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SMALL BUSINESS STRATEGIES | TECHNOLOGY: FEATURED SPEAKER

Ahead of the Learning Curve

Educational Software Pioneer Jan Davidson Made a Fortune by Putting Customers First

October 14, 1998|CYNDIA ZWAHLEN | SPECIAL TO THE TIMES

It's been a year of upheaval for Jan Davidson, well known as the former Torrance teacher who created the popular Math Blaster software for kids in 1982 and went on to build a $1-billion educational software company with her husband.

The couple sold Davidson & Associates in 1996 to CUC International Inc. for $1.15 billion in stock. The Davidsons, who with the sale became the largest CUC shareholders, continued to work at the company until January 1997. Still shareholders, they left the board of directors a few months later, before CUC's merger with HFS Inc., the world's largest franchiser.

Within a year of the merger, the company, renamed Cendant Corp., was making headlines with revelations that accounting irregularities uncovered in a CUC unit unrelated to its software business would force it to dramatically restate earnings. Top executives and board members were ousted this summer. The share price tumbled.

It was a heavy financial blow for the Davidsons, who still own about 7 million shares. Fortunately, said Jan Davidson, most of their CUC stock, approximately 94%, was put in charitable remainder trusts, then sold to diversify trust assets long before the bad news hit.

The couple has since moved to Lake Tahoe with plans to slow their pace a bit. They now run the Davidson Group, which has invested in two start-ups in Long Beach, and the Davidson Foundation, which they started last fall as a warm-up to eventually giving away "the big money" in the charitable trusts, Jan Davidson said.

Here are excerpts from a recent interview with Jan Davidson, who will be a keynote speaker at The Times' Small Business Strategies conference this weekend.

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uestion: Is the Davidson Group a venture capital fund?

Answer: No. It's basically a family office that oversees the investments and the philanthropy. The venture capital efforts are really small. It feels like we are starting (Davidson & Associates) all over again, only I am not working 80 hours a week. The principals [Neurosmith and Brilliant Beginnings] are doing all the work and I am there to advise them, which is a much better deal, believe me. But it brings back all the memories of when I first started. There are so many hard decisions at a start-up that after you get them all worked out you kind of forget about them.

Q: How is your husband involved in your latest efforts?

A: We are partners. He is better with taking a company at, say, $10 million in sales and above and building it. My skill sets are a little better with start-ups. Right now I take the lead in the start-ups. He's taking the lead in the investments that the Davidson Group does [of the family's charitable remainder trust assets]. Then I take the lead in the philanthropy. That way the leadership is clear.

Q: Despite plans to slow down, you mentioned that you are busier than ever.

A: I'm very involved in the philanthropy side. We put 94% of our Davidson stock in a charitable remainder trust. Philanthropy is a whole new area I'm trying to learn about and get up to speed on. We also have started these new ventures and, while we aren't running them day-to-day, we are helping when they need us, and that's fun and exciting.

Q: What was your goal in funding Neurosmith, which is run by two former Davidson & Associates executives?

A: The Neurosmith venture is to really see if we can empower children in cognitive development and help them learn in their natural play environment by putting computer chips in toys. . . . For me, the next generation of education technology is, instead of bringing the child to the computer, take the computer chip and put it in a childlike environment. I'm not thinking about bringing keyboards to babies, but making toys more technically interactive using these smart chips.

Q: Why did you start Brilliant Beginnings?

A: One of the things I've been particularly interested in in the last decade is . . . brain research and what's come out of that and how people learn and how those neuro-networks get developed. What became clear to me is that the most important time for cognitive development is 0 to 3 years old. . . . At Neurosmith, we set up what we call play panels and we have parents come in with their children on a regular basis. And parents were really, really hungry for this cognitive development information. I suggested to [Neurosmith's co-founders] that we have a section of our company that really helped parents and day-care providers with this information. They were so focused on the technical challenges of putting computer chips in toys that they just didn't feel they had the time or wanted to divide their focus that way. So we started Brilliant Beginnings with Kathy Heavy, a former investment banker I knew was interested in this area.

Q: What direction is education technology taking?

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