Entrepreneur takes back helm at White Pajama

http://www.mercurynews.com/mld/mercurynews/business/10016761.htm

By Matt Marshall
Mercury News

The story of San Mateo start-up White Pajama may go down in the books as one of the quirkiest in Silicon Valley.

It was born into eccentricity, rose to giddy heights during the bubble of 2000, then was sold as a failure -- and recently has risen from the ashes and gained sales momentum again. And it might yet turn into a success.

It all started with a crazy bet by co-founder Mansour Salame. In 1999, then 28-year-old Salame flew to London to meet his distribution partner and pitch Barclay's Bank, a big potential customer of his then company, NextAge Technologies. To his horror, his partner showed up in an Italian white linen suit. It was loose and billowing -- more like a pair of white pajamas -- ``totally inappropriate,'' says Salame.

The two men made a bet. If they closed the deal despite the white suit, Salame would call his company White Pajama. If they didn't win it, Salame's partner would do it instead.

They won the deal, so Salame lost the bet -- but his company was sold two months later, before he could change the name. So in 2000, when he formed another start-up to build a Web-hosted call center application, he called it White Pajama.

It fit well for the bubble. VCs pouring money into tech were drawn to a company named White Pajama. Salame and his co-founder raised a cool million from well-known venture capitalists like Mayfield and Norwest Venture Partners.

Boom times

It was a familiar story for those days: The start-up threw lavish parties, and spent millions of dollars on things like building trade-fair booths, designing multiple logos and constructing a convoluted Web site.

But in 2001, Salame's co-founder and the venture capitalists forced him to resign from the board, Salame said.

(We're aware the start-up world is a blood sport, and that there's very likely another side of the story. And Salame concedes he might have run White Pajama too emotionally. ``I used to shout and scream at anyone who would criticize my product,'' he said. But neither the co-founder, nor the venture capitalists -- David Ladd, of Mayfield, and Vankat Mohan of Norwest -- could be reached for comment Monday in time for print.)

As Salame recounts it, he wanted to sell the company to a willing bidder, but the others refused. He had other strategic differences. They wanted to raise the price of White Pajama's product, Salame wanted to lower it. As fate had it, the company foundered after Salame left. Several months later, the VCs were calling Salame, asking for his help to sell the company after all.

Salame was too busy planning another start-up. But when White Pajama's creditors called him about a default by White Pajama on debt payments, Salame made a quick offer to buy the debt for 33 cents on the dollar. It's a long story, and required ``maneuvering,'' as Salame puts it. He's legally bound not to divulge certain things.

But by buying the debt, he scooped up the rest of the company's assets. And he did it for 0,000, he said, after the VCs had sunk in million. In short, Salame says, the two sides aren't talking.

Steve Jobs parallel

Back at the helm, Salame is part of a small group of entrepreneurs who managed to steal their companies back -- Steve Jobs at Apple Computer is among the others.

Salame retook the reins with just eight employees and a handful of customers. Two years later, he's built up a team of 35, and wants to hire five more by the end of the year. He has 200 customers, several disclosed Monday (BearingPoint, PatientCare, Labor Ready and WageWorks), and has grown sales 500 percent, he says. As for the other co-founder, he left to join a competitor company in San Francisco.

Also Monday, partly to satisfy wary analysts, corporate customers and future hires, Salame said he is throwing in the towel on the name. He's calling the company Contactual. To gain more legitimacy, Salame has accepted angel funding -- not venture capital, let's be clear -- from some recognized names in the valley. One is Michel Rocher, who once ran Oracle's operations in southern Europe. They'll help make calls and set up meetings with companies despite possible opposition from some VCs, Salame said.

Meanwhile, Salame says he's learned a lot. He's ready to give it another go -- and it looks like he has a good chance. ``I feel liberated,'' he says. Liberated from the curse of the . . . White Pajama.


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Contact Matt Marshall at mmarshall@mercurynews.com or (415) 477-2518.