CEO In Overdrive Finds A Firm That Suits His Pace

Oct. 26, 2000, Chicago Tribune
TechLife column: Barbara Rose

Jack Sandner’s shiny metallic cell phone buzzes like some agitated beetle on the polished surface of his conference table. His hand darts out to shut it off, but he doesn’t stop talking.

Don’t bother trying to interrupt him. He’s on a jag about his newest venture, Internet start-up FreeDrive. Compared with Sandner, FreeDrive founder Michael Rhodes feels like, as he describes it, “a walking valium.”

Yes, Sandner is jazzed, but that’s nothing new. His energy propelled him from the futures trading pits to a 17-year stint as chairman of the Chicago Mercantile Exchange, where he remains a special adviser and a power broker still.

Lately he’s flung himself into promoting FreeDrive, a contender in the surging market for online services to store information, music, photos and movies. It’s an arena that changes so fast, even Sandner has to scramble to keep up.

The 58-year-old is at home in a business where fortunes are made and lost in a matter of seconds. But the Internet shifts as quickly, radically and unpredictably as financial markets. And there’s scant history to help chart its future.

Take FreeDrive’s evolution. It grew out of a firm Rhodes and a partner founded in 1993 as a computer-based information source for traders. That firm morphed into an Intranet service for financial firms, then into FreeDrive, which tackled the consumer market in 1998.

Now FreeDrive is at a pivotal point.

Sandner, who doesn’t disclose his stake in the private firm, took over as CEO early this year, ousting a previous CEO who lasted just a few months. What’s driving him besides the obvious glint of Internet riches? “It’s like he’s 40 again and inventing something new,” an associate says.

No question, FreeDrive is a pioneer. The firm was one of the first to try to fashion an online business around consumer demand for ever-greater amounts of disk drive space to store and remotely access files.

At the time, the hot Internet buzz was about capturing “eyeballs” and inventing “sticky” Web sites. Competitors raced to get people to visit, register and linger. What better way to hook them than with their own files?

So FreeDrive and others gave away disk-drive storage and looked to advertisers for revenue. Consumers eventually would buy space, they reasoned. Meanwhile, the firms lost millions. California’s Driveway, the only one to file for a public offering (the IPO was withdrawn in June), reported $15 million in operating losses last year on $264,000 in sales.

Sandner insists FreeDrive’s investors were spared such pain because the firm never raised venture capital or spent millions on marketing. Nonetheless, like all its competitors, FreeDrive is hunting for a profitable business model.

It’s gearing up now to pursue a potentially far bigger market–fee-paying commercial customers–while developing software to store and manage files on wireless devices–the Net’s hottest sector.

In a small room in the back of FreeDrive’s cramped West Jackson Street offices, above a bar and eatery, President David Falter is covering whiteboards with flow charts showing how the firm will use its proprietary software to ramp up sales and turn a profit by next year. He uses buzz words like “storage application providers” that offer “knowledge-management” tools.

Sandner, hyper as ever, works from his old-world-style office filled with mahogany furniture and vintage books, high above the Merc trading floor. He’s raised about $20 million from investors, including partners Motorola Inc., Electronic Data Services Corp. and EMC Corp.

His cell phone vibrates with hourly electronic updates from a computer that reports how many new surfers have registered at FreeDrive. “It was either that or calling him every hour,” explains Rhodes.

Eight thousand since midnight! Sandner can hardly sit still. At FreeDrive, he has finally met his match.

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