A Drive to Unleash the Internet’s Power

After amassing a fortune from biotechnology work, entrepreneur seeks to dominate nonprofit market

When Harry E. Gruber sets out to do something, he dreams big — and in 52 years, he has accomplished a lot. After

completing medical school, he conducted research to help develop drugs to fight AIDS, cancer, cardiovascular disease, and diabetes; started a company that created streaming video for the Internet; and helped take six companies public, selling them for more than $6.5-billion. His latest venture, Kintera, a software company he started here four years ago to help charities communicate with donors and improve their fund-raising efforts, represents perhaps his most challenging and ambitious goal yet: He wants to dominate the nonprofit technology market — a field he sees as vastly untapped — and he tries to let nothing get in the way of his goal.

Some of Dr. Gruber’s tactics have cast him as a business leader with hard-charging, sometimes controversial ways. He works 18-hour days and pushes employees to follow his lead; has structured deals with charities in which his company takes less money upfront for its services in exchange for receiving a greater percentage of money charities might raise over the long term; and vigorously defends software innovations by taking out patents and suing competitors that he thinks violate Kintera’s work.

Provides Services to 1,900 Nonprofit Groups

While some charities have shied away from Kintera because of its aggressive approach, Dr. Gruber has persuaded more than 1,900 groups, including the American Cancer Society, Girl Scouts of the USA, and the YMCA of the USA, to buy his company’s services. And since taking his young company public, in December, he has netted more than $60-million to help finance continued acquisitions, step up marketing efforts, and add features to his company’s ever-expanding software offerings.

Kintera — the name derives from what the company calls its “knowledge interaction” technology — rents software services to nonprofit organizations to help them raise money online, and its most successful efforts so far have helped charities manage fund-raising events like walkathons. But Dr. Gruber has a much grander vision for the company. He thinks it can become a one-stop technology provider for nonprofit groups — helping them reap huge cost savings by doing more of their work on the Internet and making it easier for organizations to interact with donors, volunteers, and others.

Several other technology companies are vying to help charities attract donations online and to assist them in communicating with donors. But Dr. Gruber sees Kintera at the forefront of the movement.

“We represent the first wave of a serious commercial effort to prepare charities to attract donations online,” Dr. Gruber says. “Kintera going public validates a whole new industry.”

$16-Billion a Year

Online donations could grow to as much as $16-billion within five years from an estimated $1.9-billion in 2003, according to John H. Neff, a research analyst at William Blair & Company, a Chicago investment-banking company that owns more than 1 percent of Kintera’s stock and has received compensation from Kintera for investing some of its assets.

Mr. Neff, who also owns shares of Kintera, believes that the company could sustain growth of 60 percent annually during the next five years. Kintera has yet to turn a profit, however, and some charity officials and technology experts question whether any company has the potential to make major inroads into a field known more for its institutional inertia than for adopting new technologies.

But if anyone can quicken the pace of growth in the nonprofit world, Dr. Gruber can, say several Wall Street analysts. Dr. Gruber is considered one of the shrewdest deal makers and most flexible entrepreneurs in the country, according to three analysts who regularly follow Kintera, and they say that any company he gets behind warrants attention.

So far, however, Kintera hasn’t drawn much notice on the stock market. The stock’s value reached $18 per share in March, but has since plummeted by more than half.

Kintera has certainly drawn attention from many people at nonprofit organizations — but not always in a positive way. Its aggressive tactics have offended some charity officials, says Jim Williamson, a fund-raising technology consultant in Lincoln, Mass., who has worked with nonprofit groups for more than 25 years. As Kintera has sued competitors, bought up companies at a breakneck pace — during one stretch last month, Dr. Gruber was literally acquiring a company a day — and made what some people consider brash claims about earning money for shareholders by working with charities, some nonprofit officials have dubbed his company the Microsoft of the field.

“Harry is shaking up the old way of doing things,” Mr. Williamson says. “That’s probably why he’s been vilified.”

Unlike many top corporate executives, Dr. Gruber has interests that extend far beyond the boardroom. He stays abreast of complex scientific developments in areas as diverse as cosmology, genetics, and immunology, and regularly corresponds with academic leaders in those fields.

Diving into new intellectual territory has helped fuel Dr. Gruber’s entrepreneurial fortune, but it also has sometimes distracted him from the work his companies do, according to some former colleagues. They suggest that his outside interests or other business opportunities could lead him to stray from Kintera before the company realizes its full value. Stock analysts and nonprofit officials say that could hurt the company.

‘A Cruise Missile’

But that will not happen at Kintera, says Dennis N. Berman, a longtime colleague of Dr. Gruber’s and Kintera’s executive vice president. “Harry’s like a cruise missile,” Mr. Berman says. “Once he locks in on a target, don’t get in his way.”

Dr. Gruber left two of his previous companies after about five years, but he says he has no plans to leave Kintera. “This company is my religion,” he says. “I consider it my life’s work to help modernize philanthropy.”

Although Dr. Gruber is a relative newcomer to the nonprofit field, several charity officials describe him as an extremely fast learner who listens well and follows through impeccably. Those traits helped some charities overcome their initial concerns about working with him and his company that derived from a fear, they say, that Dr. Gruber might be looking to build onto his fortune by tapping into charitable dollars.

Some nonprofit officials still question whether Dr. Gruber understands enough about charities and their specific needs to earn their business. And some people also wonder if his company’s goal of increasing support for charities isn’t somewhat misdirected.

“There’s probably a very good market for a business to bring new and more sophisticated tools to the fund-raising field — and that can certainly help charities attract greater donations than they have,” says Mark R. Kramer, managing director of the Foundation Strategy Group, a Boston consulting firm.

“But to the extent that his company focuses on fund raising — and not the effectiveness of organizations themselves — this growth has the potential to further separate where the money goes and where the money would make the greatest difference.”

Research Background

Ambition has driven Dr. Gruber from an early age. Following medical school at the University of Pennsylvania, he worked briefly as a research scientist in several college laboratories. But he grew impatient with the pace of academic life and decided to try his hand at business.

As a co-founder and chief scientist at Gensia Pharmaceuticals — now known as Teva Pharmaceutical Industries — and at three other biotechnology companies for which he provided ideas, his research and development interests extended across many fields. He conducted research on drugs to help tame diabetes, attempted to produce vaccines for AIDS and cancer, and helped clone human bone-marrow stem cells, according to David F. Hale, who was the chief executive officer at Gensia when Dr. Gruber worked there.

But as Dr. Gruber grew more ambitious, his fierce independence started to get him in trouble. At Gensia, after Mr. Hale asked him to curtail work on a diabetes drug that Dr. Gruber helped develop, Dr. Gruber rebelled.

“What he was asking me to do was stupid,” Dr. Gruber says. “I didn’t listen. I basically said, I’ll go to war with you.”

Mr. Hale says that although he believed in the scientific validity of the drug that Dr. Gruber was working on, he and the Gensia board of directors asked Dr. Gruber to table research on the drug in part because the company wanted to spend money studying other drugs.

Dr. Gruber continued to secretly conduct research on the drug in his Gensia laboratory for more than a year, and eventually his scientific instincts proved valid. The drug remains in development today, but has yet to meet approval by the Food and Drug Administration.

After it was discovered that Dr. Gruber had kept the program alive without the company’s approval, he was asked to resign. “I was insubordinate,” he says. “It was untenable.”

Creating a New Company

He didn’t leave empty-handed, as the biotechnology field had become the darling of Wall Street in the 1990s. About a decade after making $14,000 a year as a research scientist, the biotech entrepreneur was worth nearly $50-million — and he was just getting started.

Just before leaving Gensia, in 1995, Dr. Gruber started his next company, InterVu, which developed streaming audio and video for the Internet for clients such as CNN, Microsoft, and NBC. Dr. Gruber’s new company didn’t do science, but it was all his — and finally he had found an industry that could keep up with his imagination.

InterVu might not have been Dr. Gruber’s most ambitious project, but so far it has been his most profitable: In 2000, at the height of the Internet bubble and just 18 months after taking InterVu public, he sold it for $3-billion in stock — personally netting almost $250-million.

InterVu made millionaires of many employees, but the hard work it took to make the company successful came with a price, says Brian Kenner, a co-founder of InterVu.

“Harry has an enormous fear of having his companies fail — so he doesn’t let go. He almost certainly overwhelms some people who work for him, waking at 3 in the morning, compulsively going over details,” says Mr. Kenner. “But so does Steve Jobs and everyone else compulsively focused on the goal.”

Dr. Gruber makes no apologies for his seemingly tireless work ethic, strong will, and aggressive approach to business, saying that those qualities have helped him overcome resistance to his many entrepreneurial ideas.

“I work 18 hours a day, seven days a week. Not many people can do that,” he says. “As an entrepreneur, you’re trying to change the world — so you fail a thousand times a day. You’re only successful if you stand back up more than everyone else when you get hit down.”

A Shy Personality

Despite how hard Dr. Gruber works, how intense many people say he is, and how much wealth he has acquired, he has a down-to-earth, unpretentious air about him. He slumps his shoulders, speaks quietly, carries a tattered briefcase — and gets lost so frequently when he drives, his wife and kids don’t let him get behind the wheel.

A shy personality has sometimes helped Dr. Gruber feel more comfortable with technology than with personal interaction, and he thinks that many fund raisers and donors who try to persuade their friends to give to causes they believe in share his distaste for approaching people in person. That belief helped inspire him to create Kintera.

“Asking someone to donate to a cause might be one of the hardest things in the world to do,” Dr. Gruber says. “That’s the beauty of the Internet. You can kind of sneak up on people and get them involved and spare yourself the emotional trauma.”

Dr. Gruber’s personality has endeared him to many charity officials, some of whom say they initially expected to meet a flashy business executive looking to drain their organizations of money — as they felt many businesses tried to do during the technology boom in the late 1990s.

“When you know of people who have had the kind of success Harry has, it makes you especially concerned about getting gouged,” says Martha Perusek, who led online fund-raising efforts at the American Cancer Society, in Atlanta, and worked at the organization for 15 years until she left in May.

Ms. Perusek found Dr. Gruber’s “social awkwardness,” as she describes it, disarming — but it didn’t help him get in the door. In fact, she initially rebuffed Dr. Gruber’s efforts to sell his company’s service to the charity to help it run fund-raising events because she was concerned that Kintera’s software was not advanced enough to meet her organization’s needs.

“They hadn’t done the kinds of things yet that we were asking them to do,” she says, “and it required a lot of heated discussions to work through those kinds of things.”

Dr. Gruber persisted, Ms. Perusek says, adding features to his company’s software and demonstrating an unfailing desire to get the business. Eventually he won over the American Cancer Society. “Harry flat-out, absolutely, unequivocally does what he says he’s going to do and does it really fast,” says Ms. Perusek. “He is so creative, he generates more ideas than a person could possibly implement in a lifetime. He gives you the feeling that there’s always the potential to do more.”

Personal experience raising money and giving it away have helped inform Dr. Gruber’s understanding of nonprofit organizations. Dr. Gruber has contributed $5-million to $10-million to charities over the years, including to the University of California-San Diego, in La Jolla, which has an endowed chair in his name, and to many health charities.

At the University of Pennsylvania, his alma mater, Dr. Gruber serves on the Board of Overseers and has advocated hiring additional fund raisers to help the institution raise more money than it has in the past.

Judy Vredenburgh, president of Big Brothers Big Sisters of America, in Philadelphia, who serves on the board with Dr. Gruber, describes him as someone who is “genuinely, incredibly curious, challenges the status quo, and likes to be aggressive.” She says that Dr. Gruber’s understanding of the nonprofit field has grown considerably in the four years that she has known him — and that she grew to respect him so much, she helped persuade her organization to buy services from Kintera.

No Home Runs

Dr. Gruber’s vision and goals for his company, however, are taking longer to adopt than he initially expected.

“I thought I would come up with this company, take it public, and it would be a home run,” he says. “Now here we are four years later.”

Dr. Gruber expects Kintera to have sales of $23-million to $27-million by the end of the year, helped in part by the company’s recent acquisitions, but he does not predict it will become profitable this year. He attributes the relatively slow start to the weak financial environment after the stock-market crash in 2000, and to the expectation many charities have that they should receive goods and services free. That expectation, he says, has held back nonprofit organizations from realizing their fund-raising potential.

“The industry will benefit from serious investment by serious vendors,” he says. “That’s not something to be afraid of.”