Law of low expectations

Stamps.com keeps managing to defy the naysayers, most recently in a fourth-quarter profit that was above analysts estimates and seemed to have come out of nowhere. That explains why shares closed up almost 19 percent. "People were not expecting anything good and, in fact, many were expecting it to continue to get worse," Craig-Hallum Capital analyst George Sutton told Reuters. Stamps.com always seemed like an interesting concept - buying postage over the Internet - that some larger operation would take over and do a lot better. But somehow, the L.A.-based company has overcome all kinds of roadblocks - most notably the test marketing of its custom photo stamps service a couple of years ago in which folks would send in photos or graphics to be places on stamps. A few knuckleheads submitted shots of Hitler and Monica Lewinsky's dress, which got the postal service folks all hot and bothered. But the controversy died down when they figured out how to better police the process.

As is often the way in these start-ups, the idea just kind of happened. Co-founder Jim McDermott was a business student at UCLA and living across the street from the Federal Building post office near the corner of Veteran and Wilshire. "During my job search between my first and second year of business school, I ran out of stamps one night. I thought to myself, why can't I buy stamps online?" he told Socaltech.com. So he and his biz school buddies, Jeff Green and Ari Engelberg, wrote the business plan. (All three left the company early on.)

We were rejected by no less than 25 venture funds. As a sidebar, we wasted time and money looking for funding up north with the Sand Hill Road crowd. There is plenty of angel and venture capital money in southern California and in the end most investors like to be close to their investments. The main reason VC's didn't like our deal was the government. Most felt that there was a strong possibility that the Post Office would never give us the license and, as a result, their entire investment would be lost.