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An Epoch Story: 1

Katie Gallagher
Paycom's offices occupy a building in Marina del Rey, Calif., but the company's roots are in Huntsville, Ala., where fate brought together two ambitious kids more than three decades ago.

Founders Clay Andrews and Joel Hall had no way of knowing when they met through a mutual friend at age five that they would launch a company that would revolutionize the adult Internet. How could they, considering that the Internet was the stuff of science fiction to most kids at the time? But by the time the two were in high school, they had formed a friendship that would provide an ideal foundation for a business partnership — a tight bond of unwavering trust and mutual respect for each other's abilities.

There were a few detours along the way. Andrews studied veterinary medicine at Auburn University and operated a successful practice in Phoenix. Hall received his bachelor's degree in electrical engineering from the University of Alabama and his master of business administration degree from Auburn before working as a consultant for several NASA contractors in the South.

Then fate interfered once again, landing the two friends just miles away from each other in Tennessee, where they spent weekends exploring a shared interest in the emerging technology of the Internet — an interest that would blossom into a multi-million-dollar business venture, provide the technological link between thousands of adult websites and the banking and credit industries, and make possible tens of millions of dollars in online sales.

XBiz caught up with Andrews and Hall recently to find out how two kids from the South were able to make such an impact on an industry that didn't even exist when they met.

XBIZ: When did you first become interested starting an online business?

Joel: Clay and I had always wanted to do something together, but what business idea could a veterinarian and an electrical engineer possibly come up with?

Clay: That was prior to the Internet boom back in the early 1990s.

Joel: The light bulb went on for me when I first saw the Internet. I was living outside Nashville doing software consulting for the Marshall Space Flight Center and working on automation projects for Bridgestone/Firestone. At that time, though, the only people on the web were the ones with .edu and .gov extensions. It was all command line, with no graphical interface. Still, I got really excited about power of information sharing.

Clay: I was working as a veterinarian in Phoenix, but veterinary medicine was more like a labor of love for me. I started to get online and thought that, due to the number of people online and the amount of traffic you could get, there was potentially some type of business we could make up utilizing the Internet. So I learned to write HTML and make websites, then I bought a server and started hosting sites.

Joel: I was furthering my programming skills while he was learning HTML and web hosting. But it was when I saw the Mosaic browser for the first time that the idea of using the Internet kicked into overdrive. I saw that the average person was going have access to this wealth of information and information sharing. I knew it would change the world and we had to start doing something with it.

XBIZ: How did you get involved in the adult entertainment industry?

Joel: Clay had moved to Memphis and was doing hosting out of his house. Since I was living in Nashville, I'd drive over for a weekend and network computers for him. We were both learning as we went. I knew more about the backend and plumbing, how to connect the computers; Clay knew about marketing, the business aspects, how to make money.

Clay: At some point, we realized a lot of money on the Internet was coming from developing adult sites, so I started hosting them. That's when I got involved with La Toya Jackson Dreams, hosting sites for affiliates. I picked up a large number of clients quickly and made lots of contacts in California. Once I got rolling with that, I made the decision to move to L.A. — that was July of 1996. Then, when I moved here, I got involved with SexCinema.com and GayCinema.com, some of the first streaming sites.

Joel: I came out for a visit that fall. I said, "I have to check this out," I kept thinking, "There's something to be made here." I came out to network Clay's business and set up a database. I needed some supplies, so I went to Fry's Electronics, which to me was like Disneyland, and it was 85 degrees outside. I looked at all this and thought, "Why not move here?"

Clay: Our sales went up quickly, and Joel got involved at first as a consultant.

XBIZ: And Paycom grew out of that?

Joel: I'm an engineer, a problem solver. I started to see problems lots of people in the business were having. Everybody was doing great with sales, but people started getting lots of double charges, double billings. People were becoming victims of their own success. Sales were going through the roof for adult sites, but when it came time for credits or chargebacks, it became, "Who's on first?" because you had to notify the billing company to credit accounts, but then you also had to update records in your office and update your web servers — I started seeing companies dying under their own success.

Meanwhile, we were solving these headaches. It came to a point where we were driving home together and said, "Why don't we keep track of sales for websites?" We could do a better job of it than they could, and we could make a business of it. We were doing a better job with billing than the billing companies at the time because they weren't looking at it from the webmaster's point of view; they were looking from a billing company's point of view. So we said, "Let's start a company that solves webmasters' problems with things like online real-time reporting."

A lot of things that seem like common sense now appeared to be genius at the time. A lot of companies had all these people on staff trying to keep track of spreadsheets and databases, doing credits and chargebacks, removing passwords, and we said, "We could do all that for them, and do it all in one place."

Clay: We could have charged for it. That was one idea. But in the end, we thought, "No, we have to be better than the next guy; we have to offer it for free." A lot of companies were willing to take a chance with us, and a lot of them are with us still.

In part two we'll look at some of the challenges the Paycom team faced in the early days and what the future holds for online billing.

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