Electric Press, Inc.
The deserted beach town in the dead of winter was an apt metaphor for a naked startup. The discussions leading to the creation of Electric Press, Inc. had been underway for over a year, but it was a grey weekend in December 1993 when the founders gathered at a rented cottage in Chincoteague, Virginia with computers, flip charts, and the outlines of three different business plans. The idea was to get some focused time to crunch the numbers, flesh out a plan, and to see how long the group could handle being locked in the same house..
The three business plans revolved around the emerging Internet, at the time a little known, mostly government and academic telecommunications system that was just starting to see its first commercial activity. Experience at the National Academy of Sciences and exposure to some of the people who created the Internet had given rise to the three options considered that weekend:
(1) Provide access to the Internet for a fee;
(2) Provide book-like print on demand services over the Internet; and
(3) Help companies reach their customers over the Internet.
Print on demand was the favorite—and gave rise to the Electric Press name—but the numbers showed it to be too capital intensive; plus the turbo-charged copiers required did not yet integrate well with networks. Likewise, the creation of an Internet service provider was rejected due to the physical demands—too many wires.
The third option emerged as the choice. The Internet, coupled with the newly available World Wide Web browser Mosaic (Netscape was still months away at that point), seemed to have potential as a common platform that companies could use to provide information and services to their customers. Large companies were installing terminals and telecommunications facilities at their customers’ offices, allowing customers to make entries directly into their ordering systems—reducing costs, increasing customer loyalty and creating a barrier to competitors. But there was a significant expense in installing the equipment and customer purchasing offices sometimes became littered with the terminals of different vendors. The Web could provide a single platform, available on the desk of every customer and potential customer, that companies could reach out to.
With funding from the founders good for maybe six months, and an agreement to defer salaries, Electric Press was up and running by the end of January. The office was 750 ugly square feet in the back corner of a typical two story 1960’s government research building in Reston, Virginia, located using the time-honored method of driving out all of the major arteries from D.C. until rent dropped below $10/foot. The first product offering was simple and generic: a fixed fee to set up a web site, varying based on the complexity from a simple on-line brochure to a full catalog, and a monthly fee for hosting and maintenance.
In February the first advertisements for Electric Press ran in the Washington Post, Washington Business Journal, and on WTOP Radio, prompting curious callers asking “Hi, is this the Internet?” It took a couple of weeks to realize the correct answer was “Yes, how can we help you.” The ads also generated interest from some Internet pioneers, one of whom described driving down the toll road and hearing the radio spot. “Wow, here it is 1994 and there are ads for the Internet on the radio. I had to pull over!”
In those early days marketing and sales we not focused on any one industry. It was a shotgun approach with manufacturers, wholesalers, retailers, magazines, associations and government agencies all fair game—anything to bring in business, even straight hourly work on what today would be called “web design,” though that did not capitalize on the very important annuity income from hosting and maintenance. It was a fight for survival and some of the work—taken to make ends meet—did not match the company’s expertise well. That probably cost some customers and relationships down the road, a poor tradeoff in retrospect.
Six months later required another cash infusion from the founders but by the end of the first year, the company was cash flow positive. With a couple dozen customers on board, patterns started to emerge in terms of vertical markets and the types of Web applications that worked in those markets. There needed to be some focus for the company to grow, but with commercial use of the Internet still young and very chaotic, nobody wanted to bet on a single application, lest it be the wrong horse. The result was probably the most important decision in the growth of the company—the installation of good financial management software and the hiring of an experienced CFO—with the intention of tracking the revenue and profitability of each application so that the winners could be expanded and the losers fixed or abandoned.
Fast forward to 1997. The company had created at least six new applications and killed off half of them, leaving three fairly solid business lines: commercial catalogs, federal government schedules, and online publishing. The company reached annual revenues of $5MM, had 60 employees, 7,000 square feet of space, and hit number 46 on the Washington Business Journal’s “Fast Fifty” list of fastest growing companies.
But some competitors were growing faster, fueled by outside funding and a stampede of companies wanting to get on the Internet. It looked like it was time for Electric Press to secure venture funding as well. There ensued a yearlong dance of meetings, expressions of interest, but no deal. One well-know local venture capitalist—inexplicably a day early for his meeting—provided the insight as to why: “You have three companies here. I might like one but not the other two. Another guy might like a different one. And neither of us is going to like managements’ attention split. You are too small for that. You ought to break it up.”
As luck would have it, about that time, one of the large Internet service providers was starting a hosting service and needed a customer base to hit the market running. In less than two months the idea went from a first discussion through due diligence to a deal to acquire the Electric Press commercial catalog business—all cash!
Acquisition seemed to be the way to go and the company brought in an investment-banking firm to shop the federal schedule business, called eFed. This one was more of a roller coaster. An offer from a major on-line consumer retailer looking to move into the federal marketplace was on the table, then pulled by the reluctant chairman. A second, better offer soon followed from a government contractor who wanted to add on-line capability, but that got caught up in a lengthy due diligence process and ultimately was pulled as well—and the investment-banking firm blew up, the staff handling our effort departing. But the wheels were in motion and the third time was the charm. The best offer of the three—an on-line provider to state and local government that wanted to move into the federal arena—closed in September 1999, at the height of the dot com and stock market booms, the latter significantly boosting the value of the deal.
That left the online publishing business, the only business that really fit the Electric Press moniker. The application combined print on demand books—the just-in-time creation of a complete paperback book in response to an order—with the ability to read the book online—not because anyone would want to read a whole book online, but as part of encouraging the reader to buy the book, like in a real bookstore. The product debuted at the Frankfurt book fair in the fall of 1998 to good review and made an even bigger splash in Frankfurt in 1999 with a dozen publishers on board and interest from the major wholesale book distributors. Electric Press had the lead on a couple of well-funded competitors. But then the bottom fell out of the dot com boom. By the end of 2000 the competitors were gone and Electric Press was in a quiescent state—breaking even with current customers but not growing.
In July 2001, Electric Press closed its doors, the founders moving on to new ventures. A complete company lifecycle—zero to boom to bust—in seven years.