Entrepreneur sees future - on his iPhone

Last year, just as Joe Michels' corporate career was crashing, he saw hope in the form of a tiny gadget: Apple's iPhone.

The software developer watched as dozens of jobs at his Scottsdale firm were outsourced to India and more layoffs loomed.

So that April, he started Plan B. He spent months on nights and weekends writing My Eyes Only - an iPhone software application that would store log-ins, credit-card numbers and private information in a password-protected, encrypted area.

Three months after it hit Apple's online App Store, sales seemed on pace to replace his six-figure income.

"I realized I had nowhere to go but up because I could build more apps," said Michels, 47.

Apple boasts that there is an app for almost everything. There are apps that process credit-card sales, check medical symptoms, find cheaper gas stations and even show the value of your neighbor's house.

Michels is among the tech-savvy masses hoping to cash in on app mania. He's also a member of the Phoenix iPhone Developer Group. Nicknamed Pi, the group claims more than 100 mostly seasoned programmers who have soldiered on through the demise of earlier technological frontiers, from the death of the floppy disk to the dot-com burst.

They are all adamant that the iPhone - a mini-computer that is also a phone - is the next big wave of technological innovation. Sure, they would love to win the app lottery and become millionaires. But most of these men (so far there are no women) just hope to quit their day jobs and make a good living building a long-term business.

But with more than 75,000 apps, an explosion from the 500 that debuted 14 months ago, competition is towering, and app millionaires rare.

"For every one of those, there were 10,000 others that put a bunch of work into something that didn't make much money," said Brad O'Hearne, owner of Gilbert-based Big Hill Software LLC and founder of Pi. Wearing a Pi symbol T-shirt, he joked with the group at a recent meeting about many of their dual lives.

"We sound like a support group for superheroes: 'By day I do this, and by night . . . .' "

A month into his new venture, Michels' app was doing well, but he couldn't predict how long sales would keep rolling in. Or if it would be possible to one day quit his job.

Sales roll in

Like many good inventions, Michels' idea started with a need.

Two years ago, he ditched work early to buy an iPhone the day the price dropped to $399.

"I knew from the minute I saw it, it was going to be a big hit," he said. "I wanted to absorb it for a while."

Michels quickly found he needed a secure area to store passwords and credit-card numbers. At the time, Apple hadn't released its iPhone Software Development Kit allowing anyone to write applications. So he waited. And in March 2008, he was among more than 100,000 to download the kit within its first four days. The kit gave developers the tools, techniques and permission to create apps.

Even if by trial and error, Michels knew he could write a program to protect sensitive numbers and passwords.

So he got to work. For the next four months, he spent three hours after work every night, and about eight to 10 hours every weekend, hurrying to get the program right and to be among the first to offer such an app.

He missed out on movie nights and time with his wife and two kids. But he persevered, knowing he might be able to create a better future for his family.

When his app finally hit iTunes in late July, it was one of only about three of its kind on the market. It sold for $8.99.

Michels eagerly awaited sales. The first two days were slow, but by week's end, he was ecstatic.

"My God, this could actually work out!" he remembers thinking. "I wanted to quit my job instantly."

His wife, Lynn, convinced him to wait a few months to see if the sales would continue.

Michels kept busy answering customers' questions and thinking about his next app idea.

By October, seven months of 70-plus-hour weeks were taking their toll. And enough sales were rolling in that Lynn, also the family bookkeeper, was on board for taking a leap of faith.

"She's my hero," Michels said. "She has been 100 percent behind me. She knew I wasn't happy at work given the realities of the future."

Jobs left behind

As Michels was quitting his job last fall, O'Hearne was starting Pi, a group that now numbers nearly 150 from its initial 35.

The group formed after Apple lifted its ban on developers sharing ideas and information.

O'Hearne wrote GPS Mail, which lets users e-mail a map of their current location (and provide directions) instantly. He knew he and others could create better apps if they could exchange technical advice and brainstorm ways to improve and market them. The group talks code, debates the merits of Java vs. Objective-C programming language and generally talks in sentences that sound foreign to non-developers.

For the most part, Pi is not packed with wide-eyed teens or 20-somethings writing code in their dorm rooms. The core members are in their 30s and 40s, having seen plenty of innovations come and go. They've worked as Web and software developers at large firms, many using Microsoft-based programs after Apple's popularity dipped in the 1990s.

Seasoned as they are, it's easy to catch the whole brainy Pi group marvel over the iPhone, sometimes sounding like awestruck 10-year-olds.

"This is a Star Trek device," said Gilbert-based developer Jiva DeVoe. "We live in the future."

The iPhone celebrated only its second birthday on June 29. Today, more than 45 million iPhones and iPod Touch devices (which also use apps) have been sold, and more than 1.5 billion apps have been downloaded.

There's Shazam, a popular app that will identify a song playing in the background and even let you buy it from Apple's iTunes store. Urbanspoon suggests a nearby restaurant for dinner. Shake your iPhone, and options on the screen spin like a slot machine.

The selection grows daily.

That's part of what iPhone developers love and hate.

Specifically, they love the App Store for giving them direct access to customers but hate being lost among the tens of thousands of apps with little way to get noticed if they aren't a staff pick or a top seller. Many software developers have gone from writing code to answering international customer e-mails (some have to be translated) to trying to boost sales - all while coming up with new apps.

They are inspired by those such as Michels and DeVoe, who wrote iZen Garden. The meditation app lets users "rake" sand with their finger and place stones and plants while listening to soothing tunes. DeVoe's app was one of the first 500 to be offered at the App Store's July 11, 2008, debut, and earned kudos as a staff pick.

A computer programmer for a defense contractor, DeVoe also was able to give up his job and dive into full-time app development.

"It felt fantastic and liberating," he said, adding it was also a bit lonely and scary at first. "Even if all of this ended tomorrow, I wouldn't trade my time I've had being independent for anything - being able to do what I want, when I want."

Like all the local app developers, Michels is still trying to figure out a way to beat the competition, especially as the app offerings explode and prices stay low. iTunes is filled with apps that are either free or 99 cents.

"Most of the people I know who have 99-cent apps are not able to support themselves," Michels said.

All the while, more are joining the competition.

Recently, Pi's youngest member, 17-year-old Craig Bishop, gave the gang a tutorial to a complex programming tool that left some amazed.

"Right now, it beats flipping hamburgers," said Bishop, a senior at Desert Vista High School in Phoenix.

He wrote an app called Homework to help students manage their deadlines, but he's focused now on creating an iPhone game.

"I'm up against this!" Michels said after hearing Bishop, then promptly counseled the teen to take business classes, too.

A hopeful future

Although Michels has fared better than many other developers, it's not easy.

Last November, a glitch in his program forced him to stop sales for two weeks.

"Half a month's sales are pretty critical when you just quit your job," he said.

Once his initial glitch was fixed, the recession hit. Michels had some sleepless nights until sales picked up again in January and February only to drop off again by spring.

At that time, the development team he had supervised at his former job was laid-off, and his old boss was on his way out, too.

He thought he made the right decision.

"It has been a roller coaster, without question," he said. In June, he even considered looking for a job if business didn't pick up.

He kept pushing ahead.

This summer, his second app, My Eyes Only Photo, was released. It protects and encrypts photos. He priced it at $3.99, $5 less than his first program. Sales right now "are enough to make a good living," he said.

Today, he spends his days in a small office next to the master bedroom in his Scottsdale home. He has a good view of the backyard above his three Apple computers and is generally content but not stress-free.

He admits he misjudged the app explosion.

"I missed how many developers would try to develop for this platform," he said. "I thought I could get a foothold before it caught on."

Now, his whole family sees his business, called Software Ops, as an opportunity. His wife and 12-year-old daughter are helping him create an entertainment app. And most nights and weekends are family time again.

"The biggest thing is, I see the future, and the future is hopeful, whereas the other future wasn't," he said. "You can handle the stress if you have a hopeful future."