The Web According to Darien Dash Building a business that bridges the digital divide
By Arlyn Tobias Gajilan

(FORTUNE Small Business) – You won't often hear the names of rapper Dr. Dre and the MIT Media Lab's Nicholas Negroponte uttered in the same sentence. Unless, of course, you're talking to 29-year-old Darien Dash. He's equally at home among the button-down Alex P. Keaton set as with a hip-hop star's gilded entourage. It helps, too, that he's the CEO and founder of DME Interactive, the first black-owned Internet company ever to be publicly traded.

That's one of the reasons Dash has become the go-to guy President Clinton tapped to discuss the dangers of Internet illiteracy in African-American and Hispanic communities. It's also why he was called before a congressional subcommittee and asked what could be done about the technology gap between rich and poor, also known as the "digital divide." He told them they'd need to solicit the help of urban role models like controversial recording artists Puff Daddy (a.k.a., Jennifer Lopez' boy toy) and rapper Jay-Z if they wanted inner-city kids to see technology as cool. AT&T boss Michael Armstrong also called Dash to discuss that racial and economic divide, which finds 17% of white households with Internet access compared to just 8% of black and Latino households.

Dash didn't start out being an Internet entrepreneur. While still at the University of Southern California, he flirted with a career in the record industry, negotiating deals for rappers. But he managed to see past the glamour and stay focused on graduation, believing the payoffs in high tech would ultimately be better. Degree in hand, he landed a job marketing Digital Music Express, a 30-channel music cable service, where he rose through the ranks but eventually grew frustrated by the industry's reluctance to install boxes in poor neighborhoods. "I wanted to create a business that wasn't hamstrung by misperceptions of poverty," says Dash, who quit in 1994.

Creating that business hasn't been easy. His six-year-old company has a relatively small market cap of $20 million and had only about $500,000 in revenues last year. Much of that came by building Websites, creating e-commerce systems, and providing back-end technical support to companies that are mostly owned by minorities. Among his clients: Motown Records, HBO Home Video, and Def Jam Records.

There are signs of hope. Specifically, a $90 million deal with AOL [which has agreed to merge with Time Warner, parent company of FSB] to create Places of Color, an ambitious new dial-up online service and Web portal that will provide news, entertainment, and e- services to urban blacks and Latinos. The launch of POC has been complicated by impatient stockholders. To meet the Street's new miserly (or realistic) expectations, Dash laid off half his staff last summer. Still, his stock has dropped to a buck a share at press time, from $12.

Is his new service the business model for a more inclusive future? Or is it a plan that can't possibly live up to its intentions, no matter how well meaning? From DME's offices just south of Wall Street in New York City, Dash discusses how he hopes to span the digital divide and make a profit. Edited excerpts:

Why give up a career representing rappers for a job at a cable company?

My senior year at USC, I read a book called Megatrends, and it predicted wealth would be transferred from captains of industry to barons of technology. So when I got out of school, I became a marketing and sales director for DMX, Digital Music Express, the first cable service that TCI ever distributed as a separate set-top box. It offered 30 channels of CD-quality music 24 hours a day. For me the record business felt like a dead-end street. It's kind of like sports. Twenty million kids start out playing basketball, but only 1,600 of them ever make it to the NBA. The chances are very slim that that will be the way out.

So you get a tech job, do very well, then you leave. And you quit one day after getting married. What were you thinking?

That's what my wife asked [laughter]. I wanted to sell and market the kind of music that I was most passionate about, like Latin and African-American genres. Doing that meant installing cable boxes in urban areas. But I ran into all the corporate misperceptions about the creditworthiness of blacks and Hispanics. They thought we wouldn't get paid and that the boxes would never come back. It angered me. I saw a missed opportunity and a big market. So I quit and founded my own company in our one-bedroom apartment with the mission to expand the hardware and software infrastructure within minority communities. [TCI merged with AT&T in 1999. "Some of our best markets are our most diverse," says AT&T's Steve Lang in response.]

What does that mean exactly? What were you getting contracted to do?

At first I produced multimedia-enhanced CDs and built Websites, mostly for record companies. Later I created back-end computer systems to get clients e-commerce capable.

When you quit, did you have any clients lined up?

I didn't have any clients for the first six, seven months. I was walking by faith, not sight.

But faith doesn't pay the bills. How big was your bankroll?

There was no bankroll. I was operating on two weeks of savings. My first son was just two, and my wife had a $9-an-hour job. I thank God for my wife. She paid the bills that first year. We were very hand-to-mouth.

Why didn't you get a loan or try for venture capital?

Some friends and family helped, but it wasn't enough to call it a "round." I wasn't an investment banker, and my family didn't have an investment banker background. So if I got a contract for $10,000, I'd hire out three freelancers to deliver the product and maybe net six grand to live off of and sustain me until the next contract. It took a couple of years before I was able to hire anyone else full-time. And we were self-financed for the first four-and-a-half years.

Do you think it would have been difficult getting VCs to buy into your business plan?

Yes. When I did look for funding in 1998 I got a very lukewarm-to-cold reception. There was no understanding of the urban market, and there was no such thing as a digital divide in most people's minds. A few of the VCs we talked to were giving us valuations of only $5 million. I felt like I'd put in so much cash, so much energy, I needed a stronger valuation than that. Eventually we looked into an IPO, but it was too expensive. Then we met with Mason Hill, an investment bank that wanted to take us public. They came up with the idea of a reverse merger. They paired us with Pride Automotive Group, which no longer wanted to be public. A car-leasing company had nothing to do with us, but we wanted to gain their public status on the OTC. So as a by-product of the merger, we became the first publicly traded black Internet company. [The car leasing business was shut down.]

You've testified before Congress and met with President Clinton to discuss the digital divide. How deep is it, and how do you bridge it?

Ultimately, I see it less as a divide and more as an opportunity. From an entrepreneurial perspective I try to tell kids that the game is changing. In the '90s the game was rapping, being an entertainer, or going into sports. There is nothing wrong with that, but they're saturated businesses. When you're successful in those games, you'll end up a multimillionaire. But when you're successful in the online game, you're a billionaire.

The African-American market is a $553 billion market, Hispanics $490 billion. That's a trillion-dollar economy just between those two demographics. Continuing to ignore the significance of that buying power just doesn't make sense.

What do you have to do differently to reach minority audiences?

People are people. I've seen Eminem, a white rapper, sell more records than Dr. Dre, who...was one of the biggest black rappers that ever lived. That goes to show how urban culture translates and transcends color, age, and demographics. Our new service, POC, will appeal to urban sensibilities, but it will be more than just about hip-hop. The four core elements of POC are training, distance learning, certification, and job placement. There is no color on getting a job, and there is no color on distance learning.

But you're talking about services that already exist. Why stop through Places of Color rather than going directly to a Website?

Because we're focused on making our service urban. It has to be hip and cool to be relevant [to African-Americans and Latinos]. The beauty of the Web is that people can always go and find what specifically interests them. We want to point people in the right direction, not own the relationship with each site that a person visits. Our goal is to say, "Okay, here's a direction for you to go in, and here are the top ten providers in this direction. If there's something more specific you want to find, we have the search tools and applications to help you." And our initial revenue streams will come via click-throughs, advertising, and transaction commissions.

But aren't you assuming that everyone can get online? To get to Places of Color, don't people first need computers and Net access?

That's right. We're working on getting hardware into households, selling certified preowned PCs for $150. That's the price of a new pair of high-end sneakers. Of course people will need to crawl before they can walk, so we'll first offer paid dial-up service and a full-service Web portal through our partnership with AOL. But eventually we'll offer free Net access through other partnerships we're developing. And as our customers get up to speed, we'll migrate them into a wireless or broadband relationship with different devices, like a two-way pager, a Web-enabled cellular phone, or a pocket PC.

Aren't you also giving away computers to inner-city schools? Is that philanthropic activism, or is it a strategy to expand the tech-smart demographic your company needs?

It's a part of our larger strategy. When we go in and give away product, we hope that the person will sign onto our service, find that it's a quality service, and recommend it to a friend. And I also think that it's important that we go out and wire those communities, period. I don't believe in digital welfare; that's not what this country needs. But I do have a covenant. I have a pact. I have a commitment to a higher power, to expand the hardware and software infrastructure within minority communities. Thankfully, we've found a way to do good and monetize that mission. I'm not ashamed of that.

What you're building requires a big front-end investment, and Wall Street isn't as patient as it was. After the April correction, your stock went from a high of $12 to about $1. How long will it take you to make money?

After April, I and a lot of others realized you don't need a lot of people to execute a vision or business opportunity. In May we had 106 people, now we're 45. It was a painful and enlightening experience, but a must-do to meet our revenue targets. Now we've got a crew of Green Beret-like mercenaries executing a model that should allow us to be cash-flow positive after the first 10,000 customers we sign up for POC.

That sounds optimistic. Is that sight-talking, or is it faith?

It's probably a little bit of both.