria’s recent projects was creating the applications for the content contained on a customized interactive informational program called Choice Seat.

By touching buttons on small computer terminals installed at seats in sporting venues, fans can view an instant replay of a key shot, using different camera angles; check out all sorts of statistics on the game and players; or even order their next beer and hot dog.

The program was in a beta test at Qualcomm Stadium several years ago, but was operating during the most recent basketball season at Madison Square Garden in New York. Six other sports venues will offer the service this season, Phillips said. The two-year contract for time and materials, which Phillips declined to reveal exactly, was in excess of $1 million.

Randy Dean, MassHysteria’s chairman, said his firm has attracted a good deal of attention from venture capital investors, not only because it has reached profitability but because of its high-profile client list. While the owners have discussed the possibility of going public, “it’s not a route that’s realistic for us,” Dean said. Bigger Things Ahead? A more likely scenario is being acquired by a larger technology applications company, or a big player such as AOL, said Phillips. Dean, a former AOL executive who is friends with Phillips and Mitchell, was part of a group of early venture capital investors who pumped some $2.5 million into MassHysteria last year.

Next month, the firm is considering arranging a private stock placement for $20 million to $30 million, Phillips said. Part of that may be used to buy another company, and to expand the company’s current Comerica Building’s offices.

Phillips said with the funds the firm may purchase a smaller company of 10 to 15 engineers and could open another office in either New York or Washington, D.C., or maybe both. Finding interested investors shouldn’t be a problem. Unlike many financially troubled Internet firms, MassHysteria actually made a $300,000 profit last year. This year’s revenues are projected to be about $12 million, Phillips said. At 35, Phillips projects a high-energy enthusiasm for his work he hopes is shared by everyone in the company. He averages about 70 hours a week on the job, 50 at the office and 20 at home, and expects a similar level of commitment from his employees.

He pays his staff well, but says “if it’s only about the money, then we’re probably not interested.” What he’s looking for are people who regard their jobs as “a lifestyle extension.” “I want them to really feel like this is an extension of their life. We work together, we play together. It’s the clich & #233; of being family.” For a company that thrives on creative chaos, the MassHysteria name seems apropos, but it was a choice that came about after Phillips discovered EchoLink.com was a domain name already taken by another business, a telephone answering service. Unfortunately for Phillips, the owners weren’t interested in selling the name. In the course of a business meeting last year, a quick check on the Internet brought up the other company, and the query, “Is this you guys?” Phillips knew then they had to change the name. Among the new names suggested by his staff was MassHysteria, which had been previously registered by EchoLink. In a vote to see what they would be called, MassHysteria kept emerging and since the domain name was already in the company’s hands, Phillips said it sounded like a winner.

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