[MUSIC] Thomas Knobel was an unusual child. By the age of three he had mastered basic economics. Mother, what do you give this man so that he gives you groceries? He asked. At the age of five, Knobel spent his summer on the beach selling his toys to other kids so he'd have money. And by the age of eight, he was expelled from school for disruptive behavior. The teachers in his small town in Switzerland didn't exactly like to be challenged so much. So his father had an idea. He had to find a way to keep his energetic and somewhat unruly son motivated, and he said to Thomas, you can sell fresh eggs around the neighborhood and you can keep the profits. Soon, having upgraded from walking to his closest neighbor's house to a new bicycle and then to a pushcart, he was earning a 100 Swiss francs a week. Unlike other kids at school, he really didn't have to ask for pocket money, he had it. By the time he was 12, Knobel's father wanted him to focus on his school and he obliged. But the entrepreneurial spirit in this young boy could only be suppressed for so long. And three years later, Knobel discovered that he could pirate video games and he could sell them through newspaper advertisements, all this was legal in Switzerland at the time. So he developed a subscription model where you could subscribe to get new video games and he managed to take his savings up to $40,000 US. Before long, Knobel headed off to what he saw as the land of opportunity, the USA as a foreign exchange student. One thing led to another, and he ended up in prep school there. And eventually enrolled in Babson College in January, 1998. So once at Babson, he and Kyle White, his roommate there started a class project. It was to research the phone card industry as a possible business opportunity. But there was one small problem. White's new girlfriend was jealous over the time Knobel and White were spending together on the business. This was a big issue. Enough of an issue that it resulted in a parting of the ways, mutually agreed. So, Nobel went ahead with the idea on his own. The challenge now was a big one though. How can foreign student studying on student Visa in the US set up a business. It seemed impossible. Knobel first turned for help to his international student advisor, who told him that no foreign student at Babson had ever started a business, and that is was not possible on a student Visa. But in his business law course, he learned this was not exactly true. A foreign person in the US was not prohibited from owning a business, he just couldn't be employed by it nor could he weren't earn any wages from it. Never one to take no for an answer of course, Knobel struck a deal with his favorite professor. He would do an independent study project that would allow him to work more on his phone card idea. And instead of getting eight academic credits all in one year for the project, the two agreed he would spread them out over the three remaining years of his time at Babson. He wouldn't be working in his business, of course, he would be working on it for academic credits and he wouldn't take any wages either. The business would be to buy phone cards from distributors, sell them, initially to retailers, targeting various ethnic communities around Boston. Now, at the same time he did all this, Knobel registered Nobelcom.com in order to try selling phone cards online. Because doing business online was the hot thing to do. But nobody had ever sold phone cards online, and many people said no way is that ever going to work. So he needed a plan and he decided what he would do was create his own phone cards. So in November 1998 he made a deal with a carrier called ITelsa, a carrier based in Florida that had really good rates. Knobel gave them $30,000 in return for the cards and holed up in a room in Babson's business incubator. He bought a vending machine and he put his new phone cards in the machine as well as in his retail accounts. But exactly one week later, ITelsa bellied up, it ceased trading and their cards stopped working. Knobel was annoyed to say the least, but he assumed his money would be returned but little did he know that crisis number one in his fledgling venture had struck. So emails started flying around the campus that these NobelCom cards bought in the vending machine were a scam and to be avoided at all costs. In spite of the crisis though, this was the perfect opportunity, thought Nobel, to promote the business. I'm real, he replied. I'm a student, I've been done over by my supplier. I'll refund you all. Please bear with me. By December though, Knobel had less than a hundred dollars left in the in the bank. In addition to the $30,000 given to ITelsa he spent another $10,000 on the vending machine and some other expenses. So he called in desperation the ITelsa lawyer. Who said that Knobel was at the back of the queue and he'd never see his money again. Desperate to survive, Nobel began a campaign. Everyday he left at least one voicemail message on every single phone at the ITelsa offices. Nobody was answering their phones, he remembers. I'd call and leave a message on extension 101. Then I'd hang up and I'd dial back and call extension 102 and I'd leave the same message. Until there was no more extensions to call. It was a fight for survival. His calls became quite emotional. I'm a student, I have no money. You've taken away my business. I hope your son's and daughter are never treated this way. The campaign work and after a week. I ITelsa's lawyer called Knobel and say you'll get your money if you please stop the voicemails. He stopped the voicemails, and he got 10,000 a month for three months got his money back. Knobel then retrieved it to sell in other brands of cards in retailers and his machine and he started to gain some sales through the machine, but it wasn't enough. And in the absence of a better idea he got the website developed and he started offering prepaid phone cards online in February, 1999. Nobody was surprised when there were no orders on the first day after going live. But on the second day, there was one order. And Knobel packaged up and posted the phone card. It was probably a one off, he thought. Maybe there won't be any next day and sure enough, the next day, no orders. But then the following day, two orders. And the day after that, four orders. And on and on and on, and the orders started to grow. Maybe there was a business here. Fortunately, Knobel soon discovered that selling cards online was a dramatically better business model than selling them to retailers. When he sold cards to retailers, he typically got paid for the cards in 30 to 45 days. But when he sold cards online, he got paid with a credit card right away. And he didn't have to pay suppliers to carry the calls. Didn't have to pay them to a 30 days later sometimes more. So Knobel always had plenty of cash on hand. Throughout 1999, revenue and gross margins continued to grow. And by November of 1999, Knobel was doing $30,000 a month in revenue and growing even faster than before. At this rate he was worried, it looked like the business might turn profitable for the 1999 year heaven forbid. So, he spent some money device and computers and move his team to a small office off the campus. He also decided that going forward his cars would be rebranded and always sold under the name Nobelcom.com. Now, there's lots more I can tell you about the rest of the story, but here's the bottom line. By 2008, after a decade in business, Knobel's company was doing north of 200 million in annual sales and its entire growth had been financed by customer funds. That is, by customers paying in advance for phone cards or PINs and access numbers that were then used to make future calls. So which would you rather do? Would you rather spend your time pandering to investors? Or would you rather find a business that can be grown with your customer's cash, just as Thomas Knobel did? [MUSIC]