Tech writer Michael Arrington, who founded TechCrunch and sold it to AOL a year ago, announced last week he is raising a $20-million venture capital fund to invest in early-stage technology companies, reported The Los Angeles Times. Since then, he has been widely criticized for what many say is a conflict of interest and now the future of TechCrunch itself appears to be on the line. READ MORE
How you view a new report by Thomson Reuters and National Venture Capital Association on venture capital fundraising really depends on whether you’re a glass-half-full or glass-half-empty type. According to the report, VC funds have raised $2.7 billion in the second quarter of 2011—but the number of firms raising funds has declined “significantly.” READ MORE
Instant Heart Rate, a smartphone app that measures a user’s heart rate through the phone’s camera, has accumulated eight million downloads on iPhone and Android devices since its debut last fall. The creators of the app, Azumio, a start-up based in Palo Alto, California, announced today that it’s raised $2.5 million from investors, including Founders Fund, Accel Partners, and Felecis Ventures, to continue to deliver health-measuring mobile apps. READ MORE
“A rising tide lifts all boats,” so the saying goes. But when it comes to the venture capital industry, not all boats are being lifted to the same heights. According to The Wall Street Journal’s Pui-Wing Tam, brand-name VC firms tend to corner the market on top Internet companies and thus benefit “disproportionately” when it comes to IPOs. READ MORE
The crowdsource design service 99designs got a big boost from Accel Partners of $35 million. According to TechCrunch, 99designs is “profitable and growing revenues at a rate of about 120 percent a year.” That kind of growth explains why Accel Partners has been courting this deal since 2009. READ MORE
In a Facebook Live panel, technology leaders discussed challenges for women in the workplace and solutions for the future. ”More women are entering the workforce and still not making it to the top,” said Sheryl Sandberg, Facebook‘s chief operating officer. READ MORE
Money What your phone company won’t tell you: these new Web sites promise to shrink your long-distance and wireless bills Dr. JoAnne Duffy knows how to scout out a bargain. She finds 10-foot Christmas trees for $35, bargain-basement prices on designer suits, and two-for-one airfare deals to Ireland. This Baltimore-based clinical psychologist honed her shopping skills in the 1980s when she was a cash-strapped graduate student. But today, when it comes to buying cell-phone service, she’s mystified. Duffy, who racks up monthly phone bills of about $150, says she’d like to investigate which cellular plan is best but that as a private practitioner she’s pressed for time. Case in point: she recently spent 40 minutes on the phone with Bell Atlantic Mobile — almost as much time as she spends with a client — regarding a $25 charge on her bill that she didn’t recognize. Needless to say, Duffy can’t afford many more 40-minute bill problems. “My Ph.D. didn’t cover cellular science,” says Duffy. When she shops for other items, Duffy knows what she’s looking for and can determine if she’s getting a good deal. With cell-phone service, though, she’s not sure if she should be comparing monthly rates or price per minute. It shouldn’t take a Ph.D. to figure out a telephone bill. Yet Duffy and countless business owners find themselves lost in a maze of roaming charges, peak and off-peak rates, and activation fees. Long-distance plans are no better. The recent onslaught of long-distance price wars has left most people confused about whether to choose Sprint Nickel Nights or AT&T’s One Rate 7¢ Plan — or service from a less well known long-distance reseller. A new breed of Web sites wants to help small-business owners ascertain how to get the best deals on everything from wireless to long distance to calling cards. Point.com, Decide.com, eSpoke.com, LetsTalk.com, Telezoo.com, Telstreet.com, Simplexity.com, and others that are popping up as fast as you can say “venture capital” provide free search engines into which customers enter information about their monthly calling habits. The sites then recommend wireless or long-distance plans that should suit a customer’s specific needs. Customers can order many of the recommended plans right on the sites. And they may well want to do so to cut down on one of the biggest expenses small businesses incur. The Yankee Group reports that businesses employing from 2 to 99 people spend an average of $220 a month for phone service; businesses with 100 to 499 employees spend about $2,800. Larger companies can spend less per employee, since they can negotiate better deals directly with carriers. Smaller businesses don’t have that luxury. “By just being on the wrong plan, you could end up leaving literally hundreds of dollars on the table,” says Roy Prasad, president and CEO of Decide.com. When Carol Newton visited eSpoke.com, she discovered she was leaving more than $500 on the table every month. The CEO of Priority Search Partners, a $2-million Redondo Beach, Calif., company that matches IS professionals with contract and permanent work, Newton was spending about $700 a month on long-distance calls. For only $165 she could get the same service from UniDial, a carrier that eSpoke.com identified. Newton had never heard of UniDial, but the eSpoke site informed her that the service provider, which has 230,000 customers and $215 million in revenues, resells service from MCI, Sprint, and others. “We figured, they’re solid; they’re not going to be disappearing tomorrow,” Newton says. She estimates that by switching carriers, Priority Search Partners will save from $5,000 to $6,000 yearly. She’ll use some of the savings to get a toll-free number. We chose to test the best of the dozen-plus sites that purport to help customers make informed telecom choices. With assistance from Michael Lauricella, an analyst at the Yankee Group, we first compiled an extensive list of sites. We narrowed the list by choosing only those sites that were already up and running and through which customers can purchase some services. We eliminated all sites backed by telecom companies, because those sites typically sell plans from only one or two carriers. Finally, we eliminated any site through which we could not contact a human being, figuring that if the site didn’t return our E-mail messages or phone calls, it probably wouldn’t return yours either. To test the sites, we ran the phone bills from a variety of growing businesses through the sites’ search engines and came up with recommendations for economical calling plans. The wireless sites that made the cut are Point.com, Decide.com, LetsTalk.com, Simplexity.com, Telstreet.com, and Telezoo.com. Similarly, Decide.com, Simplexity.com, eSpoke.com, and Telezoo.com made the cut for long-distance service. Some of the sites also compare Internet services and calling cards. (See “The Players,” below.) To provide services free to Internet surfers, the sites charge some or all of the carriers listed in their search engines. When a customer signs up with a carrier at a particular site, the carrier pays the site a one-time referral fee or 5% to 20% of the customer’s monthly bill. Execs running these sites are quick to point out that even though the sites make money from service providers, they remain unbiased. (The execs make that claim despite the fact that some carriers pay higher commissions than others, making it tempting for a site to recommend one carrier’s offerings over those of its competitors.) And some sites, in an effort to be completely neutral, list a huge gamut of offerings, regardless of whether the carriers are paying clients or not. ESpoke.com, Simplexity.com, Telezoo.com, LetsTalk.com, and Telstreet.com carry only service providers with whom they’ve negotiated agreements. Decide.com and Point.com, on the other hand, carry plans from a wide range of service providers, whether or not they take commissions from them. “We have the largest database of all the available plans, whether we have a business relationship or not,” says Decide.com’s Prasad. (Decide.com’s claims of neutrality were true: in our tests, both Decide.com and Point.com recommended some providers that don’t pay any commissions to their sites.) Another variation among the sites is ease of use. All the wireless sites examine how many minutes a customer requires and how much he or she wants to spend. Telstreet.com and Simplexity.com pull up plans based on those two factors and the customer’s location, but it’s up to customers to discern which plan best fits their needs. In addition to using minutes and price as criteria, Point.com also asks customers to choose between analog or digital service and to select features such as prepaid plans, no cancellation fees, or a one-year service contract. At LetsTalk.com, customers can sort by features such as voice mail, caller ID, text messaging, and E-mail services. Decide.com was the easiest site to use. It poses a series of questions including what percentage of calls are long-distance and what percentage of calls the customer places outside the home-service area. Then it recommends up to 10 plans, listing its top recommendation first. Decide.com and eSpoke.com allow for quick comparisons or detailed comparisons of individual calls on long-distance bills. The easiest and most accurate way to evaluate long-distance bills is to plug in the number of interstate, intrastate, off-peak, and peak minutes from a recent phone bill. Plugging in individual phone calls at both sites is time-consuming, however, and in our trials turned out to be a less accurate method of evaluating total cost. ESpoke.com seems to understand that this process can be cumbersome. To make the process easier, it offers a service through which customers can fax or mail in their most recent long-distance bill; eSpoke.com will analyze the bill within an hour of receiving it and send its results out by E-mail. While most of the sites let customers figure out how much they can save on wireless or long-distance phone bills immediately, Telezoo.com and Simplexity.com offer “request a quote” services. To use those programs, submit your phone bill or your calling requirements to the site and request bids from a variety of carriers. Such a service can be ideal for companies with complex and costly telecom needs. Elias Shams, Telezoo.com’s chief zookeeper (yep, that’s what this company calls its CEO), says companies that spend more than $1,000 per month are most likely to benefit from requesting quotes. Take Timothy Wierbinski, for example. When the communications engineer needed to order a T1 line from Hawaii to Alexandria, Va., he didn’t know whom to call. Wierbinski, who works for Science Applications International Corp., in Tyson’s Corner, Va., turned to Telezoo.com and entered his request. “Within an hour somebody from Telezoo had called me back to get more details,” he says. The carriers, unfortunately, didn’t respond as rapidly as the Web site had; it took a couple of weeks for Wierbinski to receive a few bids. In the interim, he found Hawaiian carriers listed on Telezoo.com and called them himself. Regardless of which services they offer, all the sites provide easy-to-reach customer service. Telstreet.com, LetsTalk.com, Simplexity.com, Point.com, and Decide.com have toll-free numbers. The two sites we tested that don’t have toll-free numbers offer cyberservice: Telezoo.com provides online support through LivePerson.com — a real-time chat application. Customers click an on-screen button and choose a customer-service rep. It took less than a minute for the rep to join the online chat; he answered our question (about the request-a-quote service) immediately. ESpoke.com provides support only by E-mail but answered our question within an hour and a half. Both Telezoo.com and eSpoke.com list the phone numbers of corporate headquarters so customers can call (albeit for a fee) if need be. To take these sites for a test-drive, Inc. Technology asked three growing companies — MBA FreeAgents.com, WebCT, and eOriginal — each to submit one month’s long-distance phone bill. We plugged the information from those bills into eSpoke.com and Decide.com. (Simplexity.com’s long-distance portion wasn’t yet operating at press time, and we didn’t use Telezoo.com since it doesn’t offer any immediate price-comparison tools.) In addition, we entered information from one of eOriginal’s cellular-service bills into Simplexity.com, Telstreet.com, Decide.com, Point.com, and LetsTalk.com. (See the charts below.) MBA FreeAgents.com places experienced MBAs with start-up and other companies that need high-level employees. MBA FreeAgents.com is a fast-growing company with three full-time employees and seven part-timers. CEO Rob Steir works from his home in New York City and spends about $235 a month on long-distance calls with MCI WorldCom. When Steir first signed up with MCI WorldCom, he snagged a 12-cent-per-minute rate. At the time, Steir recalls, the provider promised 10,000 airline miles along with a 20% rebate if he stuck with the plan for a year. Steir knew there were cheaper per-minute rates available, but he resisted the advances of other carriers because he figured he was getting a good deal with the rebate and the miles. At year-end, however, MCI gave him only the airline miles, saying that he had chosen that option over the rebate. Steir says he feels misled by MCI, especially since his 20% rebate would have amounted to about $250 — more than a month’s long-distance bill. As a result, Steir was more than ready to dump MCI for another provider — if he could find a better deal. (An MCI spokesperson says that Steir’s account is being credited to correct the error.) And did he ever find a deal. ESpoke.com pulled up the lowest-priced plan — $102.24 per month, through a carrier called RSL Communications. Decide.com came in slightly higher, with a total estimated monthly cost at TTI National Inc. of $114.01. Those sites take usage patterns into account and occasionally turn up surprisingly useful information. For example, Decide.com also lists MCI WorldCom’s 5¢ Everyday plan — which might seem like a bargain. But after analyzing Steir’s calling pattern, Decide.com estimated that MBA FreeAgents.com would spend $283.13 per month with MCI WorldCom — no bargain at all. A larger company like WebCT, which builds systems that colleges use to create online classes, has more complex telecom needs. The company more than tripled in size, from 60 employees last fall (split between offices in Peabody, Mass., and Vancouver, British Columbia) to more than 200 today. The company counts millions of student users in 100,000 courses at 1,100-plus colleges and universities in more than 40 countries. “From a sales perspective, we need to make a high volume of calls around the world, 24 hours a day,” says Peter Segall, vice-president for sales and strategic partnerships at WebCT. “We need a plan that’s flexible enough so that as we see patterns about time of day emerge, or we see patterns about regions emerge, we can minimize our expenses by getting discounts in those categories.” In addition, because it’s growing so quickly, WebCT doesn’t want to get locked into any long-term contracts. Currently, WebCT uses Bell Atlantic for its in-state toll calls and American Long Lines for its state-to-state and international calls. The company spends about $1,347 a month on in-state, state-to-state, and international calls for its headquarters in Peabody. ESpoke.com came up with the cheapest deal — RSL’s Alliance plan, which would cost WebCT $986.38. Still, that may not be the best that WebCT can do. Bobby Martyna, president and CEO of eSpoke, says its site is optimized for companies with fewer than 20 employees. (Decide.com says it can handle phone bills from companies with up to 100 employees.) Since WebCT receives complicated 70-plus-page telephone bills each month, it might benefit from the customized bids that Telezoo.com and Simplexity.com offer. EOriginal Inc. is a four-year-old company that has developed a patented process for creating what it calls “electronic source documents” — digital versions of birth certificates, driver’s licenses, and so on. At the end of last year, eOriginal had 25 employees. This year the company expects to grow to more than 60 employees and about $12 million in sales. Doug Trotter, eOriginal’s CEO, says his company looks for the cheapest long-distance service possible for its headquarters, in Baltimore. Last fall eOriginal spent about $133 a month on direct-dial long distance with AT&T and used its teleconference service once, for a cost of $90. Again, eSpoke.com found the cheapest plan: RSL came in at $81.16 per month. Both eSpoke.com and Decide.com also pulled up TTI’s Month-to-Month plan, but eSpoke.com estimated the monthly cost would be $83.76 while Decide.com estimated that same plan would cost eOriginal $96.13. Unfortunately, neither site compares teleconferencing services. Simplexity.com promises to do so later this year. Ultimately, Trotter feels his cellular service is more important than his long-distance plan. He’s looking for high-quality cellular service for his senior executives, general managers, and sales force. All senior staffers at eOriginal are converting to one-rate national plans. “We’re getting really large telecommunications bills from hotels when we’re traveling,” says Trotter, adding that, as more and more employees download E-mail on the road, the bills are mounting. “Normal direct dial on a computer without an 800 number can run you up to a couple hundred dollars an hour in a hotel room,” he says. EOriginal founder and executive VP Stephen Bisbee already uses AT&T One Rate service from AT&T Wireless Services and pays $149 for 1,400 minutes a month. But Bisbee, who used the phone for only 300 minutes in December 1999 (the bill we used), is obviously overpaying for a plan he doesn’t need. Simplexity.com, Telstreet.com, Decide.com, and Point.com all recommended AT&T’s Digital One Rate plan, through which Bisbee could get 300 minutes for $59.99 a month. LetsTalk.com recommended Sprint PCS’s Free & Clear 500 plan, which would give Bisbee 500 minutes for $50. Even the pros admit that comparing wireless plans is no simple task. Without a Web site to help buyers navigate roaming charges and off-peak bundles, it’s next to impossible. “My guess is that the majority of the people in the wireless area are on the wrong plan, just because it’s hard to understand,” says Decide. com’s Roy Prasad. But by investing about half an hour — and a little patience — in these sites, most consumers should be able to turn the odds in their favor. Even those customers with a Ph.D. Rachael King is a freelance writer based in Hoboken, N.J. Test-Drive: Long-Distance Here are the plans currently in use by our three companies compared with the Web experts’ recommendations: COMPANY DECIDE.COM ESPOKE.COM MBA FreeAgents.com MCI WorldCom MCI One for Small Business Extra $235.35 per month TTI National Term plan $.069 per minute $114.01 RSL, Alliance plan $.069 per minute $102.24 WebCT Bell Atlantic/In-state American Long Lines/Interstate, Intl. $1,346.90 per month TTI National MTM promo $.069 per minute $1,201.89 RSL, Alliance plan $.069 per minute $986.38 eOriginal AT&T $133.35 per month TTI National MTM promo $.069 per minute $96.13 RSL, Alliance plan $.069 per minute $81.16 Test-Drive: Wireless We put the wireless plan used by eOriginal’s Stephen Bisbee to the test at five different Web sites. Here are their recommendations: WIRELESS CUSTOMER WIRELESS PLANS Stephen Bisbee AT&T One Rate plan is 1,400 mins./$149 currently uses 300 mins. Simplexity.com AT&T Digital One Rate 300 mins./$59.99 Telstreet.com AT&T Digital One Rate 300/$59.99 Decide.com AT&T Digital One Rate 300/$59.99 Point.com AT&T Digital One Rate 300 /$59.99 LetsTalk.com Sprint PCS Free & Clear 500 500/$50 The Players DECIDE.COM What it compares: Wireless, long-distance, prepaid calling cards Site launched: September 1999 Funding: $20.5 million in 1999 from Advanced Technology Ventures (ATV), Morgenthaler, Information Technology Ventures (ITV), and J.F. Shea & Co. Customer service: 800-792-3890, M – F, 6 a.m. – 11 p.m. Pacific time; Weekends, 9 a.m. – 6 p.m. Pacific time LETSTALK.COM What it compares: Wireless Site launched: December 1999 Funding: $20 million in 1999 from Brentwood Venture Capital, Accel Partners, HIG Capital Management, and Goldman Sachs Customer service: 877-825-5460, M – F, 6 a.m. – 9 p.m. Pacific time POINT.COM What it compares: Wireless Site launched: May 1998 Funding: $18 million to date from private angel investors, Oak Investment Partners, IDG Ventures, and Kirlan Venture Capital; and $3.5 million from Staples Customer service: 888-764-6877, M – F, 6 a.m – 7 p.m. Pacific time; Saturdays, 8 a.m. – 4:30 p.m. Pacific time SIMPLEXITY.COM What it compares: Wireless, long-distance, calling cards, and 800 service Site launched: January 2000 Funding: $28.5 million from ABS Capital, Best Buy, and Novak Biddle Venture Partners Customer service: 24-hour service, 800-321-8552; 877-868-2652 (fax); customerservice@simplexity.com ESPOKE.COM What it compares: Long-distance. Internet service providers and digital subscriber line (DSL) to begin this month Site launched: November 1999 Funding: At press time, the founders had bootstrapped $500,000 and were closing their first round of financing. Customer service: customer-service@espoke.com TELEZOO.COM What it compares: Long-distance, wireless, local, teleconferencing, DSL, Internet service providers, ATM, frame relay, Web hosting, and more Site launched: March 1999 Funding: $3 million from Lazard Technology Partners Customer service: Online chat, M – F, 9 a.m. – 6 p.m. Eastern time TELSTREET.COM What it compares: Wireless Site launched: September 1999 Funding: $17 million Customer service: 877-947-3537, M – F, 8 a.m. – 11 p.m.; Saturdays, 9 a.m. – 5 p.m. Eastern time
Resources Finally, a new breed of tech consultants provide affordable, timely help to growing businesses No computer comes worry free. Despite all the advances in computers, software, and networks, our wired universe, sadly, often becomes tangled. And since the pace of business has revved up to Internet speed, random crashes and network traffic jams are becoming more taxing than ever. Of course, if your budget has room for a full-time tech-support team, kinks like these are mere headaches. Pop an Advil and call the help desk. But what about the smaller and solo businesses that can’t afford to devote precious resources to computer support? What about people like Andy Schilling? Schilling, who is president of Tangent Fund Management LLC, also wears the hat of “technology decision maker” at the private-equity-fund -management firm in San Francisco. Since Schilling joined the 15-employee company 11 years ago, Tangent’s computer arsenal has grown in much the same way that most other small companies’ do — one PC at a time, when a new employee is hired or a creaky computer dies. As Schilling bought new computers, he’d pass the old ones down the food chain. Tangent chose its tech support, too, as most small companies do — -by proximity. When the company decided to network its PCs, Tangent hired a local computer-consulting outfit, which installed, configured, and maintained the new network. When the business decided to add more PCs to the mix, though, it went to a local branch of a computer chain that provided basic maintenance for its machines. That worked fine — until the branch went bankrupt. So Schilling figured he’d devote more of his own time to the company’s tech decisions. But since his expertise is in finance — not in computers — he found himself at a disadvantage. Back in 1990, Schilling had purchased what he thought would be adequate hardware and software to network the office. But as time went by and Tangent added more users, the network constantly crashed. So he brought in new consultants, who advised installing an Ethernet local area network along with more-powerful computers. “We had to rip the whole thing up to put in the Ethernet,” says Schilling. Then he hired another local computer consultant just to wire the LAN, which added to the bill. “It would have been cheaper to install the Ethernet LAN from the beginning,” he says. For computer emergencies, Schilling depended on the same consulting company that had advised him to install the Ethernet network. Although he found its service useful, Schilling says he had to wait for the consultants to respond to his pages and then to travel to his site. Meanwhile, Tangent waited in limbo. “When they got here later in the day, the clock was ticking,” he said. “I kept thinking, ‘How many hundreds of dollars would it take to get our printers to print?’ It gets expensive.” Sometimes very expensive, says Mark Margevicius, a senior research analyst at the GartnerGroup. The average large company spends between $8,000 and $10,000 a year just to install, maintain, and support one corporate PC. Those costs are even higher, he says, for small companies, which often can’t afford an in-house tech staff. As a result, they suffer from significant downtime when faced with a computer glitch. Schilling was hardly alone in his frustration; most small businesses have never had much in-house IT help. According to Eric Klein, a senior analyst at the Yankee Group, 53% of networked very small businesses — those with between 2 and 19 employees — don’t have any full-time tech staff at all. Of networked companies with 20 to 99 employees, only 32% have a full-time IT staff. “The bottom line is that businesses are continuing to adapt to PCs and the Internet. The fact that they don’t have a tech staff points to an obvious hole in their support system,” Klein says. Moreover, because of the high hourly rates of most computer consultants (between $40 and $70 for those who offer both time and materials) and the time spent waiting on the phone for help from software and hardware vendors, many small companies don’t seek outside IT help unless they have a major crisis on their hands. Fortunately for companies like Tangent, a growing band of support warriors have spotted this hole and are rushing to fill it with affordable, timely help. By providing standard sets of PCs, software, and networking products — and, in some cases, by requiring lengthy subscriptions — these new businesses can keep their costs so low that even soloists and two- and three-employee companies can have full-service tech support at their beck and call. Some of these technology soldiers configure, install, and regularly monitor individual companies’ systems in an effort to spot problems before they turn into crises. Just call it Fortune 500 service for mom-and-pop shops. CenterBeam When CenterBeam Inc., a start-up based in Santa Clara, Calif., approached Schilling, last July, the Tangent president was grappling with yet another set of tough technology decisions. He was ready to set up an officewide E-mail system and scrap the multiple E-mail accounts that Tangent’s employees had been using to communicate. And he was thinking about registering a domain name and putting up a company Web site. CenterBeam not only offered him E-mail and Internet access but also promised new PCs with 128MB of memory and 17-inch monitors. The company would also provide printers, a wireless LAN, a local server, a software suite that included Microsoft Office 2000, a professionally managed firewall, nightly data backup, and 24-hour tech support. All this would cost Schilling only about $165 a month per user. Because CenterBeam bills its customers on a subscription basis, those costs would be fixed for three years — the life of the contract — no matter how much tech support Tangent might need each month. Some of these new businesses can keep theirs costs so low that even soloists and two- and three-employee companies can have full-service tech support at their beck and call. Just call it Fortune 500 service for mom-and-pop shops. Schilling scribbled out a back-of-the-envelope cost comparison between CenterBeam’s tech services and the system he had pieced together himself. CenterBeam was only slightly less expensive. However, Schilling found the notion of going with a service like CenterBeam attractive because of its consistency. “Now I know what the budget is,” he explains. “Before, it would go in cycles. I’d have some big problem and would have to get new software or buy new PCs. This is a lot more predictable.” CenterBeam cofounder Sheldon Laube hopes his service’s predictability and reliability will speak to small-business owners. “The whole idea is to not ever worry again about this stuff,” he says. As chief technology officer at Novell Inc. and cofounder and CTO of USWeb Corp. (now USWeb/CKS), a San Francisco-based E-commerce consulting business, Laube spent much of his career worrying about technology. And he’s still a worrywart: he and the CenterBeam staff regularly fuss over the health of their customers’ PCs. Laube’s employees use the Internet to peek into the inner workings of their customers’ computers across the country. They hunt remotely for potential problems — and, using the Internet, they upgrade customers’ software without leaving their desks. But even the folks at CenterBeam can’t solve every problem, like the mystery glitch that murdered a PC in Tangent’s accounting department. “One PC just died,” Schilling remembers. No bother. Schilling opened the storage closet and grabbed his “emergency PC,” an extra machine that had come with the CenterBeam package. Schilling called CenterBeam’s office and had all the old computer’s files transferred to the new machine. Because CenterBeam had backed up Tangent’s data nightly, transferring the information was a breeze. “The new computer was up and running in 45 minutes,” Schilling says. “Things like this were a real headache before.” Now headache free, Schilling liked the service so much that at press time he gave CenterBeam a ringing endorsement: his company invested an undisclosed sum in the computer start-up’s second round of financing. Everdream CenterBeam isn’t the only full-service, subscription-based tech provider vying for the small-business market. Everdream Corp., based in Mountain View, Calif., is aiming at soloists and small and midsize companies that would normally purchase inexpensive, so-called white-box computers from local resellers. Everdream manufactures and brands its own PCs before shipping them off to customers, who end up paying about $150 a month per computer. Everdream, like CenterBeam, provides software, hardware, and networking components, as well as Internet access, Web hosting, nightly backup, and round-the-clock online and telephone IT support. In addition, Everdream builds into its machines a simple, commonsense security feature: it divides the hard drives into two parts in an attempt to safeguard business applications from viruses brought in over the Web. One part of the hard drive houses business applications, and the other plays home to programs and games that users download. It would seem that tech-savvy companies — especially new dot-coms — would hardly need outside tech support. Not so, says the Everdream team, which is betting that many high-tech start-ups would rather develop their own technology than worry about day-to-day glitches. Such is the case of Tom Jones. As CEO of Stratasource Inc., a start-up based in Menlo Park, Calif., that provides automated systems management, Jones wanted his software engineers to spend all their time creating Stratasource products. Sure, the engineers could troubleshoot their own PCs. But the rest of the staff would still need occasional help. Last October, Jones signed up as a beta tester for one of Everdream’s PCs before committing his support staff to the system. This January he became a paying customer. While testing the gear, he hadn’t needed much support, but when he did need support, he got it right away. “I was working in Microsoft Word and just got hung up,” Jones recalls. When he called Everdream, a technician “entered” his computer remotely — so that both Jones and the technician were looking at Jones’s screen — and quickly showed the CEO how to solve the problem. That said, there are a few drawbacks to CenterBeam and Everdream’s services. Both companies are subscription based and require long-term contracts. Everdream’s customers are obligated for 30 months — a subscription only slightly shorter than CenterBeam’s aforementioned three-year deal. And then there’s the issue of privacy. Both companies tout nightly data-backup services and the ability to enter any subscribed PC through the Internet with permission. Schilling says that although allowing an outsider full access to his files is troubling, the trade-offs are worth it. “We have more up-to-date methods of communication,” he says. “And it’s clear to me that CenterBeam can provide us with much better firewalls than what we were going to be able to afford on our own.” Finally, these kinds of standard services may not fill the needs of small-business owners who require custom configurations or who are devoted to particular brands of computers not offered by the service provider. And they certainly don’t erase the need for customers to ask for written “service-level agreements,” which describe the time frames in which consultants answer service calls, deliver hardware and software, upgrade equipment, and solve problems. More to Come CenterBeam and Everdream both call California home and at press time had only just begun to expand nationally. By the time these pioneers provide services nationwide, they could be facing fierce competition from large computer companies like Micron Technology Inc., which already offers a subscription service for small businesses. Meanwhile, a potential rival, Dell Computer, recently invested in CenterBeam’s second round of financing, and CenterBeam has an agreement with Dell to supply its customers with the computer manufacturer’s PCs. Competition, of course, usually brings lower prices and better-quality service, which is good news for small companies that until now were unable to afford the kinds of services that their larger counterparts benefited from. For people like Andy Schilling, Tangent’s formerly frustrated president, these new services couldn’t have arrived on the scene soon enough. Anne Marie Borrego is a reporter at Inc. The Nitty-Gritty Company: CenterBeam Inc. Location: Santa Clara, Calif. Founders: Sheldon Laube, CEO, former CTO of USWeb/CKS; Glenn Ricart, CTO, former CTO of Novell; Marc Epstein, executive vice-president of product management and development, former CTO of Quarterdeck; Thomas Twietmeyer, CFO, former Autodesk executive Employees: 70 Funding: $55 million in equity financing from Crosspoint Venture Partners, Accel Partners, Microsoft Corp., USWeb/CKS, New Enterprise Associates, Intel Corp., Dell Computer Corp., Impact Venture Partners, and Tangent Fund Management LLC Buzz: $165 a month per user gets you Dell PCs, printers, high-speed Internet access, E-mail, a wireless LAN, Microsoft Office 2000, regular software upgrades, firewall protection, and 24-hour tech support. Dell recently announced an investment in the company, complementing a deal to supply CenterBeam customers with its own PCs. Fine print: You have to make a three-year commitment to the service. If you’re a hot dot-com, three years probably feels like a lifetime. Also, the CenterBeam monthly cost per user of $165 only applies to companies that need 10 or more machines. Prices are higher for companies with fewer users. Finally, you have to feel comfortable letting other eyes peer into your hard drives. Company: Everdream Corp. Location: Mountain View, Calif. Founders: Russell Rive, CTO, and Lyndon Rive, vice-president of partnership development. The brothers Rive hail from the Republic of South Africa, where Lyndon established a successful catalog business when he was 17. Before founding Everdream with Lyndon, Russell picked up computer and sales experience at Zip2 Corp., an online city guide that Compaq Computer Corp. snapped up last year for about $341 million. Employees: 70 Funding: $18 million from Canaan Partners, Draper Fisher Jurvetson, Ricoh Silicon Valley, and others. Investors include Jack Kuehler, former president and vice-chairman of IBM; and Stanford University. Buzz: Like CenterBeam, Everdream operates on a subscription basis. Customers pay about $150 a month for their Everdream-branded computer, 24-hour IT support, a choice of dial-up or DSL Internet and E-mail service, business applications like Microsoft Office, nightly backup, online training courses, and virus protection. Everdream splits the hard drive into two parts — one “locked down” part that handles the business-critical applications and another that’s open to Internet downloads. Fine print: As with CenterBeam, Everdream’s technicians will have access, albeit limited, to your hard drives. You have to sign up for a 30-month contract — that is, if you can get one. The company hasn’t rolled out nationally just yet but plans to offer service outside California by the second quarter of 2000.
REALITY CHECK: Smart money doesn’t come unless you’re already smart Click here for the word from the experts Then Cliff Young was getting ready to launch his own Internet service provider, he says, “I was looking for capital, like everybody else.” He was also looking for the right investors. Smart investors. Young, a former real estate developer, thought the right venture-capital firm would provide just the expertise he needed. It was 1995, and venture firms pouring money into Internet start-ups were priming their fledgling investments with insider advice and powerful contacts. “It was well known that VCs invested in high-tech start-ups and added a ton of value,” he says. Young drafted a detailed business plan. By the beginning of 1996, it was making the rounds. “I contacted a bunch of places,” he recalls. “But venture capitalists receive thousands of business plans a week. It’s very difficult to get their attention if you’re not already on your way. With just my business plan in hand, it was hard to get even a return phone call.” Elite firms like Benchmark Capital and Accel Partners never responded to Young’s persistent queries. Even middleweight firms ignored him. “The only person who ever returned my call was a research associate at Hambrecht & Quist,” Young says. “He said it wasn’t in their area of interest.” From that point on, Young decided to forgo the extra value VCs could bring, and build his company — InternetConnect Inc. — using any cash he could get. If he could grow the Marina del Rey, Calif., business somehow, it would become more palatable to smart VCs and he could approach them again. Young hooked up with a well-connected vice-president of finance who helped to raise $1.5 million from 65 “completely passive” angel investors. The early, undercapitalized months of the company were difficult for Young, who felt hamstrung by his lack of resources. But low cash had a benefit: it forced him to concentrate on the most underserved segment of the ISP market (selling broadband service to small companies), which turned out to be very profitable. “One of the benefits of going a bit slower in the beginning is that you don’t blow all your powder before you know your business,” he says. “A lot of companies in my industry got funding and grew quickly and then realized that their margins were too low. They ended up going out of business.” InternetConnect did well, posting revenues of $500,000 in 1998. In April 1999 the smart money finally came a-callin’. Young was contacted by Bob Hoff of Crosspoint Venture Partners, in Irvine, Calif., and Matt Mochary of Spectrum Equity Investors, in Menlo Park, Calif. Young met first with Mochary, and at the end of the meeting he had a term sheet from Spectrum. Crosspoint also invested. The two firms gave Young $20 million, and Hoff helped him recruit an experienced CEO. “This gives us the opportunity to really turn on the gas,” Young exults. “Venture firms in Silicon Valley don’t fund ideas; they fund people,” says Mochary. “If you aren’t a person the firm knows as someone who has already created a whole lot of value for them or somebody they know, then you’re unlikely to get funded. If you do have a good idea, then build, it and companies like mine will come to you.” THE 7 MYTHS OF THE WEB ECONOMY Myth 1: Building a Web site is easy The word from the experts Myth 2: Traffic will make you rich The word from the experts Myth 3: Smart money makes you smart The word from the experts Myth 4: Razzle-dazzle makes Web sites great The word from the experts Myth 5: Brand is everything The word from the experts Myth 6: Wild ads make Web stars The word from the experts Myth 7: Community, community, community The word from the experts Plus: Tales my guru told me Dispatches from the Web economy Back to Intro, ” I Was Seduced by the Web Economy”
