Ted Dacko, CEO of HealthMedia, was named the 2008 Entrepreneur of the Year at the New Enterprise Forum's annual awards event Thursday night.

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.

The crowd at Thursday night's New Enterprise Forum, held at the Holiday Inn North Campus on Plymouth Road.

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.

HealthMedia got a boost in its nascent stages from a handshake understanding.

If you’ve just described your company as “the coolest damn company in the world,” how do you announce to your 150 employees – 95% of whom are shareholders – that the company has been acquired by Johnson & Johnson? If you’re Ted Dacko, president of HealthMedia, you take advantage of the venue you’ve selected for the mid-afternoon announcement. You’re at a nightclub with an excellent AV system (Live at PJ’s), so you cue up the company movie.

As the fast-paced sequences of still images, synced to the tempo of Angels and Airwaves’ “Heaven,” flickered past the assembled employees’ attentive stares, it seemed pretty clear they’d seen most of it before – except for the final frame: “HealthMedia is now a Johnson & Johnson company.” And that frame drew the applause it was designed for.

For some employees, it was a confirmation of the rumors they’d heard. Dacko tackled head-on the possible uncertainty he thought that some employees might be feeling, emphasizing that this was not a “financial acquisition” for Johnson & Johnson, but rather a “growth acquisition” – meaning that HealthMedia was the first investment Johnson & Johnson was making in a division called the Office of Strategy and Growth. The plan is to grow HealthMedia from a $23 million company to a half billion dollar company.

Dacko said that the plan was to retain all employees and that this was not like two auto companies merging, and then immediately trying to squeeze out various parts, leaving a completely different looking entity going forward. It’s hard to know if the company movie soundtrack was chosen specifically for the final lyric, “Please stay/Don’t go/I’ve got you now/Are you curious?/Please stay,” but it seemed apt given Dacko’s assurance of sticking to the place and people that had brought them this far.

Ted Dacko holding a poster of a cockroach, which recalled some earlier, harder times for HealthMedia, a company like a cockroach - it might be bad off, but you just couldn't kill it.

This was not a guarantee of lifetime employment, Dacko told the assembled group, but they should not go home tonight thinking “Oh crap, I’m going to get laid off.” In describing HealthMedia as now a wholly owned independent subsidiary of Johnson & Johnson, Dacko focused on the “independent” part. He stressed that HealthMedia would keep the same sign on the front of its First Street building, would continue in its same line of business, would retain its company culture, but would go global faster.

In fact, HealthMedia has already entered the global market, with clients in Germany, France, Italy, Ireland, Japan, Australia, and Singapore. But in a sense, HealthMedia’s most important client, which came on board in 2003, was an American company: Johnson & Johnson. They liked the HealthMedia product so much, said Dacko, they decided to buy the company.

What exactly is HealthMedia’s product? Let’s say you’re an employer who’s concerned that your workers are suffering from stress, coronary heart disease, asthma, depression, diabetes or any number of other health conditions that could be partly ameliorated through behavioral modification. What HealthMedia does is offer web-based educational and coaching modules that assist people in a self-directed way to adjust their behaviors for a maximum benefit to their own quality of life.

Say, for example, someone has a health condition that could be addressed in part by walking every day. HealthMedia offers coaching products that work by monitoring walking mileage – with that mileage upload-able from a pedometer directly into the coaching program. Don Turner, director of solution planning for HealthMedia, said of their approach to eating, “it’s not a diet,” and compared it to coaching people as opposed to forbidding them to eat certain foods. So, Turner assured us, “You can still have a cupcake!” Which was good news for anyone within earshot and arm’s reach of the several dozen cupcakes loaded onto tables for the occasion of the announcement. (Based on appearance, the cupcakes looked like they’d come from Cupcake Station.)

Health Media CFO John Ternes, and director of solution planning, Don Turner.

What the employer can expect as a result of workers’ participation in HealthMedia programs are workers who are at work more often and more productive when they are present. Turner explained to The Chronicle that the outcomes measurements for each of the products are made at the beginning of a program (baseline), and then again at 30, 90, and 180 days. Insurance claims data analysis also showed the financial benefit of HealthMedia’s programs, said Turner. Turner said the financial benefit to a company using HealthMedia programs could range from $600 per person per year to thousands of dollars per person per year. HealthMedia CFO John Ternes pointed out that this savings was especially significant given the cost of the products at a few dollars per head.

Asked if HealthMedia itself used its own programs as an employer, Turner said, “Absolutely. We eat in our own kitchen.”

If HealthMedia is a kitchen, then it’s fair to ask, Who’s the chef in that kitchen? Otherwise put, who knew enough about health and behavior modification to cook up the basic concept? That would be Victor Strecher, Professor of Health Behavior and Education at the University of Michigan School of Public Health, who founded HealthMedia some 10 years ago. The company is a University of Michigan spinoff, with the UM retaining some equity as a part of the licensing of the technology – equity which will bring the UM around $1.7 million as a part of HealthMedia’s sale. That licensing was accomplished with the help of Ken Nisbet, executive director of the UM technology transfer office. In acknowledgment of that key role, Nisbet was called to the front of the group by James Epolito, head of the Michigan Economic Development Corp., who was on hand to mark the occasion along with Michael Finney, CEO of SPARK; Cynthia Wilbanks, UM vice president of government relations; Rick Snyder, CEO of the Ann Arbor venture capital firm Ardesta; Roger Fraser, city administrator of Ann Arbor; and John Hieftje, mayor of the city of Ann Arbor.

Victor Strecher and Rick Snyder shake hands, celebrating the acquisition of HealthMedia by Johnson & Johnson.

Snyder was instrumental in providing some early venture capital investment to HealthMedia through Avalon Investments, and continues to serve as chair of SPARK’s executive committee after helping to found the economic development agency. SPARK supported HealthMedia with talent recruitment, marketing outreach and business development.

It wasn’t a smooth ride for Strecher and HealthMedia to acquisition by Johnson & Johnson. In fact, just after the internet bubble burst in 2001, HealthMedia looked nearly dead, missing payroll a few times, borrowing money from its employees. When Strecher took the mic, some hint came of why the company didn’t die. That hint came from the founding story Strecher told, which showed how personally invested he is in this enterprise. It’s rooted in the wait for a heart transplant for his daughter and not knowing what the options were. Sifting through the information, evaluating various studies, Strecher said his father (who was on hand to share in the occasion today) asked him, “Don’t you do this for a living?” The elder Strecher joked that he was not “to blame” for the creation of HealthMedia.

Dacko also gave a lot of credit to Snyder, who said that he’d had a one-hour meeting that grew into a three-hour meeting, at the end of which Snyder and Dacko had a handshake understanding moving forward. There were plenty of other handshakes at today’s event: Eagle-eyed Chronicle readers will have already noticed that the hands shown mid-shake at the top of this story are from a larger photo of Snyder and Strecher just above.

Victor Strecher and Ken Nisbet.

HealthMedia employees await the announcement of their company's acquisition by Johnson & Johnson.

Michael Finney, CEO of SPARK, joked that he tried hard to hit the required dress code, but didn't figure on the T-shirts that the HeathMedia employees were wearing.

HealthMedia offices along First Street between Liberty and Huron. A T-shirted HealthMedia employee heads towards Live at PJ's where the acquisition of HealthMedia by Johnson & Johnson was announced.

Cupcakes served at the announcement of HealthMedia's acquisition by Johnson & Johnson.