H. B	Photo by Mark Rhodes Rob McGovern recruited fellow Legent alumni when he fielded his own company, CareerBuilder.

Legent's Legacy
A unique confluence of cash, experience and opportunity has made spinoff entrepreneurship the name of the game.

By ROBERT BURKE

Four years ago Rob McGovern was just a guy at the beach, pondering his future. His employer, Legent Corp., had been swallowed whole by industry giant Computer Associates, and McGovern spent most of the summer of 1995 smoothing out antitrust objections by the Justice Department.

When the deal was done, McGovern took his family to a Delaware beach for vacation. Still, it was hard to get away from a looming question: Now what?

McGovern, a Legent vice president, had money from stock options and a severance package. But he had to sign a noncompete agreement that effectively locked him out of his specialty, network management. "It meant all my expertise went out the window because I could never again do those things I was good at," he says.

A little pressure was apparently a good thing for McGovern, then 34 years old. "I'm sitting at the beach looking out on the water, and I'm thinking, 'This Internet thing is going to be big.'" He brainstormed on what was wrong in the business world that he could fix and settled on the hiring process. He bought a legal pad at a dime store and started writing a plan. "By the fifth or sixth day, I had a draft," he says. He started calling people back home, asking if they wanted to hear his idea. By the 10th day, he says, "I wasn't really on vacation anymore."

Out of McGovern's brainstorming came Reston-based CareerBuilder, now a 150-employee firm that links employers and would-be employees via the Internet. About 1,000 companies subscribe to the service.

McGovern's company is just one of many to come out of Legent, a Herndon-based software company that had a fast rise in the industry before its top competitor, Islandia, N.Y.-based Computer Associates, finally acquired it for $1.8 billion in 1995. When it was absorbed, Legent had 2,600 employees, including about 450 in Northern Virginia. Out of that group came a burst of entrepreneurial energy and corporate leadership. Legent alumni have high-level jobs in dozens of technology firms such as America Online and Axent Technologies, and in venture capital firms like New Enterprise Associates and Updata Capital.

Legent produced a lot of senior management and new companies for a couple of reasons. It had been around for a while — having been formed in 1989 via the merger of Mario Morino's Morino Associates and Pittsburgh's Duquesne Systems. And it had bought a lot of small companies, so it employed a lot of workers who'd already been through the start-up experience. "That's the irony," says Morino. "The more you hire entrepreneurial people, the harder it is to keep them."

And then there was the Computer Associates acquisition — a catalyst for many. It produced severance deals and stock options for a lot of Legent employees who were forced out, and it gave many the required kick in the pants to try running their own firm.

That's a scenario likely to be repeated. More mergers are pushing bright people out the door. And the bruising experience of watching their company be devoured by another will drive some to try it on their own. "What happens is, you get laid off and you tend to get really pissed, and you go out and do it," says Morino, who retired from the company in 1992 and now heads The Morino Institute, a Reston-based non-profit group.

He says Northern Virginia is developing the chemistry that has existed in more mature technology centers such as Silicon Valley. "You're going to see a lot more mergers and acquisitions," he says. "It's going to fuel the growth. It's going to drive more money into the region and it's going to give more people the confidence to do it on their own."

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What has traditionally been missing from the technology sector here is what Morino calls "spinoff hubs" — companies that spawn lots of brainpower and entrepreneurial energy. Now it has several: America Online, MCI WorldCom and others. The spinoff effect that a company like Legent had "is what's going to go on at AOL in spades," Morino predicts. "AOL could have the most significant impact of any firm that we've known here. It could approach what Microsoft did for Seattle."

Another company with a potential ripple effect is Yurie Systems, a Maryland-based company founded in 1992. The company was purchased last year by New Jersey-based Lucent Technologies for $1 billion, with $510 million of that going to its founder, Jeong Kim. Some think it's bad for the region when a locally owned firm like Yurie gets bought. But people come out of such acquisitions with money and motivation, Morino says.

The same model can apply to other industries as well, such as the Baltimore-based securities firm Alex. Brown, which was acquired in 1997 by Bankers Trust in a $1.7 billion stock swap. "I'd be surprised if in the next five years you don't see new people" coming out of that sale to start venture capital funds, he says.

"Clearly the area right now is hotter than it's ever been," says Kathy Clark, CEO and co-founder of Reston-based Landmark Systems. "The whole infrastructure has really grown up around here." Landmark was created in 1983 — a time Clark dubs "the Dark Ages" — before there were bankers who understood technology or lawyers who understood intellectual property, she says.

Another factor helping entrepreneurs today is the advice and support from experienced professionals. Some of it is nearly free, such as the Northern Virginia Technology Council's CEO Team-Solutions program. For $300, a leader of a new company can spend a few hours with professionals in areas such as finance, business strategy and operations.

The access to start-up capital may be the biggest change of all. "We finally have in this marketplace the people that have some wealth, and they're risk-takers," says John Sullivan, an attorney with the McLean office of Venable, Baetjer & Howard. "The old model up here was the real estate guy who, when he hit it big, if he actually had enough sense to take his chips off the table, he'd retire to Florida. These [technology] guys do well and they say, 'Hey, let me try something new.'"

Venture capitalists from outside the region are coming, too. Sullivan says there are a dozen or more locally based firms now, compared with just one when he started practicing law in 1985. "You used to have to go to New York or the West Coast to get your capital. You don't have to do that now."

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The fun part, says Larry Shoup, is making a big company, not working for one. He had a taste of that with Duquesne Systems, which grew from 70 employees to about 350 before merging with Morino Associates. Duquesne's fast growth made it an exciting place to work, he says. "It was a high to do something like that."

The merger made Shoup vice president for customer service at Legent, but he was starting to get the itch — driven in part by rubbing shoulders with CEOs in the Pittsburgh area and realizing "there's nothing magic about these guys. The only difference between them and me was they had the guts to quit" — to start their own companies — "and I hadn't yet."

In July 1992, after three years with Legent, he joined another ex-Legent employee to form Janus Technologies, a 50-employee firm that helps companies spend their IT budgets. Shoup doesn't fear for his company's survival the way he did in the first few years. Even that worry wasn't justified. "You talk to enough [entrepreneurs], and you realize a lot of them had two or three or four failures before they became successful," he says. "You realize that even if you try and fail, there's no dishonor. A lot of people do that."

One of Legent's old-timers was John McCann, who started with Morino Associates in 1982 in its European office near London. At the time, the company had about 35 people. "Everybody knew everybody. It was the classic entrepreneurial spirit." When he left in January 1995, there were nearly 2,600 people, and for McCann it wasn't as much fun.

McCann, 48, left his job to join his wife, Candyce, 40, whom he'd met at Legent. A few months earlier she had started a small firm called C-Lutions. It's a home-based business in Sterling that produces custom software. The attraction for McCann was reliving the spirit of a small company — what he calls the "let's get it done" attitude.

There are other rewards. The couple's daughter, Elizabeth Margaret, was born in October. "Now I get to participate in my daughter's life. To me, that's real important."

The four years since Legent was acquired have given some alums enough time to start more than one company. Ex-Legent engineer Shawn Amini is on his second. "What drives me is having a unique technology and being the founder of the company," he says.

He started his first, an Internet service provider, then sold it and last year started his current company, EyeCast, which uses the Internet to link companies to video surveillance equipment at remote sites. Amini, 32, says he wishes now that he hadn't sold his first company so quickly, but figures this time he won't make that mistake. "We learned quite a bit from it, including how to deal with venture capital firms."

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The Legent name turns up in the bios of high-level executives across the region. Former Legent President and CEO John Burton, for example, is a managing director with the investment banking firm of Updata Capital. So is a former Legent COO, David Wetmore. Notably, both men came to Legent via mergers — Burton when the company he co-founded, Massachusetts-based Business Soft-ware Technology, was acquired by Legent in 1989; Wetmore when Goal Systems merged with Legent in 1992.

Peter Barris was Legent's COO and president before joining New Enterprise Associates in 1992, where he is now a general partner based in its Reston office. Lennert Leader, president of AOL Investments, came to work for Morino in 1986 and later served as Legent's vice president for finance.

James Condon, a Legent corporate vice president who is now COO at CyberCash, says one thing that made Legent unique was the success its leaders had in attracting bright people. "Mario [did] his absolute damnedest to go out and find people who have had success," says Condon, 43, who came to Legent in 1991 from Marriott Corp.

McCann says in the 1980s, Morino Associates would occasionally make a "talent hire" — offer somebody really sharp a job even if they didn't have a slot for them. The idea was to "get them on board and adjust the organization around them," he says.

Some ex-Legent leaders have tapped their former company's talent pool. McGovern at CareerBuilder called Legent colleague Jim Winchester from his beach vacation and pitched his idea; today Winchester, who co-founded CareerBuilder, is its vice president of engineering. Former Legent vice president of marketing Gene Austin is CareerBuilder's senior vice president of sales. McGovern figures he's got about a dozen ex-Legent people. "That's kind of how our industry works," he says. "It's a little bit like when the queen dies in a bees' nest. Everybody wants to know, 'Who is the new queen? And who am I going to follow?'"

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Even four years later, it still hurts. Condon of CyberCash left when Computer Associates bought the company, and he doesn't have fond memories of the takeover. "I refer to that time period as 'Bambi meets Godzilla.'"

Computer Associates representatives moved quickly to lay off Legent workers. They went through the building "like a hot knife through butter," Condon says. To help the more than 1,100 laid-off employees, Morino stepped in quietly for several months to set up career counseling centers in four cities — Reston; Pittsburgh; Columbus, Ohio; and Boston — "which is also why people tend to be phenomenally loyal to Mr. Morino," Condon says.

Morino says many of the people were highly employable and found new positions quickly. "But there is something demeaning about losing a job, no matter how it happens," he says. "And corporate America has been unnecessarily negligent of this psychological cost. All people want is to know that you give a damn. We did very little. Yet, the fact that some had a place to get a cup of coffee and meet friends meant so much."

Many still keep their link to their life at Legent. Anthony Febbraro, 31, who worked for four years in Legent's Pittsburgh office, maintains a Web site with the names and e-mail addresses of more than 400 ex-Legent employees. He started the list in 1996 as a way to practice HTML skills and soon had people asking him to add their names.

"There were a lot of young people in the company. It was really like a family atmosphere." Camaraderie was high, he says. "We had a pig roast. We had a 'murder mystery' night — the kind of things that build relationships outside of work so you can get along better. ... It was a good place to work."