David Marshall’s life as a serial entrepreneur began in a traffic jam on the freeway when he was a 19-year-old delivery boy. In the next lane was a car carrying Russell Fine, then a high school senior, and a mutual friend. They started a conversation and Fine invited Marshall to a party that night. Since then, for 20 years, the two men have been best friends and business partners. A series of startups led to Woodland Hills-based YouBet Inc., with Marshall and Fine bringing horse wagering online 12 years ago with one of the first Internet-based betting sites in the nation. In 2006, Marshall left YouBet to start blank check company Santa Monica Capital Partners. Its first company is ProElite, a mixed martial-arts venture with the goal of turning “cage fighting” into a real sport. Already, Showtime is broadcasting the company’s fighting events, and CBS is an investor. Last year, one of ProElite’s first events drew 44,000 people to the Los Angeles Memorial Coliseum. During an interview at his Santa Monica office, Marshall told the Business Journal about the first time he had to fire a close friend at age 17, his years living in Thailand, and the time when his wife spent a month of their honeymoon alone in Argentina. Marshall seems happiest when talking about his wife, Neidda and their two toddler daughters, Shanti and Sedona.
Question: Have you always been entrepreneurial?
Answer: My first business was a videotape editing company called Sunward Video. Josh, my friend growing up, bought editing equipment for $20,000 from a company that burned down. When we got a group to fund us, they wanted me to fire Josh. My first fun task in business was kicking my friend out. I was 17.
Q: What did this company do?
A: We filmed the first Jazzercise commercials and the Battle of the Bands Midnight Rock & Roll show. We had one truck that could go out and shoot things. We eventually had a deal lined up with Universal Studios, raised $10 million and bought equipment to build more trucks. But at the 11th hour, they went with a competitor whose chairman had a strong relationship with Universal. I was 19 and that was my first taste of how business really gets done.
Q: What did you do after that?
A: I got a job as a delivery boy. For my first delivery, I had to get on the 405 freeway, which was jam-packed. Sitting in traffic, I started talking to Russell, who was in the car next to mine with a mutual friend. We talked in traffic for 45 minutes. We’ve been friends since. I never delivered the package and got fired the next day, but the whole point of getting the job must have been meeting Russell.
Q: Did you two decide to go to the same college?
A: It was mostly my decision. He wanted to go to Arizona State University for the bikinis and Frisbees. I said Babson College business education. When I interviewed at Babson, and it was clear they were interested in me since I had already run a business, I told them, “If I come, Russell has to come and don’t worry, Russell is 10 times smarter than I am.” So they interviewed Russell over the phone and we both ended up at Babson College.
Q: How did you end up starting YouBet.com together?
A: It goes back to the summer after our junior year, when we traveled to Thailand together to attend a friend’s wedding. Our friend was Swiss and he married a Thai woman whose family took us in for two years. We started working for them and helped them computerize their insurance company. They also bought a horse race track in northeastern Thailand and asked us to find a system that runs betting at a race track.
Q: Is that how you developed the technology behind YouBet?
A: We went around the world to meet with totalizator companies, which tally horse race bets, and we realized that the technology behind the system that calculates bets was antiquated. So in 1987, Russell built the world’s first PC-based wagering system.
Q: What did you do with the technology?
A: We licensed it to companies in Australia and at age 24, we were millionaires. We decided to come back to the U.S. and get back into this business. But in 1989, 24 hours before we would launch the company, called PC-Totes, we came to the conclusion that our competitors were losing money, that there was a price war going on and it would be years before we would see a profit. At the last minute, we gave back millions of dollars to investors.
Q: What happened after that?
A: In 1990, we were dead broke. Through a friend, Russell and I got connected to Dun & Bradstreet, and came up with a concept called middleware, a software that translates different languages within the telecom infrastructure. The deal never happened. But all the intellectual property around this technology coupled with those of PC-Totes came together for YouBet.
Q: So, essentially, YouBet was a culmination of a decade of experiences dating back to Thailand.
A: Yes. In 1995, Dan Downs, founder of NTN Communications, approached us to launch online horse racing. We already had all the necessary knowledge behind online communications and the PC-based totalizator system.
Q: Why did you decide to leave YouBet.com?
A: I actually left YouBet twice. In 1999, we had built the company up and brought in someone who could take it to the next level. When I left, there was $75 million in the bank. I took two years off, got married and planned a 14-month honeymoon. About 100 days into the honeymoon, I got a call on a Saturday in February 2002. They were going to take YouBet to bankruptcy. That Monday, I started negotiations to step back in as chairman and CEO.
Q: What was happening at the company when you got back?
A: We were burning $550,000 a month and there was $750,000 in the bank. We put in an additional $750,000 on a loan so we had three months. We turned the company around in six months to cash flow positive, and grew it from a $10 million market cap company to $200 million in 2004.
Q: Did your wife come back from the honeymoon with you?
A: No, she stayed alone in Argentina for a month on our honeymoon having a great time. She got a corporate apartment and did lots of sightseeing.
Q: Why did you decide to leave YouBet the second time?
A: I left to form Santa Monica Capital Partners, originally to create a special purpose acquisition vehicle, or Spac. It’s basically a public financing vehicle where you raise substantial amounts of cash, which goes into a trust. We’ve raised $100 million with Citigroup. We’re looking for acquisitions in the $100 million to $500 million range, mostly in media, entertainment, technology and communications.
Q: Where does ProElite fit into the picture?
A: Santa Monica Capital Partners doesn’t raise money for other people. We create or acquire our own businesses. We came across ProElite when Doug DeLuca, now the company’s chief executive, asked us to look into mixed martial arts. We weren’t really interested at the time, but Doug gave us tickets to see an Ultimate Fighting Championship at Staples Center. We were blown away. My partner and I started thinking about how to turn it into a real sport. How do you use the Internet to create a MySpace for mixed martial arts? In 2006, we came up with a business plan and raised $40 million.
Q: What is your goal with ProElite?
A: We’re taking mixed martial arts mainstream. Showtime is broadcasting our shows; CBS has invested with us. We acquired leading mixed martial-arts brands around the world King of the Cage based in Fontana, Cage Rage in London, Icon Sport in Hawaii, and in partnership with a South Korean media company, we acquired Spirit MC. We have the largest library of fights in the world and we plan on putting on 80 events this year.
Q: How do you make what’s essentially cage fighting into a real sport?
A: It begins with education. Part of it is where we’re putting on the events, who is behind them and who is broadcasting it. When it’s on Showtime, it lends a lot of credibility. Building a community online, where fans can meet and understand the fighters, changes the sport as well. UFC was looked at as more of a spectacle, if you will, and not a true sport. UFC did a great job of getting it licensed in a lot of states and got it going. Our task is to take it from there to mainstream.
Q: Why do you think there’s a bad rep for mixed martial arts?
A: Because it started in bars and back alleys.
Q: Is this what you envisioned you’d be doing when you were young?
A: I never thought I’d be in mixed martial arts or horse racing. When I was younger, Russell and I said if we wanted to make a difference in the world, there are three basic power centers. One is politics in Washington, D.C. Second is filmmaking that guides our thinking as society. And third is money. We decided to make money. That was our drive. It was less based on a specific industry. This is just how our lives unfolded.
Q: Have you ever not been opportunistic in terms of choosing an industry?
A: Nui.com is the only I company started with a goal. It’s my charity side. It’s a for-profit company but we give 50 percent of our profits to charity. Our first product is kids water. It’s sweetened just with natural fruit juice and has liquid fiber, calcium, multivitamins and electrolytes like Gatorade without any salt and a full cup of green tea.
Q: Is your family entrepreneurial? Did your siblings begin businesses at age 17, too?
A: My dad was corporate. He went through the ranks in advertising and was very successful. My business acumen comes from him. My brother started a music company. My sister is an actress. My grandfather was an entrepreneur. He migrated from Russia and sold fish on the streets.
Q: What’s the best advice you’ve ever gotten?
A: My dad always told me: Keep your eye on the ball. Whatever you do in life, particularly in business, there will always be personal issues, ego issues and competition issues. Don’t worry about the rest of the stuff. Focus on the goal or else you’re going to make mistakes.
Q: What was the highest point of your career?
A: When I wasn’t working in 2001. ProElite is the most exciting. It’s taken off so fast. Putting $100 million in the bank was also fun.
Q: Your greatest disappointment?
A: My greatest disappointment has been people who you think are on your side who turn from you. When I was 17, a close friend ripped me off for money. He had a gambling problem. I realized then that I could stop trusting people, but then it would be my problem. I came to terms with fact that I’m going to get ripped off from time to time, and decided to trust people to begin with.
David Marshall
Title: Founder and Chief Executive
Company: Santa Monica Capital Partners
Born: 1963; Studio City
Education: Babson College, Massachusetts
Career Turning Point: Bringing YouBet.com Inc. through the first year, when it couldn’t make payroll for six months, to a $200 million market cap company
Most Influential People: His father, an advertising executive; and Russell Fine, best friend and business partner of 20 years
Personal: Lives in Pacific Palisades with wife Neidda and two daughters, Shanti and Sedona
Hobbies: Traveling, skiing, yoga
