Coffee & DoughNets Hits A Hot Topic In E-Commerce
"Coffee & DoughNets" on November 21st at the McLean Hilton brought
together area technology entrepreneurs who announced successful business partnerships and
shared advice with the proprietors of a young start-up company in the hot new e-commerce
Mario Morino reported that The Global Information Infrastructure (GII) Awards, which
recognize innovation in the use of Internet and networking technology, have added a
"Netpreneur" category this year. "These are like the
Oscars or the Emmies in our industry, with very big hitters participating," said
Several Netpreneurs shared their success stories. Lisa Amore of TV onthe Web
reported that her company recently broadcast online the opening party for Gloria Estefan's
new restaurant in Orlando. Despite almost no advance publicity, the site got nearly 7,000
Larry Brown of Digital Now reported that his company, which produces software for
digitizing images from 35mm film, has just signed a deal with Hewlett Packard to
package their image-organizing software with all of HP's scanners and many of its
Shep Bostin of NetWord (http://www.netword.com)
reported that his company has gotten more than 100 participants in their logo program, and
that they have been selected to be a presenter at Internet World.
Hans Tallis of Explore Reasoning Systems (http://www.ers.com)
reported that his company provides fully-automated financial-planning software to The
Vanguard Group -- previously a closely-held secret because Vanguard did not want to
alienate its customers by suggesting that a computer was giving them investment advice.
Vanguard has added $7 million in new investments since going with ERS.
Andrew Stern and Mike Shehan of Logex
provided this month's "business challenge." Logex provides e-commerce
implementation for businesses looking to sell their product on the Web. The company, less
than a year old, offers everything from catalog development to integration into the
company's legacy systems to site hosting and marketing. Their current business
relationships include Crown Books, Ingram Book Group, ImagiNet and CyberCash. They are
positioned to serve the bookselling, association, and mail-order catalog industries.
Logex's revenue has come almost exclusively from fixed-cost contracts, with half paid
up-front and half upon completion of the implementation of their e-commerce solution. But
Logex believes there's more money to be made in e-commerce in the long run, and Andrew and
Mike want to position themselves to take advantage of it. The challenge: discovering the
best way to do so without overextending their company.
The options they proposed: become partners with their clients and benefit from the
revenue growth in online sales, charge transaction fees to benefit from individual sales
online, or start their own online storefront using fulfillment houses to provide
Attendees advised against a transaction-based revenue model, pointing out that it is a
formula that has not met with great success in the software or online industries. Flat
rates have been a hallmark of online business, and are viewed as more consumer-friendly,
both in individual transactions and in business deals. Additionally, in such a young
marketplace it's unclear whether this will be a reliable stream of revenue for a company
Several thoughtful suggestions about partnerships emerged. A partnership can be
sabotaged by a non-technology partner with diverse interests who is not fully committed to
the idea of e-commerce. In a partnership, Logex ought to commit to helping their partner
find new revenue streams in order to maintain profitability and interest. Logex might form
a joint venture with one company whose services can complement theirs and be sold to other
businesses, but the up-front costs for a new partner company can be high.
Other Netpreneurs offered ideas for capturing revenue in different places such as
expanding to offer billable consulting hours and getting retainers for services, rather
than just selling the fixed-cost turnkey solutions; create contracts which bring a
percentage of savings brought in by e-commerce; set a "floor" of revenue, above
which you'll receive revenue-sharing with client companies; and, rather than partnering,
sell the company's e-commerce management services to a large client like Ingram Book
Group, to implement in their business-to-business sales, thus ensuring a steady revenue
flow to Logex.
Attendees continue to feel the growth of a supportive netpreneur community at these
monthly meetings. Mike Grow of Microstate Corp. (http://microstate.com)
compared the atmosphere at Netpreneur events with that in Silicon Valley: "Everybody
talks to everybody. Competitors aren't afraid to talk to each other. There's a free
exchange of ideas." Michelle Nixon of Proxicom (http://www.proxicom.com)
marvelled, "I don't know what other industry group does this. I don't think there are
The excitement that comes from critical mass was evident after the meeting. John Casey
of Brian James & Associates said "One phenomenon you're seeing here is these
little sub-networks start....We're using Coffee & DoughNets as a hub event, where we
can all see each other and carry on discussions on an ongoing basis."