Rich Barton: King of travel and real estate

  @FortuneMagazine January 16, 2013: 5:38 AM ET
HOW14 rich barton zillow expedia

Zillow this: Rich Barton in Seattle's North Capitol Hill neighborhood

(Fortune)

Some entrepreneurs can shake up an industry once. Rich Barton, 45, has done it twice, with travel site Expedia.com and Zillow.com, an online real estate company. For the nine months ended Sept. 30, 2012, Expedia reported $3.06 billion in sales, and Zillow forecasts $113 million in annual revenue. Now Barton is trying to change the way people look for work: Glassdoor.com gives job seekers the inside scoop by posting salaries and company reviews by anonymous employees. The startup has raised $42.2 million to date. Barton's story:

I was raised in New Canaan, Conn. My mom was a teacher before she married and became the CEO of the family. Dad worked for Union Carbide, had big jobs in sales, and was a mechanical engineer. He likes to remind me that in his day, plastics and chemicals were high tech. I was always interested in technology. There were early Apple (AAPL, Fortune 500) computers in high school, and I was into that stuff. When it was time for college, I decided to go to Stanford University and fell in love with the West Coast. I had an aptitude for math and science, and also had the ability to communicate with people. I got a general engineering degree but knew I wanted to start my own business.

After graduation in 1989, I wanted to learn how to think about business from a CEO's perspective. So I went to work for Alliance Consulting Group in Cambridge, Mass. In 1991, I was recruited by a friend to work for Microsoft (MSFT, Fortune 500) and moved to Seattle. I became product manager of MS-DOS 5.0 and worked on Windows 95. Three years later my future wife, Sarah, who was attending medical school in Chicago, began shopping for medical residencies. In preparation for a move, I started casting about for a business to start in the Internet space.

Microsoft had created Encarta, a multimedia encyclopedia. At the time, it wanted to produce multimedia CD-ROMs on everything, and I was given a portfolio of things to manage. One of them was a multimedia CD-ROM on travel guides. I didn't think the travel-book business was very big. So, at 26, I went into my first product-review meeting with Bill Gates and said I thought the idea was dumb, small, and uninteresting. I showed him a travel service on Prodigy that allowed travel agents to look up flight information from home. I said, "Everybody's going to be online eventually, and we can build this for consumers."

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I pitched him to fund me to do it outside of Microsoft because one day it would need to be a separate entity in order to thrive. He and Steve Ballmer kind of laughed at me, but said they'd get it going internally, and if it made sense to spin out, they'd think about it. So I used Bill Gates as my venture capitalist. Sarah moved to Seattle for her residency, and I became general manager of Expedia (EXPE). I was a small cog in a big company, but I thought of myself as an intrapreneur.

Back in 1999, the web was new. We were so cool and interesting that consumer adoption and word of mouth were not a big challenge. The big challenge was industry relations. Microsoft was powerful, and having young kids from the company go into offices to negotiate with old guys at American Airlines didn't sit well with them. I wore a suit, tried not to be cocky. I built relationships based on demonstrated expertise. If you challenge people to think about business in a new way, they tend to forget you don't look like them. Our annual revenue went from zero in 1994 to $70 million in 1999.

When we IPO'd in 1999, Expedia was half the size of Travelocity, the first to market. Within two years we were twice its size. Travelocity was built on Sabre, a mainframe-based air-ticket pricing system. We built a totally radical system called Best Fare Search that enabled consumers to simultaneously shop price and schedule, which had never been done before. Travelocity focused on air travel, and we thought hotels were way more interesting to travelers than airline tickets. So we had product advantage in securing better hotel pricing and deals from suppliers.

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We were a public company for several years, until Barry Diller's USA Interactive (IACI) bought the company and took it private in 2003. Soon after, I decided to leave.

After I left Expedia, I joined Benchmark as a venture partner because I wanted to stay plugged into the cutting-edge stuff in Silicon Valley. New companies are often started to solve a problem that an entrepreneur has. When I left Expedia, I had a growing family. Lloyd Frink, who had worked with me at Expedia, and I were sharing an office, and both of us were house hunting. In 2003 we were struck at how difficult it was for us to find good information on the housing market. So we saw a yawning opportunity.

We hit on the idea of writing an algorithm that digested publicly available information and would come up with an estimate of what a house is worth, and plot that over time. The negotiation process in real estate wasn't very transparent. So Zillow would be a way to get a quick estimate of what a house would be worth.

After our eureka moment, we were scared. The first one to define this could have great market share, so we decided not to tell anyone about the idea. Lloyd and I decided to fund it ourselves for a while. We each put in $2.5 million, and a few close friends pitched in $1 million for a total seed round of $6 million. The balance of Series A was $26 million from Benchmark Capital and Technology Crossover Ventures.

MORE: Zillow - the jobs creator

We hired our first 35 people without telling them what we did. The website was up as Zillow, and said, "Interested in a little revolution? Come work with us at Zillow." Mystery is so much more alluring than fact. People didn't know until the day they showed up for work what Zillow (Z) was.

I find it easy to launch tech startups because I can draw on a network of people I've enjoyed working with. Tech startups are not capital-intensive. It takes money to build the first version of the software, but it's very inexpensive to deliver that to millions of people. They're high-margin businesses if you can get scale.

Glassdoor didn't take long to get to 14 million unique visitors because people want to see what people at different companies make. They also want to see where their friends work, which is key to networking. The site can be used for job hunting, or for preparing for a review. It's a way to bring light to the job-hunting process.

Having resources to invest has allowed me to be more aggressive and prolific in creating companies. I sit on eight boards. Four of them are companies I started with other people, and four are companies I've invested in or am involved with because of Benchmark.

I'm an evangelist for the things I believe in. My startup philosophy revolves around a power-to-the-people concept that enables people to take control of the decision-making in their lives. When people are empowered, a revolutionary disruption of an industry can then occur. That is the wellspring of most of the businesses I've created.

My advice

Have courage. Entrepreneurs have to be able to overcome fear and the petty criticism of others who will tell them, "You're crazy." Post-9/11 at Expedia, we decided that if travel didn't rebound, we'd be in trouble, so we doubled down on our marketing. We got three to four times the bang for our buck and established market share in hotels.

Nurture the brains. Creating a work environment and culture where smart people want to work is important. Give people space and privacy, empower them to do things and take risks without the fear of being fired. Workspace is a small part of the P&L but makes a big difference.

Have a heart. Great entrepreneurs have a passion for doing something and for caring for the people who are doing it with them. Great leaders need to be able to point to the mountain, define it, and motivate people through the difficult expedition to success.

This story is from the January 14, 2013 issue of Fortune. To top of page



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