July 24, 2000

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Redefining Business:
Dot-Com Bargain Hunting

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Onloan.com began as a site where consumers could apply for home mortgages. Competition, including larger sites such as Mortgage.com, soon flooded this arena so president and CEO Barney Danzansky began to shift from purely business-to-consumer to incorporate business-to-business components.

The company sought partnerships to bring mortgage lenders and borrowers together. Unlike other sites at which borrowers linked with lenders still had to go through a conventional approval process, Onloan.com handled the entire approval process online. To do this, Onloan.com developed a proprietary qualification logic engine and a flexible and re-useable integration tool to transfer customer information to lenders.

For its business-to-business service, the company also began offering back-office fulfillment and loan processing for mortgage brokers and banking institutions. That's why it needed Decade Systems, which provides back-office integration for enterprise systems

Decade is a recognized name in financial systems with about 85% of its clientele in the mortgage-lending industry. Onloan.com itself has been a client. Other customers include Bank of America, First Nationwide, GE Capital, Homeside Lending, PNC, and Wells Fargo.

"In the mortgage industry, there's no clear distribution channel," says Danzansky. "Decade has helped integrate all the pieces such as data exchanges and loan origination systems."

The goal, he says, is to pull together diverse systems within each provider so that the consumer can get real-time data on mortgage rates and approvals.

ONCE, TWICE, SOLD!
Gavelnet.com president Michael Haynes says he didn't have a cash-flow problem when he decided to merge his San Francisco site with a brick-and-mortar company. Instead, he had a strategy problem--the company needed more customers.

Gavelnet.com is similar to many small tech-driven companies in that it had some strong technology, but needed more to make it a complete business. Meanwhile, its merger partner--a southern California rare coin and collectible dealer called Tangible Asset Galleries--was struggling in a market in which giants such as eBay Inc. were claiming huge tracts of Internet territory.

The rationale behind the merger, Haynes says, is that both parties have something the other needs.

"The traditional business has property, inventory, and customers," he says. "What they don't have is unlimited capacity. The virtual business has unlimited capacity, but finding customers can be difficult and expensive."

Tangible Asset Galleries has $20 million in annual revenues and a showroom in Newport Beach, Calif. Gavelnet.com is a startup founded last November with the backing of Benchmark Equity Group of Houston, to bring live, real-time auctions to the Internet. The cost of attracting customers in a specialty market such as collectibles and art, Haynes says, can run into the tens of thousands of dollars per customer. "As a virtual business, I'm asking 'Where will I find inventory and customers?' he says. "Tangible has the network of dealers and access to properties."

In addition to selling merchandise as an online retailer and through online auctions that last a specified length of time, much in the way auctions at sites such as eBay work, Gavelnet.com holds quarterly live Webcast auctions. Interested buyers can point their browser to the site, watch the auction unfold, bid on any items for sale, and complete the purchase online if they win. Gavelnet.com uses its own servers and streaming software to broadcast the auction rather than outsource to a service provider, Haynes says.

Like Cannold at Space.com, Haynes sees himself as part of a new trend in E-business in which Web-based operations are looking for brick-and-mortar properties to support their core online business. Haynes notes that he doesn't have to look far for well-funded competition: eBay has bought San Francisco's Butterfields, a prestigious auction gallery with worldwide operations and clientele.

If these deals have a pattern, it is this: For every Pets.com-Petstore.com merger, there's still a Petco or Petopia out there to put up a fight. As HealthZone buys customers and brands, Drugstore.com looms as both competitor and potential buyer. The competition and choosy investors that have brought on bankruptcies, layoffs, and deferred IPO dreams will continue.

And troubled or stagnant Internet businesses will continue to draw the public's fascination with watching paper millionaires lose their value amid escalating cash burn rates. Yet dot-com is not a dirty word. Just this month, Yahoo surprised the investment world with a $74 million three-month profit, and Amazon.com shipped more than 300,000 copies of Harry Potter and the Goblet of Fire on its first day of publication. Clearly, some Web businesses are here to stay. That there are and will be failures, there's no doubt. But for the survivors, the failures offer more fuel for growth. For them, there has never been a better time to be in business.

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Illustration by Randy Hess
Photo of Danzansky by Tom Salyer
Photo of Haynes by Edward Carreon

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