Oct. 9–David Becker apparently knows something the rest of us do not.
Why else would the clean-cut 39-year-old leave a plum job at Downtown-based FreeMarkets Inc. that brought him millions to work above his garage in Sewickley, pondering the vagaries of commodities trading and contemplating the investment of venture capital at a time when the national economy is still shaky?
It turns out, there are several reasons.
One, Becker believes he is really good at investing money. (He started as a teenager)
Two, he sees himself as a contrarian, moving forward when others do not.
“I want to be at the front end of the curve, not the back end of the curve,” Becker said. Now “is the appropriate time to enter into the markets. — You still have a lot of good ideas out there.”
“Innovation,” he added, “is alive and well.”
Becker was one of the first 10 employees to join FreeMarkets, the Downtown Internet auction firm that went public in 1999 at the height of the dot.com boom.
While co-founders Glen Meakem and Sam Kinney “got all of the kudos,” Becker “has been kind of the unsung hero over there,” according to local venture capitalist Sean Sebastian, who said Becker was responsible for much of the early sales, marketing and hiring that FreeMarkets needed to sustain itself as a company.
Becker, the chief operating officer, became a paper millionaire when the company went public, and he had to resist “every investing instinct in the world” telling him to sell his shares and take advantage of what was, at the time, a “ridiculous valuation.” (Indeed, after its shares hit a high of $370 in early 2000 only weeks after going public, FreeMarkets plunged to about $30 by December of that year).
Instead, Becker waited nearly four years, until FreeMarkets was more mature, to exit for his new venture — Clearwater Capital Management.
The firm, housed in an office he built above his garage, is being launched as two funds — one investing in young technology companies and the other a hedge fund investing in bonds, equities and commodities. He already has $5 million to $10 million in commitments for the technology fund, and he plans to put up his own money, as well.
For the hedge fund, he designed a complex investment model that weighs the emotional and numerical factors influencing asset prices, providing a theoretical method for making the most money while putting up the least risk.
While the investment strategy is carefully calibrated, “I am not afraid to take a risk if it is warranted.”
But not many people are now starting venture funds for the first time, especially in Pittsburgh.
So, is Becker crazy?
“Look, I always think the more people are investing, the better,” said Joel Adams of Sewickley-based venture capital firm Adams Capital Management. “This area, like any other area, could use more people doing this. It never hurts. I applaud him.”
To understand why Becker would do something such as this, it helps to know something about his life story, which is a study in calculated risk, contrarian thinking and self-sufficiency.
Born in a rural part of northeastern Kansas where “there really is no town,” Becker spent his childhood on a 7,000-acre farm that produced soybeans, corn, sorghum, wheat, cattle and hogs (400 heads annually). His father taught him the self-sufficiency so common to farmers, showing him how to hang drywall and strip down cars.
If Becker wanted extra money, he had to find it elsewhere, baling hay for neighboring farmers.
There were 18 kids in his high school graduating class. Few, if any, would settle down more than 30 miles from home. For some, St. Joseph, Mo., or Kansas City might be the biggest town they would ever see. Becker’s ticket out was an Army ROTC scholarship to an engineering college 12 hours away, but before he left, Becker learned from his dad Ray several lessons about money management, commodities and stock market speculation.
A former military officer, Becker’s father was in charge of the family farm but he also ran a financial planning firm and sold gas leases on the side. He used that financial expertise to weather the bad years on the farm, hedging the family’s crops with futures — which are obligations to buy or sell a commodity on a specific day for a predetermined price. Farmers who commit to sell their crops at a certain price are protected if the price drops.
Becker’s father was always on the lookout for a good investment. When Chrysler Corp. ran into problems in the late 1970s, losing as much as $460 million in one quarter, the elder Becker concluded that the federal government would not let such a large company go bankrupt. So father and son bought shares in Chrysler, the son using money he made bailing hay for neighboring farms. The father was right about the car company. The U.S. government loaned Chrysler $1.5 billion in 1979, the stock went back up and Becker pocketed the profits.
This is a pattern that would repeat itself.
After leaving the farm, Becker continued to invest on the side — with impressive results. While working at Union Carbide, in West Virginia, his investments in the chemical industry earned him more in one year than his entire Union Carbide salary. At Harvard Business School, in the early 1990s, Becker invested with a friend in such companies as Intel Corp. and Microsoft Corp., and “we did extremely well.” Becker said.
So well, in fact, that he was able to use the proceeds to pay off his school loans and walk away from B-school debt free. And “Harvard Business School is not cheap,” said Trip Levis, a friend and former colleague.
Instead of following the usual Harvard path to a consulting firm such as McKinsey & Co., or a Wall Street investment bank, Becker went to work for Dole Food Co. — a company he had studied part time, at night, for a paying client. Dole moved him to Costa Rica.
“Dave took a different tack because it was something that was intellectually engaging and meaningful to him,” Levis said. “I think that counts as pretty contrarian thinking.”
It was former Harvard classmate Meakem who lured him to FreeMarkets in 1996.
Becker said he tried to play the contrarian at FreeMarkets, too, pursuing moves that were smart but not necessarily popular. As examples, he cited the decisions to shut down the company’s Korean office, spin off an asset business and lay off employees.
Because he was responsible for hiring many of the company’s first employees, Becker became the man prospective workers feared most. It was Becker who stressed the use of the system of interviewing that tested intelligence and performance under stress, with mind-twisters such as “How many gas stations does the city need?” or “How many phone booths are in Manhattan?”
Sometimes, Becker would ask candidates to help him think through a real problem he had at work. “My interviews are infamous in FreeMarkets lore,” he said.
In leaving, Becker became the latest of several prominent FreeMarkets employees to move on. Of the first handful or so, only Meakem remains. Like Becker, though, Meakem has started an investment fund out of his house in Sewickley. The one difference between the two is that Meakem launched his investment firm from his basement.
Becker, leaning on his rural origins, chose to build a new office on top of his garage, preparing the designs himself, participating in the construction and building a staircase that runs from the office to the house. In doing so, Becker is drawing inspiration from his father Ray, who told him recently that “You have a couple left in you.”
Repeating the phrase, perhaps for emphasis, Becker said, “I have a couple left in me.”
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