In business for 21 years as an operator of residential real-estate auctions, Latham decided to test out cyberspace this past January. It held its first Web auction of 147 homes in the Hartford and New Haven, Conn., area in the middle of an ice storm that paralyzed much of the Northeast. But on its Homebid.com Web site, Latham sold 136 homes in three days and more than 85% of the deals eventually closed. The industry average for auctions is about 60%.

"A live auction would have been canceled, no question," says Homebid.com president and CEO Kevin Hickey. "That was our tester, and we realized that we didn't need to do live auctions anymore. Once you find the right business model, you want to go after it hard."

Latham, in Scottsdale, Ariz., already had the Homebid.com name registered, so it did a "reverse merger" whereby Homebid.com acquired the assets of Latham, then proceeded to raise $25 million in venture capital with Chase Capital Partners, Chase Manhattan Bank's venture arm, as the lead investor.

Latham founder Larry Latham had a limited background in technology, so he recruited Hickey, the former president and chief operating officer of tools vendor Viasoft Inc. and an 18-year IBM veteran. Hickey, in turn, hired Jean-Luc Valente, Viasoft's former senior VP of marketing, as Homebid.com's chief of marketing and operations.

To build the Web auction infrastructure as fast as possible when it had almost no IT resources of its own, Homebid.com hired Internet services provider Scient Corp. for design and programming. Most of the technology is proprietary, but Homebid.com is negotiating to license a packaged report-generation application. The company plans to bring IT in-house later this year and is hiring aggressively; Homebid.com already has 35 employees, twice as many as Latham did.

Homebid.com didn't forsake hotel ballrooms and satellite broadcasts as auction venues simply to cut logistics costs, although that has been a benefit. The primary motivation was expanding its business, which had relied mostly on U.S. Department of Housing and Urban Development and Resolution Trust Corp. properties. As the "first mover" to the Web in the $40 billion market for auctions of institutionally owned properties, Homebid.com focused on new institutional customers such as Fannie Mae and Freddie Mac, and on large private real-estate agents.

Homebid.com held its first private Web auction for real-estate agents in June with 151 Phoenix-area homes listed by Coldwell Banker, Prudential, and John Hall & Associates. It sold 32 homes for a total of $6 million. Two weeks ago, continuing what Hickey calls "our summer of pilots," Homebid.com launched an auction of 319 homes in Las Vegas.

With some of the money saved on ballroom rentals and travel expenses, it has hired salespeople to court these new customers. "With an Internet solution, people are automatically more interested because no one else is doing it," says Hickey. "Our sales reps will make a call and say, `Look at our Web site and then tell me if you want to see me.' Nine times out of 10, the doors will open."

Return to the opener, "E-Business: What's The Model?"

Illustration by Hank Osuna
Photo by Richard Morgenstein