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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 business.

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 Morino.

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 hits.

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 printers.

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 inventory.

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 like Logex.

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 any others."

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."

Copyright 1997 Morino Institute. All rights reserved. Edited for length and clarity.  

 

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