Billionaire Aubrey Chernick read plenty of books about handling competition before starting his business, but he didn’t realize how tricky it would be until he launched software company Candle Corp. almost 40 years ago.
“I read a book on product differentiation and how any company can differentiate its product in the face of competition,” Chernick said. “They said if Charmin toilet paper can be differentiated from their competition, then any company can do this.”
But when the tech entrepreneur found himself competing with IBM almost two years into his business, he wasn’t so sure.
Chernick had created a product that could produce real-time displays of a computer’s performance and was set to pitch his technology to Southern California Edison Co.
The day before his big meeting, IBM announced that it had created a similar product and would be offering the service to its existing customers for free.
“I felt like they were taking a bull’s-eye to me,” he said. “I called up the people at SoCal Edison to see if they still wanted to see me and they said yes.”
And to his surprise, Edison agreed to a deal with Candle.
“It absolutely shocked me,” he said, and does to this day since he never got an explanation. “Then three or four years later it turned out that IBM, even though they had their own product that they developed internally, started to buy my product (and) they became my largest customer.”
He eventually sold the business in 2004 to IBM for $641 million. Chernick is now worth an estimated $1.29 billion thanks to his earnings from that sale and holdings in El Segundo software firm National Center for Crisis and Continuity Coordination, or NC4. That put him at No. 43 on the Business Journal’s Wealthiest Angelenos list in May.
The challenges of standing out in a sector as saturated as tech still exist, and now Chernick is hoping to help startups and consumers with his latest venture, NextGeneration Crowdfunding.
The El Segundo company launched two months ago and aims to be a resource for consumers and startups navigating new Securities and Exchange Commission rules regarding crowdfunding that allow nonaccredited investors to own equity in companies.
“There’s lots of little questions and angles and deeper questions that many people will want to know about, whether it’s investors or a startup company,” Chernick said. “We’re going to be providing a series of informational content and we have amazing experts that we have helping us out.”
For example, NextGen named Richard Swart as chief strategy officer, who serves as a crowdfunding and alternative finance researcher and scholar-in-residence at UC Berkeley’s Institute for Business and Social Impact.
The company will host its first crowdfunding conference this week in Santa Monica, focusing on ways everyday investors can now fund startups and emerging businesses. The event features industry leaders such as San Francisco crowdfunding website Indiegogo Inc.
New era
NextGen’s launch comes a month after federal regulators released final crowdfunding rules as part of the Jumpstart Our Business Startups, or JOBS, Act, which was signed into law in 2012.
The rules permit companies to raise as much as $1 million in a 12-month period from individuals with a net worth less than $100,000.
The purpose of the changes is to make it easier for startups and small businesses to raise capital and grow.
The reclusive Chernick said he had been following the developments for some time, and he decided that the final passage of the rules offered him a good opportunity to enter the business world once again.
The billionaire had kept a low profile for years prior to NextGen, focusing on his philanthropic work with conservative causes, Israeli charities and education-focused nonprofits. He said the SEC rules inspired him to create his own platform that would help entrepreneurs and consumers understand how the new funding rules work.
After all, what entrepreneurs need most, said Chernick, is funding.
“Of course, they’re not all going to be successful – nothing in life is going to be very easy,” he said. “But I’m a big fan of startups and entrepreneurship as a way to energize our youth and for the youth to frankly energize our nation.”
But the website is more of an education tool than a place for potential investors to make transactions. Visitors will be able to find educational content such as videos and even quizzes geared toward equity crowdfunding. There are also plans to create a directory of startups and emerging businesses so consumers can discover investment opportunities.
Chernick said revenue for the site would come from advertising as well as fees paid by startups to list detailed information on the site. There would be no charge for companies listing basic data.
Chernick started Candle at the age of 26, decades before the emergence of Silicon Beach, a thriving ecosystem of startups, accelerators and venture capital firms. While he was able to bootstrap the company and build it up without any outside capital, Chernick acknowledged that’s a far more difficult prospect these days.
“It’s different,” he said. “There’s so many exciting opportunities that people are working on with incredible creativity. There’s a new incredible app every day, (but) one of the challenges for people that is timeless is the issue of marketing. Breaking through the noise is really, really difficult.”
But with the exposure and educational tools offered by NextGen, Chernick wants to make it easier for startups to get discovered by potential business partners and financial backers.
“We want to explore how the new era of crowdfunding can spark a new economy,” he said. “We want to help educate and connect both investors and small businesses.”
