The E-Exchange Enablers

Dec. 21, 2004
A number of entrepreneurs are facilitating e-marketplace transactions.

There is no shortage of companies seeking to provide the technology that makes online manufacturing exchanges work. Bid.Com International Inc., a software firm that sells technology to enable companies to set up e-exchanges, is one of hundreds, and perhaps thousands, of companies seeking to supply the shovels, picks, and pans for the gold rush in exchanges. "Most companies already have a healthy array of customers and contacts, and we provide them with a mechanism to build their own proprietary type of exchange," says CEO and cofounder Jeff Lymburner. Together with cofounder Paul Godin, now a board member, Lymburner based the company on a sketch they did on the back of an envelope. "The idea of doing liquidation auctions over the Internet I thought was a terrific idea," he says. "We started out initially as Internet liquidators." Bid.Com since has shifted its business model, today providing instead the mechanism for companies to set up their own online market, while maintaining their brand and control of the pricing mechanisms. "We enable them to keep their brand, and they select the pricing method that suits their business," Lymburner says. He and his partner did the usual self-funding route early on, "scrounging from friends and relatives for seed capital." The company later used $2 million in venture capital to acquire a nonfunctioning "shell" company in Canada, using it to go public and obtain capital through a secondary offering. For Lymburner, managing a start-up was nothing new, having owned a cellular-telephone and wireless-data business in Toronto. His technology background included a stint as national manager of a major electronics retailer in Canada. Another e-marketplace enabler is NetVendor Inc., an Atlanta-based software firm that provides sell-side systems for companies dealing with exchanges. CEO Sean McCloskey returned from Prague, Czech Republic, in 1996 to start the company with his father, John, and two engineers. "We didn't realize how early we were," he says, referring to the fact that B2B e-commerce in those days was pretty much EDI or nothing. Nonetheless, over the next four years the company raised $75 million in venture capital. A former corporate lawyer who had been working with Deutsche Telecom AG and Bell Atlantic in Eastern Europe, McCloskey had been a Wall Street lawyer for five years. "What I brought to the table was an understanding of how to raise money and how to explain the company to potential investors." His father, John, is an ex-CIO who, as the son puts it, "is very good at matching technology to solve business problems." Explaining just what NetVendor was about wasn't easy, especially in the early days when few investors understood the B2B market. "I must have talked to 50 investor groups that didn't understand the idea," McCloskey says. The father-son duo each extended their credit to the tune of $100,000 before the company got its first taste of venture money. "We were two weeks away from our next payroll and wouldn't have been able to meet the payroll" if the company hadn't received funding from one of its key backers, Wheatley Partners LP. "We'd have had to shut the company down."

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