Editor’s note: This is the second of a two-part article.

RESEARCH TRIANGLE PARK — When Todd Masonis, one of the three co-founders of rapidly growing Plaxo, talks at the CED’s Entrepreneur 04 conference on Saturday about the hardships of launching a startup, he speaks from experience.

Masonis, his Stanford colleague Cameron Ring and Sean Parker, a friend of Ring in high school who helped launch Napster, and some mutual acquaintances helped generate the creative process leading to the company’s launch. The devotion of these three outlasted that of others.

“Actually, in the early days, we brought together a number of people to help brainstorm and think through the Plaxo issues,” Masonis explained to Local Tech Wire in an email interview. “But after many months of working hard without any salary and with only grim prospects, the team shook out to be just the three of us – Sean, Cam and me.”

LTW asked what is the most important lesson to be learned from his Plaxo experience.

“The biggest message is not to give up. The idea is important. And of course you have to be smart, hard-working, and lucky,” he wrote. “But at the same time, you have to put yourself in a position to have that luck.

“With Plaxo, there was a nine month period where I had no job, no money, and all of the VCs were rejecting us. By the end of it, I was completely supported by my girlfriend, Sean was living on our couch, and it was a pretty tough time.

“Many times along the way we wanted to give up and find a job, but we stuck with it. And eventually we realized we were pitching the wrong types of VCs with the wrong pitch, and once we figured that out it became much easier. But the reality is that if you don’t have a lot of experience starting out, you need to compensate for it with perseverance.”

Now, Masonis is helping Plaxo grow, the company has raised $20 million in venture capital, it is preparing a new release of contact software, and his own star is rising. Masonis has been a guest on CNBC while making frequent speaking appearances.

Listen, listen

Besides perseverance, Masonis will stress to the entrepreneurs the need to listen to customers as they build a company.

“The primary focus for us has always been to create a great product. All of the people we’ve hired care deeply about the user and creating something that is powerful yet easy to use,” he said. “We’ve also listened intently to our users — we launch a new version, listen to their feedback, improve, and launch a newer version. Through this iterative process, our users steer the product. I also think we have the benefit of dealing with peoples’ contact data which is often a very personal thing and, as a result, creates an emotional bond with the software. When done well, this can drive usage and satisfaction.”

Assuring privacy

Plaxo also had to deal with a pressing user issue — privacy.

“We’ve always known that privacy would make or break Plaxo,” Masonis said. “From the beginning, we decided to do the right thing from the user’s perspective. We’ve put all of the control into our users’ hands as to what emails are sent out and what data is stored by Plaxo.

“We’ve hired a privacy and security officer to make sure that we do all the things we promised to do. In doing this, we have what Business Week called ‘the most stringent privacy policy’ on the Internet. Plus, I think a lot of it is that we’ve been around for a few years and have not done anything evil. As a small company, trust is something that takes a long time to earn and isn’t something you can rush. We’ve taken the slow and steady approach by building a solid product and consistently doing what is right for the user.”

In preparing for the commercial launch, Plaxo has said a free version will remain in the market.

“The basic version will always be free,” Masonis said. “Plaxo will only be successful if as many people as possible use it, and the free version is the key to this success. But at the same time, it is important for us, our investors, and our users to make sure that we turn this into a real business.

“We’re currently beta-testing a number of premium features, mostly dealing with mobile applications and premium enhancements. Look for this to become publicly available this year.”

For information about the CED conference, see: www.cednc.org/cgi-bin/irCom.pl?92069/1/db/351/0/0/28/0/0/0/2157

Part One of interview: www.localtechwire.com/article.cfm?u=9704