case study: self-serve website builder: a dot-com… not a dot-bomb
Do you remember the internet in 1999? Venture capitalists should have renamed themselves “adventure capitalist” as they threw money at any business that had “.com” at the end of its name. Our story begins with a dot-com start-up that offered self-serve websites for small businesses. The website creation system was cutting edge. In less than 15 minutes (no kidding, we tested this claim), you could create a custom-looking website by selecting an industry, template and color theme. Fill-in the business info and you were done… including sample content tailored to your industry! Want a custom domain name and email to compliment your new website? In less than 5 minutes, you had it! It was a great system with one simple problem. In 1999 everything on the Web was free.
Keeping programmers was impossible: Web programmers were demanding exorbitant salaries, bonuses and equity. Due to the demand for qualified talent, competing dot-com firms were continually raiding competitors’ tech staffs; hence, building a stable tech team was extremely difficult.
Furthermore, the Internet’s mantra was; “If it’s on the Web, it’s free”; hence, little-to-nothing could be charged for the core product and up-sells were difficult. Lastly, the business could not generate sufficient website advertising to support its operations.
“Cage” the Tech Staff: The non-financial issue was to create a stable tech team who could support the system. The answer was creative and simple… re-locate the firm’s development team to an extremely desirable and remote location. This location? Maui, Hawaii. Upon relocating the tech team to Kihei, turnover was eliminated. (The programmer’s loved living in Hawaii and the Company was the only high-tech business within a 9 hour flight!)
Build the Company to meet the needs of a strategic buyer: As stated above, the Company recognized that it could not generate sufficient revenue within the “free services” culture of the Web. This meant it needed to re-assess its business goal. It had a strong small-business website service supported by an experienced, stable technology team. Who needed this combination? Thorough market research surfaced a number of candidates. Top-of-the-list were national business-forms firms serving the small-businesses market. These firms recognized the immediate need to augment their traditional print products with web services.
The Company adapted its marketing and website systems to support the products offered by three leading business-forms companies. Joint marketing proposals were prepared with the stated goal of developing a long-term marketing relationship (and the unstated goal of being acquired). The primary target enthusiastically accepted the marketing partnership and simultaneously offered to purchase the Company for a multi-million dollar price that provided the Company’s investors with a 900% IRR.