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January 1, 2001

DotCom Divas

continued...page 2 of 3

By Elizabeth Carlassare

Illustration by Amanda Duffy
More on women in IT:

Time Is Right For Women In IT (10/13/00)

TechWeb: Women Steer Online Auto Sales (11/10/00)

TechWeb: Internet Battle Of The Sexes Narrows (11/10/00)

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To attract more users, Strausberg set out to brand Edgar Online as the premier source for Securities and Exchange Commission data. The company negotiated deal after deal with major search engines, portals, and highly trafficked financial Web sites. "Our first executive hire was Jay Sears, our vice president of business development," says Strausberg. "He helped us pioneer our cobranding model and negotiated deals with CBS Marketwatch, Snap, Lycos, and AltaVista."

Edgar Online-branded data feeds and content now flow to more than 100 sites, including Yahoo, SmartMoney.com, TheStreet.com, and the Go Network. In exchange, Edgar Online gets tremendous brand exposure, licensing fees, and a cut of advertising revenue, in some cases as high as 100%. "This is an effective and profitable way to build our brand, generate advertising and licensing revenue, and upsell subscriptions," says Strausberg. The company's content is distributed through so many channels that Edgar Online has become the leading online brand for SEC filings. Barron's has twice named it a top-20 site.

"Edgar Online has opened up a whole new set of information to the consumer," enthuses Forrester Research analyst Jaime Punishill. "I'd argue that consumers now have access to more information than most Wall Street professionals did five years ago--that's pretty cool."

The money game. The Strausbergs funded their business out of their own pocket for the first six months. "My husband and I invested every penny we had in our business," says Strausberg, who brings her dog, Bean, to work with her every day. When the company needed more capital, she went after strategic investors such as Bowne & Co. (the world's largest financial printer and adviser to the SEC on the creation of the Edgar system), who would see the purpose and potential of her vision. "What we were doing was such a departure," she explains. "Hardly anyone knew what Edgar was or even what the Web was, so we decided to find investors who at least understood one component of what we were trying to do."

As the company grew, Strausberg steered clear of venture capital and stuck to a strategy of carefully selecting investors who understood the niche, raising a total of $4 million from strategic corporate investors. "My husband and I have much longer life experience than most people who start Internet businesses, so we didn't need the kind of oversight that a VC firm might have given us," she says. "Besides, we're older and married. We're not the type of entrepreneurs VCs usually fund."

The Strausbergs took the company public in May 1999. The outcome? The stock was priced at $9.50 but traded flat. "Our stock didn't have the pop that other Net stocks before us had, but we took in even more money than we expected," she says. "Our goal was to get capital into the company, and we did." With the IPO, the Strausbergs' paper net worth instantly increased more than $66 million. (The couple personally owned 43% of the company at the time of its IPO.)

Capturing FreeEdgar. Because the SEC's Edgar database is in the public domain, anyone with the gumption can go out and mine it. Even though barriers to entry are nil, competitors to Edgar Online were slow to emerge--an indication of just how prescient the Strausbergs' idea really was. But in 1997 one serious rival sprang up: Washington state-based FreeEdgar.com, another Edgar data-mining site, created by a former banker.

While Edgar Online's IPO wasn't a screamer, it did create the stock currency the company needed for strategic acquisitions. So in July 1999, it acquired FreeEdgar in a stock deal valued at about $10 million, instantly eliminating its chief competitor and increasing Edgar Online's traffic and user base by 50%. With the acquisition, the company got its competitor's watch list functionality and assumed its partnership with Reuters, getting yet another distribution outlet at a leading financial Web site.

Although Edgar Online still has a few competitors, the site's brand ubiquity and strong first-mover advantage have deterred rivals from flocking to the scene.

KIM POLESE

For the first six months after leaving Sun, Polese and her [Marimba] co-founders were the entire company. Each kicked in $15,000 to bootstrap the business, lived off of their personal savings, and worked under a shroud of secrecy for fear of prematurely exposing their concept to would-be competitors. "Even though our office space was pretty funky, I think self-funding was the right way to go because we were able to build value into the company during the first six months and not give away equity," explains Polese.

The press speculated to no end about what these four former key members of the Java team were up to, and their secrecy amplified the buzz. Venture capitalists pricked up their ears, too. Java was all the rage, and VCs were dying to know what this startup was doing and get in on the action first. By the end of 1996 the founders had built a prototype of their product and signed up their initial beta customers. They were ready to unveil it and raise funding to refine and market it. The musical foursome dubbed the company Marimba and punnily named their flagship product Castanet. "I like names that are easy to spell, remember, and pronounce, and reflect the energy of the company and the people behind it," says Polese. "When I chose 'Java,' it was the same thing--a name that kind of captured people's imaginations."

Based on Java, Castanet provides an efficient mechanism for getting software, software updates, and information from point A to point B over the Net securely. And here's the neat part: Castanet sends only data that has changed, thereby conserving bandwidth. Moreover, the product compresses the data, further minimizing the impact on the network. Software downloads can be interrupted and then pick up where they left off.

Kim Polese Photo by Ellen Grossman End users download a piece of client software called a tuner, and on the server side, businesses install a transmitter that lets them dispatch software and information to any subset of users with the Castanet tuner regardless of their device or computer platform. As long as users are connected to the Internet, the software or information is automatically updated when revisions are made to it on the server side.

Castanet has helped companies reduce information technology expenditures, since they can use it to remotely install and update software sitting on employees' desktop PCs, as well as to distribute software to suppliers, customers, and business partners. The product relieves system administrators of the tedious task of visiting employees one at a time, CD-ROM in hand, to manually install or update office suite software, E-mail clients, and the like. It also saves employees the hassle of having to download upgrades and patches from the Net. What's more, Castanet enables companies to tailor applications and information to specific groups of users.

Marimba's first customers were companies trying to deliver sophisticated applets through the browser and struggling because downloading them across the Net was taking so long. Problems were compounded because these companies usually didn't know which type of browser and version each end user would have. Bear Stearns was one of the first companies to license Castanet. It had a large bond-trading applet it was delivering to brokerages, but every time someone wanted to trade a bond, they'd have to wait for the applet to download.