Sky Dayton on Helio

The last of excerpts from my interview with Sky Dayton at UCLA...which is available here.

Dayton founded Helio as a high-end cellular carrier, and now it's allegedly in talks with Virgin Mobile about some kind of partnership. Here's what Dayton had to say about Helio and his departure as CEO:

Q: There were some news reports that Helio was not doing so hot basically.  What's going on?

A: It's interesting when you're gonna build - if you're gonna build a skyscraper, you're gonna put all the money out there and build the skyscraper.  Usually you don't do it as a public company.  Helio is a quasi-public company in the sense that it's private, but one of its owners is public, and so what you basically see is the losses that Helio generates as it's building its business flowing through EarthLink's balance sheet and income statement.

And all those losses were just taken as they were incurred, and so you kind of have this mis - unbalanced view.  You basically see what the losses were but not really see what the business was that was being built.  So to get - to put a flag in the ground in the telecom space today is expensive.  There's no question.  And you're gonna lose money as you do it - as you build the business. 

I mean, EarthLink - we probably raised $1 billion on our way to becoming profitable.  So I guess that's the answer to your question.

Q: This whole model of being an MVNO, which is a kind of cellular system that actually rents the space. Can it work?

A: I love that, by the way.  I really love that.  One of the hardest things that you'll run into as an entrepreneur is when everyone is saying that your business - your category is just so great.  What happens is -

Q: That's a bad thing?

A: Yes, that's a bad thing -

Q: Because everybody else wants to be there.

A: Yeah, it attracts capital, and worse it will attract dumb capital.  We saw that in the Internet.  We saw that in the bubble - it was largely an issue of too much stuff getting funded that shouldn't have been funded.  So I like being in a situation where you have a real business that's growing where people are pounding away at the category saying the category - taking shots at the category.  What that means is fewer competitors.  I'm okay with that.

Q: And you're basically - you don't believe the -

A: Well, I do think that it is an expensive business, and I've said that from the beginning.  Three years ago I got a - I think there was some article somewhere where I was talking about too many companies getting funded.  It's an expensive business.  You have to have staying power if you're serious about being in this business.  When push came to shove, Helio is the one that survived through all that.  I mean, there were a bunch of companies that got funded that just shouldn't have been funded, and they're gone.

Q: You're right.  They are.

A: And talk about back to the idea of perseverance.  So Helio today has the highest average revenue per user in the industry - about $85.00 a month   Industry average is about $50.00.  It's got the highest usage statistics - key things like the average user of cellular phone sends and receives about 50 text messages a month.  Helio members, it's more like 600 text messages a month.

There voracious users of the service, and the - I guess the core fundamentals of a single subscriber are pretty good.  And I think that they can continue to improve.  So time will tell. 

Q: You stepped down in January - from the CEO job to the chairman job in January?

A: It was more - it's all a blur.  I think it was January - early January.

Q: And some of the reports that I remember reading at that time were saying that SK Telecom wanted to have a greater role in the company, and that was part of what happened.  What did happen?

A: I had been at it for three years as a founding CEO. At EarthLink, I went from CEO to a very active chairman role after three years.  At Boingo, same thing after three years.  And Helio, it seems like the right time to do that.  I've stayed very involved now as chairman.  I wasn't chairman before, so I'm chairman now.  And we've got a good team - a really smart team.