Teen’s Love of Computers Helps Thriving Net Business Grow

Like many high school seniors, Michael Krause grabs a bite to eat after his last class every day and rushes breathlessly to an after-school job.

He shows up a little late and disheveled. But nobody complains. After all, he’s the boss.

The 17-year-old is the founder and co-owner of ExchangeNet, one of the largest Internet providers in northeast Ohio. He started the company in his bedroom at his parents’ Euclid home when he was 15. Two years later, it has downtown office space, 20 employees and gross revenue of $1 million for 1996.

For about $20 per month, ExchangeNet provides customers in the Akron and Cleveland areas with unlimited access to the Internet and e-mail. There are about 5,000 subscribers, including about 25 corporate customers who pay as much as $1,000 a month.

Those are impressive numbers for a kid who considers himself a bit of an outcast.

“Why would I do a business and do something which costs so much time if I was the normal kid who wanted to go out and play baseball and all that?” Krause asked.

“I was really into doing things which weren’t really traditional mainstream. I was very into the computers, into very one-person-type hobbies. I was a loner.”

Krause co-owns the company with his half-brother, Dan, 28, and Dan’s wife, Kate, 25.

The Krauses are sensitive to any suggestion that there is a 17-year-old in charge.

Both Krause brothers work part-time: Dan, ExchangeNet president, also works for a brokerage firm, and Michael, the co-systems manager, has to go to Euclid High School in the mornings. Kate Krause is the full-time office manager.

Michael Krause had much of the responsibility at first, but now has the help of a staff, his brother said. He still oversees the operation, but focuses mostly on the corporate customers.

“The burden was on his shoulders,” Dan Krause said. “He doesn’t have that much now. He’s not the CEO, he’s not the business manager.”

Mark Freeman, an ExchangeNet corporate client, said Michael Krause’s age has nothing to do with his perception of the company.

“Michael has been just super,” said Freeman, president of Mark Freeman Associates, an advertising agency and Internet development company. “The Internet is so young that most of the folks we have working in the programming end of the business are young.”

But Ian Verschuren, technical leader for DigiKnow, a digital marketing firm, was more critical, saying some clients could be put off by such a young executive.

“That’s the problem with the Internet,” Verschuren said. “We had hotshots coming along--17-, 18-, 19-year-old kids--who want to take this new industry by storm.”

Michael Krause, the son of an insurance salesman and homemaker, got an early start in the business, beginning with his first computer when he was 6.

Krause was running an electronic bulletin board for Apple users in March 1994, when he began experimenting with the Internet. At the time, the worldwide computer network and the World Wide Web were not yet household names.

He got an Internet account and was hooked.

“I decided, ‘I like this. I think I ought to run a network of my own that does this,’ ” he said. “At that point, it was more like to run a network to have a really cool hobby.”

But his hobby was lacking a few things, including money. That’s where Dan Krause stepped in. Mostly in credit card advances, he gave his younger brother the $7,000 he needed for a new computer, 10 modems and other equipment to get started. He also had 50 phone lines installed in Michael’s home.

Now ExchangeNet needed customers.

Michael Krause asked his bulletin board users for $90 up front in exchange for four months of Internet access down the road.

“The basic deal was you give me this 90 bucks and three months later, we’ll hope there’s an Internet provider,” he said. “It was really something that was difficult to sell because the product and service doesn’t exist but people wanted it.”

Krause lived up to his promise, and ExchangeNet went online.

Within six months, there were 400 subscribers and the numbers have continued growing.

The Krauses attribute their success to good business moves--keeping costs down and offering technical support 13 hours a day, seven days a week.

They also had good timing. ExchangeNet was taking off at about the time the Netscape Internet browser software arrived, making it easy for virtually anyone with a computer and modem to go online.

All the time his company was booming, Michael Krause still had to worry about the more mundane parts of being a teenager, like grades (a B average) and SAT scores (1320).

Still, he doesn’t think the business has robbed him of anything.

“I was socially way behind without it,” he said. “It helped me grow up, mature and catch up.”

The next change for him and ExchangeNet will come this fall when he enters John Carroll University. The Krauses already are training the other co-systems manager to take over the work.

Michael Krause plans to major in economics and get an MBA. Then, it’s back to his brainchild.

“What I want to do is stay and grow ExchangeNet,” he said. “I’m going to try to make things go as long as possible and really grow this into that $1-billion company.”