Health Media CEO: “Don’t Ever Give Up!”

HealthMedia, says Ted Dacko, is “a company that shouldn’t be here.”

Just a few years ago, the Ann Arbor firm was left for dead. They had 85 employees, a burn rate of $685,000 a month, and very little revenue. Venture capital funding had dried up. Dacko was working there as vice president of sales and marketing when the previous CEO quit – two weeks before the firm would literally run out of money.

The board asked Dacko if he wanted the job. If he took it, he had two choices: Make a go of it, or lock the doors.

If you know the rest of the story, you know why Dacko was honored Thursday night with the New Enterprise Forum‘s Entrepreneur of the Year award.

And if you’re someone who likes to read the last chapter of a book first, this is for you: In October, HealthMedia was purchased by Johnson & Johnson in a deal that’s been hailed as one of the bright spots for the local economy in 2008. The pharmaceutical giant plans to keep HealthMedia’s operations in Ann Arbor, and give it resources to grow.

This isn’t the first time The Chronicle has heard HealthMedia’s story. We were on hand in October for the company meeting at Live at PJ’s where executives announced the acquisition to employees. The video shown then was replayed at Thursday night’s presentation too – this one held at the Holiday Inn North Campus in front of 100 or so local entrepreneurs and investors. And like the October announcement a, Thursday’s event included cupcakes.

And, of course, both featured the now near-mythic tale of how Vic Strecher – who Dacko calls the “real entrepreneur” – developed a way to customize programs aimed at changing health behaviors, like quitting smoking or losing weight. Strecher, who couldn’t attend the New Enterprise Forum event, is a professor of health behavior and education at the University of Michigan School of Public Health – HealthMedia is a UM spinoff he started in 1998.

Venture capitalists came on board, including Rick Snyder of Ann Arbor’s Ardesta. The business grew and hired its first CEO, who didn’t work out, Dacko said. The second CEO – the one who quit two weeks before the company went broke – didn’t work out so well, either.

Which brings us back to the brink, when Dacko took the job as CEO in 2001. He cut the staff from 85 to 50 people, wiping out the highest-paid employees. Another 20 people quit over the next six weeks, wanting to move to more “stable” companies, Dacko said wryly, like Pfizer. At its lowest point, the firm employed about 25 people, including its interns.

“We lived hand to mouth for two years solid,” Dacko said. Checks from customers came in Thursday’s mail and were deposited that same day in order to meet Friday’s payroll. Even so, they missed three payrolls. They borrowed from employees. Strecher took out a second mortgage on his home. Potential funders weren’t interested.

Slowly, though, things began to turn around, but only because of the dedication and perseverance of those 25 people who stuck it out, Dacko said. Their mascot became the cockroach: “We won’t die ever.”

At a time when many companies in the tech sector were folding, HealthMedia grew. (Today the company, headquartered on First Street between Huron and Washington – has about 140 employees.) Investors took notice, and started calling. Even when they decided to hire an investment banking firm to consider a sale, Dacko said, the No. 1 thing they kept in mind was that they didn’t have to sell. If a potential buyer didn’t meet their asking price, they could walk away and continue to grow. One of the reasons they sold to J&J was because that firm agreed to “leave us alone,” Dacko said, and not weave the business into the larger firm’s corporate culture.

And though he received the award on Thursday, it really should be for HealthMedia as company of the year, Dacko said. “I just get to wear the C.”

Other Awards

In addition to Dacko, the New Enterprise Forum handed out several other awards on Thursday: Earle Holsapple of SciTech won for best presentation; Ake Elhammer of AureoGen Biosciences got the best technology award; and the best business model went to Peter Dressler Dresslar of Torrey Path (the award was accepted by his colleague, Sean Ainsworth).

The group also heard a presentation from Peter Tchoryk of WindSight, a spinoff of Michigan Aerospace that’s developing wind measurement systems. Keeping with the awards theme, Tchoryk was presented with the ACE Cup – actually, a clear lucite disk – for winning the Elevator Pitch competition at last month’s Annual Collaboration for Entrepreneurship.