November 8, 2011

What Drives Serial Entrepeneurs

November 8, 2011

By Ina Paiva Cordle – The Miami Herald

Mike Fernandez, Laurie Silvers and Ed Iacobucci are South Floridians with entrepreneurial tenacity who have had big hits-and persevered through misses.

They envision change, solve problems and take risks.

They launch new ventures, see them to fruition and then start or invest in new ones. And even when there is a bump in the road, they adapt, change course, and dive right in again. And they don’t like to be told they can’t do it.

They’re successful serial entrepreneurs, and they’re a rare breed.

“These are very elite people,” said Ted Zoller, senior fellow with The Ewing Marion Kauffman Foundation, and the director of the Kenan-Flagler Business School’s Center for Entrepreneurship at the University of North Carolina at Chapel Hill.

“They are the top of the heap, the entrepreneurs who are really sought after for their market insight, for their knowledge of opportunities, for their strategic contacts, and for their leadership abilities to organize teams and build companies”,he said.

And their work is anything but mundane.

“They break industry standards and look for opportunities to create new value where it doesn’t exist, eliminate dysfunction, make things more efficient and create products that don’t exist,” said Zoller, who has researched serial entrepreneurs. “In a word, they are painkillers. They look for markets that are in pain and come up with solutions.”

Next week commemorates Global Entrepreneurship Week, with dozens of events, mostly free, taking place across South Florida. The University of Miami, St. Thomas University, Miami Dade College and Florida International University will all host panel discussions, presentations, seminars or contests to nurture developing entrepreneurial ventures.

True serial entrepreneurs comprise a tiny subset of business people. While an estimated 8 percent of all entrepreneurs launch a second venture, only 1.75 percent launch three or more, Zoller said.

Many times, they grew up with a parent or a family member who was an entrepreneur. Often, they don’t do well in conventional education, may show signs of entrepreneurship at a young age and drop out to start a business, he said.

Entrepreneurs may be rebels who defy authority and are creative, tenacious and adaptable, said Jerry Haar, associate dean and director of the Pino Global Entrepreneurship Center at Florida International University’s College of Business Administration.

“And they tend not to have bruised egos, so they bounce back real fast,” he said.

Moreover, they may have been “deprived of something, whether political or economic,” Haar said. “So, you have that kind of resilience- the ability to show others that you have what it takes.”

A serial entrepreneur creates a business, grows it, then sells it or takes it public, bringing in loads of cash.

They may stay on for a period of time, and then go off and create a new company.

Often, they may create a holding company to invest in multiple companies. They often serve on advisory boards or boards of investors of other firms. They often have a group of people that invests with them, and they form a syndicate based on trust and market insight, Zoller said.

“They do it because they love entrepreneurship. They love building. They love being involved with leaders and they like to remain relevant in their markets,” he said.

We found three highly successful serial entrepreneurs in South Florida who embody all that is the spirit and the tenacity of their ilk.

Miguel “Mike” Fernandez, Laurie Silvers and Ed Iacobucci have embraced risk and created businesses that are on the cutting edge of their industries.

Here are their stories:

Mike Fernandez

Healthcare magnate Mike Fernandez, 59, may be a billionaire today, but he wasn’t born well-off, the son of a merchant in Manzanillo, Cuba, a small town with dirt roads.

Yet very early on, he showed signs that he would be an entrepreneur.

Fernandez was 12 when his family arrived in New York in 1964, after living in Mexico for a few months. Preparing for high school, he picked out a top Catholic school and got accepted on a scholarship. His father, who worked three jobs, asked him if the scholarship was because of his grades. He said no, it was because he was Hispanic.

“Then I suggest you go get a job, and you pay half and I’ll pay half,” he recalls his father saying. “We don’t take charity.”

Fernandez got two jobs, including one, on the weekends, working at the American Museum of Natural History’s gift kiosk. There, he sold key chains, plastic Triceratops, film for cameras, and the like, but he noticed that the store didn’t have a plastic Brontosaurus, the most popular exhibit, or photo flash bulbs, which were needed for the darkened museum. He suggested the items to the manager, who told him to mind his own business, he recalls.

After his second week on the job, he went to the storeroom and found the name of the company that supplied the kiosk’s merchandise. He got on the subway, went to the company, and bought 100 plastic Brontosauruses and 25 flash bulbs.

“I sold out within hours,” Fernandez said. And he made a 300 percent profit. But the manager chastised him for going against her orders.

Yet, it set off a light bulb in his mind, and he realized he could become independent.

He has never responded well to authority, and was never good at following orders, he said. He held the record for the most detentions at school. And when he was drafted into the Army in 1972, he was promoted three times and demoted three times, leaving after three years at the same rank at which he had entered.

“I always had to define my own way,” Fernandez said. “In some ways it has paid off.”

He spent just one year at the University of New Mexico, majoring in architecture, before being drafted. He remembers the dean telling his class that if they chose the field to make money, they were in the wrong profession. It is his most vivid college memory.

Fernandez’s first business was as an independent agent for an insurance company, making $500 a month. He didn’t like the direness of selling life insurance, so he gravitated to health insurance. He built up a brokerage portfolio, focusing on airlines, and by 1979 he had seven national airlines as clients. He was in his mid-20s, and making $1.5 million a year. He knew he would be outbid eventually, so he put his book of business up for sale, and it brought $4.5 million. He was 27.

“After a month of retirement,” he said, “I realized I have a passion for what I do.”

In 1981, when the first IBM personal computer came out, he decided he could automate insurance data. He founded Miami-based Group Tech Systems, which he says was the first national database of health insurance information.

But by 1983, he was broke. He had drained the $4.5 million as well as a $600,000 bank loan.

It was the first time I saw the possibility of failure,” Fernandez said. An accountant advised him to file for bankruptcy, but Miami attorney Cesar Alvarez told him his reputation was paramount and to try to work things out.

Fernandez went back to the bank and asked for six months and $100,000 more. In return, he sold his house, his Mercedes and his boat, moved with his wife and two children into his parents’ home, and got the business off the ground. He changed the name of the company to Comprehensive Benefit Administrators, and sold it in 1989 to Ramsay HMO for $3.5 million.

Because of the sale, he became a substantial Ramsay shareholder and the company’s No. 2 executive. He had signed an employment agreement to stay three years or until the HMO doubled in membership.

By January 1992, the HMO had doubled in size, and he left, but with a non-compete agreement for South Florida. Two years later, United Healthcare bought Ramsay for $500 million. His stock was worth more than $25 million.

He turned to Tampa, and in 1993, Fernandez started Physicians Healthcare Plans, flying his private plane from Miami each day to work.

He had invested $1 million. Eighteen months later he sold 49 percent of the company for $30 million.

“A 30-to-1 sale in 18 months,” Fernandez said. “And I still had control.”

In 2000, he bought back the 49 percent for $20 million, and two years later, sold the company for $160 million to AmeriGroup, retaining a segment of the business that AmeriGroup didn’t want, CarePlus Health Plans.

Fernandez’s strategy is to find troubled companies that are in a nosedive and that need to be pulled out.

When he sells them, he shares the profits with the employees who helped him turn around and grow the businesses.

“I’ve never looked at any deal as my last deal. I’ve always looked at it as another deal,” he said. “You need talented people, so spread it around and you get talented people willing to work as hard as you work.”

He has also developed a group of 28 partners who invest in all his deals, including Philip Frost and Alvarez. Fernandez puts in 80 percent, and the others put in the rest.

Next, he bought CAC Medical Centers, which was losing $60 million a year. He paid $10 million for it in 2003. In two years, he made it profitable and sold both CAC Medical Centers and CarePlus Health Plans to Humana for $485 million.

This time, he signed a five-year national non-compete agreement barring him from involvement in HMOs. But he didn’t retire. “If I stop moving,” he said, “I think I will whither away.”

So he launched a private equity firm, MBF Healthcare Partners, in 2005. He brought in two partners who had worked with him at Ramsay: Jorge Rico and Marcio Cabrera. Today they have a staff of 13, looking at a deal a day.

So far, they have bought six core companies, and folded in other acquisitions. The six include Suncrest, a home nursing company; a 60 percent ownership in Navarro Pharmacies; Nutriforce, a vitamin manufacturer; and eMindful, an Internet-based counseling service.

Last year, when Fernandez’s non-compete agreement expired, he acquired the HMOs Total Health Choice, which operates Simply Health Plus, and Better Health. With 20,000 customers, the HMOs were losing $13 million a year, combined. Now, after investments in systems, technology and management, they have 60,000 customers and are generating a profit, he said.

His goal for the private equity firm is to purchase a company each year, and tuck in two or three other smaller purchases.

Fernandez, a morning person who rises at 4:30 a.m., says he is not as hands-on as he used to be. He has moved from an “operations attitude to an investment attitude,”; he said.

On the side, he raises Black Angus cattle and has amassed 5,000 acres in North Florida, 5,000 acres in Central Florida and 25,000 acres in Alabama.

In January of this year he had a health scare that caused him to reflect on his life: Prostate cancer.For three weeks, he told no one, not even his wife.

He took his dog on long walks, sat on a coral bench at his eight-acre Coral Gables home, and thought about all the time he has put into work, the two failed marriages he had before his current, happy 11-year marriage; the time he could have spent with his five children. He asked himself if he should have done things differently.

He decided he would not have. “I have done what I was put on this earth to do: to provide for my family, to create jobs, to share with the community that has given me so much,” he said.

Since then, he has had surgery and is fine.

“We’re all wired differently,” said Fernandez, recalling the memory of his parents losing everything to come to the United States. “I’ve always thought of myself as a provider.”