Russell Stern, a former front-runner for the top job at Western Digital, is taking over as CEO of Santa Ana-based escrow.com, a small Internet startup with big players behind it.
“We’re really happy Russell is joining us,” said John Snedegar, chairman of escrow.com. “He’s a strong operating guy. He oversaw 10,000 people at Western Digital.”
Stern is joining a company that has 106 employees. It was begun in November as a joint venture of Santa Ana-based Micro General Corp. and Irvine-based Fidelity National Financial Inc. Fidelity, whose chairman is well-known entrepreneur Bill Foley, is the majority shareholder in Micro General. Foley is a co-chairman of Micro General, and Snedegar is president and CEO.
Stern’s hiring comes on the heels of a $30 million third-round equity investment in escrow.com by major players, the beefing up of its board of directors and the hiring of two other top executives. Escrow.com is also preparing for an IPO in the first quarter of next year, said Snedegar.
Stern said he joined escrow.com because he saw the company as filling a need on the Internet,creating trust between buyer and seller. Escrow.com holds the money of e-commerce buyers in escrow until they receive their products and are satisfied, then releases the money to the sellers.”When I left Western Digital, I was looking to become part of an Internet play. My goal was to find the company that would facilitate commerce on the Internet, with both a revenue and profit model that actually works,” he said.
Escrow.com is gaining backing from impressive investors. Its recent funding included $13 million from Softbank Finance Group, a subsidiary of Softbank Corp., and $12 million from Chase.com, a subsidiary of the Chase Manhattan Corp.
Snedegar said Chase Manhattan will recommend escrow.com to its clients. He said Softbank is interested in helping escrow.com expand into Asia, where the company’s escrow services could replace electronic letters of credit.
“Think about cross-border transactions and multiply it a hundred-fold,” said Snedegar. “Try Pakistan and Philippines. That will all be B2B plays because the consumers aren’t connected yet to the Internet, but businessmen in Pakistan and the Philippines have embraced technology.”
Another noted investor, though with a smaller stake, is Pacific Century CyberWorks Limited (PCCW), which is run by Richard Li, whom the Economist magazine called “the messiah of Cyberasia.” Li, son of billionaire Hong Kong businessman Li Ka-shing, recently engineered the takeover of Hong Kong’s telecom giant, Cable & Wireless HKT. The deal, valued at $38 billion, was Asia’s biggest takeover ever.
A fourth investor is VerticalNet Inc., which recently reached an agreement with escrow.com to use its services.
The foundation of escrow.com’s technology is a trust accounting software platform that has been in use by Fidelity National Title for more than 15 years, and processed more than $1 trillion in transactions. The software platform was customized and extended to the Internet by Micro General.
Escrow.com’s board also has landed some famous players: Yoshitaka Kitao, the No. 2 at Softbank, where he is VP and CFO, and Ken Minihan, a retired general who was director of the National Security Agency/Central Security Service. Foley is also a member of the board.
Snedegar had been acting as CEO of escrow.com but he didn’t have the time to run the company in addition to his duties at Micro General. Snedegar said he became aware of Stern because they live in the same Laguna Hills neighborhood.
“We need execution of our business plan. Selling is not an issue for us because we can sell all day. It’s just finishing the next technology build and executing,” said Snedegar.
Stern joined disk-drive manufacturer Western Digital in 1994. Among other areas, he ran Western Digital’s operations in Singapore and was head of its R & D.;
Although Western Digital has annual sales topping $2 billion, it’s been plagued with losses for the past two years. When Western Digital’s CEO Chuck Haggerty last year announced he would step down, Stern and Matthew Massengill were announced as co-chief operating officers and named the top two internal candidates to replace Haggerty.
However, Stern resigned in November; two months later, Massengill was named CEO and president of Western Digital. At the time of his departure, Stern said, there had been no decision as to who was going to be CEO.
“Frankly, I felt that this is where I wanted to take my career. I wanted to get involved in the new economy, but that opportunity was not there at Western Digital,” said Stern, who said he remains good friends with Massengill.
Last week, escrow.com also announced the hiring of David Sklar as executive vice president and chief financial officer and Mark Rosenberg as executive vice president of marketing and business development.
Sklar has more than 20 years of executive experience in the financial services sector, having served as executive VP and CFO at Aames Financial Corp. His work resulted in the raising of $165 million in new equity and the increasing of the company’s line of credit to more than $1 billion.
Rosenberg previously had managed IBM’s worldwide Internet operations for its PC Division and he was the marketing and strategy executive for IBM Interactive Media.
Most recently, Rosenberg served as vice president of sales and marketing for an online auction start-up serving the B2C and C2C markets. He was also president of Rosenberg & Associates, a boutique marketing firm, that was sold in 1995. n
