End of the Dot-Bomb Era? Dot-com Deaths Appear to Be Leveling Off
Starting at a time when the B2B Internet industry looks as inviting as a romp through a Bosnian minefield, Cardiff startup Zoovy says all is groovy.
“When we launched last month, I was hoping we’d have about 1,000 trial accounts, but as of last week we had about 7,000 signed up,” said founder and CEO David Steel.
Zoovy designs, creates and maintains e-commerce Web sites powered by an applications software that Steel says is superior to his competitors, and which has been a year-and-a-half in the making.
“Our focus is on customer relationship management, and increasing sales,” said Steel, who managed the city of Escondido’s information systems for five years. “We help merchants not only place their products on a Web site, but we place those products on auction sites and other e-commerce sites as well.”
Steel founded Zoovy in January 2000 with about $600,000 in capital, primarily from friends and family. This January it obtained $1.5 million in equity funding from American Pinnacle, a Los Angeles-based technology VC.
“We really don’t need that much (funding) because we’ve been able to keep our monthly burn rate down, have an excellent business plan and great team of people,” Steel said.
Right now, Zoovy has eight full-time staffers, supplemented by eight contract employees, but it will soon add another four to its payroll. Within a year, the number could easily grow to 100, he said.
Revenues are already flowing, and the break-even point is in sight, estimated to be somewhere in the first quarter of next year.
The company name doesn’t mean anything; it’s just a catchy sound, says Steel. To find an available domain name he had his programmer conducted a search for available domain names with a lot of vowels. Zoovy was among the words and sounded like a winner.
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Dot-com Deaths Leveling Off:
Fifty-three Internet firms were shut down or declared bankruptcy in June around the world, about the same number as in May, suggesting the death rate for the dot-coms may have reached its peak, according to the latest report by Webmergers.com.
The latest casualties brings the total number of dot-coms that have gone belly up since January 2000 to 555, the report said.
Since the beginning of 2001, 330 dot-coms have expired. That is nine times the number for the comparable six months of 2000.
The report didn’t include the latest dot-bomb, Webvan, Inc., based in Foster City, which stopped delivering its groceries to homes last week.
The company had operations in about seven cities including San Diego, but simply couldn’t find sufficient customers to keep afloat. It had purchased Seattle-based HomeGrocer.com when the latter went under about a year earlier.
MusicMatch Downsizes:
MusicMatch Inc., the Rancho Bernardo-based provider of music software, said it laid off 44 people, or 25 percent of its full-time staff, including 40 full-time and four contract workers, last week to cut its expenses and meet its goals.
“This was done to meet our goal of becoming cash flow positive by the end of this year,” said spokesman Gary Brotman.
By the term, Brotman said the firm would have more sales than expenses, but not necessarily be profitable.
The Internet software developed by MusicMatch allows users to listen to music delivered via the Internet. Its main product is called MusicMatch Jukebox, which competes with similar software products made by RealNetworks (RealPlayer) and by Microsoft (Windows Media Player).
The personnel cuts were made across the board and included mid-level managers, product marketing people and customer support staff, Brotman said.
The reductions will leave MusicMatch with 114 full-time staff. It had less than 100 employees at the beginning of this year.
MusicMatch has attracted nearly $30 million in capital investment since its inception. Top investors are Thomson Multimedia, Redpoint Ventures and Intel Capital.
Revenues last year for privately held MusicMatch hit about $10 million, but won’t reach their original projections of more than $20 million, but will likely reach $17 million, Brotman said.
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AirFiber Completes Third Round:
AirFiber Inc., the San Diego-based developer of wireless networking equipment, said it completed a C round of financing last week, obtaining an additional $3.5 million to an earlier announced investment of $50 million, bringing the total round to $53.5 million.
In addition, the company said it arranged a $10 million line of credit from Silicon Valley Bank. AirFiber was able to secure additional funding from Spinnaker Ventures, a VC firm with strong ties to Latin America.
The company plans to use the funds for advanced development, sales and marketing, customer support, and the distribution of wireless optical networking equipment.
Privately held AirFiber was founded in 1998 and has about 150 employees.
Analysts Cut Gateway Estimates:
Earlier this month, both Merrill Lynch and Prudential Securities dropped their estimates on Gateway Inc.’s earnings , or more accurately losses , for the coming quarter. Prudential tabbed the loss at 3 cents per share while the Merrill analyst put it at 4 cents per share. The average loss predicted by Thomson Financial/First Call was a penny per share.
Gateway, which is headquartered here and has about 400 employees locally, is expected to release its second-quarter financials July 19. For its first quarter, the PC maker reported a net loss of $503 million on $2.03 billion in sales.
The negative news on Gateway sent the stock downward by about a point, which it regained but then lost again over the past week. It was trading at $14.80 as of July 9. About three months ago, shares were trading above $18.
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TeraGlobal Gets $4 Million:
TeraGlobal Communications Corp., a San Diego-based maker of networking software used in delivering voice, video and data, said it has received $4 million in funding led by WallerSutton 2000 LP, a VC firm specializing in the media and telecom industries.
As part of the investment, WallerSutton purchased $2.5 million in preferred stock and warrants and provided a $1.5 million bridge loan that also included Spencer Trask & Co., members of TeraGlobal’s board of directors and outside investors.
Barrow Moves On:
Abi Barrow, director of programming for UCSD Connect, the public-private organization for high-tech startups, left that job to take another position at the UCSD Jacobs School of Engineering. She will be setting up new programs within the newly established Von Liebig Technology Advancement Center.
Barrow had been the programming director at Connect for 11 years and managed the organization for two years following the death of Connect’s founder and first director, Bill Otterson.
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