St. Paul Pioneer Press (PDF) - May 30, 1999
By George Beran, Staff Writer
Some entrepreneurs make waves by starting a business, selling it and going on to another startup.
But Scott Litman, chief executive of Imaginet LLC, followed another path - by founding his firm, selling it to a big corporation and buying it back. When he sold his Web architecture firm to Imation in 1997, Litman joined the 3M spin-off, working with Dan Mallin, director of Internet business and technology development.
In their brief time at Imation Internet Studio, Litman and Mallin decided that independent operation was necessary to keep pace with the swiftly evolving world of electronic commerce.
``Being independent would let us operate on Web time,'' said Litman. ``There's nothing like having absolute control of your own destiny.''
Litman and Mallin joined forces with Edwin (Skip) Gage, owner of Plymouth-based Gage Marketing Group, to buy the Internet Studio and rechristen it Imaginet.
Gage financed a big chunk of the deal, brought employees and corporate clients to the reconstituted company and received a 40 percent ownership share. Litman and Mallin control the remaining 60 percent.
Imaginet, which has 48 employees (including 30 technical types) at its Minneapolis office, may reach $5 million in revenue this year if Litman's projection proves true. It tackles interactive projects for Fortune 1,000 companies and smaller firms.
Meeting client budgets and deadlines are the chief challenges of the business. Developing a Web page and providing database, quality assurance and other services can cost a client from $100,000 to $1 million, depending on a company's size and the amount of business it does.
With the Christmas season showing retailers how the Internet can register huge sales, Litman sees demand rising for Imaginet's services. ``Last Christmas was the wake-up call,'' he said. (Forrester Research estimates that Internet sales rose to $9 billion last year from $5 billion in 1997. )
To accommodate expanding demand for e-commerce services, Imaginet is hiring Web developers and other technical people at rising salaries. ``There's a lot of young people making a lot of money in this industry,'' Litman said.
He would not divulge what the company pays to lure talent, but an industry source said Web developers command salaries ranging from near $40,000 to as high as $55,000.
To help retain workers in a tight labor market, Imaginet is issuing its first employee stock options this month. The goal is to give employees a 20 percent ownership share in the company, which is planning to go public in two years. ``How can you be a tech company,'' Litman says, ``and not think of a stock offering?''
Stock options, a casual dress code and a game room furnished with a pool table and machines all contribute to a sense of community, says Litman. They also build company loyalty among young employees, he says.
When working with retailers, Imaginet develops an online format and strategy to bring shoppers into existing stores or help consumers buy things from home.
About 30 percent of Imaginet revenue comes from developing systems for business-to-business transactions over the Web. ``It's easier to bring up a Web page than go to a fax machine for ordering,'' Mallin said.
Imaginet uses Gage Marketing, IBM, MultiLogic and other firms to help fill its project needs.
Litman, 32, is a University of Minnesota graduate who worked for Microsoft and Apple Computers before starting Imaginet in 1991 as a vendor of Macintosh-based digital publishing systems. Within a few years, he moved the company into Internet consulting.
Mallin, 33, received a B.A. from Drake University and an MBA from the Carlson School of Management, University of Minnesota. He worked for Apple and Microsoft before joining 3M to form a team working on Web projects.
This fall, Imaginet will move to larger quarters at 1300 Nicollet Mall where Litman says the game room will grow with the business.