The Launching Fad

A next-generation start-up plays the fortune game

PLANT LIFE I

It's under the whiteboard and the 'To Do' list thumbtacked to the wall ('Find Attorney,' 'Create a Record of Action'). From the corner where it sits, it doesn't get any light, save the stray radiance of monitors. Who knows if it gets watered—it seems to be growing out of stones and desiccated sponge, anyway. It's ignored, except when it needs to be moved out of the way, to make room for the next sawhorse, the next pine door laid flat.

And yet, this tall potted plant—one of several in the office—is the deepest, healthiest green you've ever seen. The foliage seems to be springing off the stem. If you take a moment to really look at it, it's startling just how alive it is, given the circumstances—like it's hydrating from hope itself and feeding off an interior sun.

THE WEB YOU WANT

Back in early September, William O'Shea sent out an e-mail to friends. The 23-year-old assistant editor was looking for a slogan for a new company. At that moment, from his desk at a small e-zine in Soho, O'Shea was chief executive of an idea. In 1985, 26-year-old Steve Case was the executive of an idea called America Online, and last week his idea absorbed a giant chunk of American media for $165 billion.

O'Shea's idea is RedFilter.com, a "personalization and randomization service for 18-to-26-year-olds" (along the way, it will broaden to 16-to-30 and then scale back to 17-to-29). "Personalization" is one of those ideas that is, as they say, very 1998. "Randomization" goes back all the way to 1995. In Internet years, these are concepts so old that they almost hearken back to that era of "bank tellers." But that's not a problem. eTour.com, a similar company, raised $10 million last year. (Put into perspective, $10 million is just about 395 times more than O'Shea was making.)

RedFilter is founded on the premise that people get bored online. There's just too much out there for search engines to do any good. Plus, if you're in that 18-to-26-year-old window, you're kinda into randomness anyway. So you go to RedFilter and fill out a questionnaire about your interests—say, sports and movies. Then, every time you get online, RedFilter brings you a new site as your home page, selected by a team of editors. "It's like turning on the TV and getting a new channel brought to you, based on what we already know that you'll like," O'Shea says.

Before he had financing, an office, or employees—but long after he had interns—O'Shea needed a catchphrase for the company. He provided some options: "undercover surf junkies," "the web you want," "express your web," "illuminating the net," "where you didn't know you wanted to go." Hours later, he sent out another e-mail with eight more to choose from. And a week later, he sent out the invite to the launch party. In three more weeks he sent his resignation e-mail—O'Shea 1.0 was quitting his job so that O'Shea 2.0 could run a company.

DATE: FRIDAY
JAN 07 2000 13:37:14

O'Shea 2.0 oversees a boxy, two-room office in the financial district with a staff of six people, a handful of contractors, and about $200,000 of seed money from private investors. But after three months, RedFilter.com still doesn't quite exist. They need to hire programmers to create the technology they're promising—assuming they can find programmers in this insanely tight market. They've got to convince other sites to drive their audiences to RedFilter.com. They've got to expand their database of sites so that whole "personalization" angle will really be personal when they launch in March—just about the time their first round of financing will run out.

As start-ups go, RedFilter isn't a surefire juggernaut. These aren't Stanford MBAs or Microsoft alums. But if you wanted a picture of the dotcom industry at the turn of 2000, RedFilter is a paradigmatic case. The first generation of start-ups, the Netscapes and Yahoo!s, were born from the intersection of engineers and capital. The second generation, like digital advertising companies, rose from the juncture of marketers, media people, and capital. The third generation, the ones that will be born this year and beyond, are the protozoa of a pre-cambrian explosion of capital. The barriers to entry online have gotten so low they're practically a ditch. The start-up mojo may have reached saturation point, but William O'Shea and his three RedFilter partners—all 25 and under and not an MBA among them—feel that the fever pitch has never been hotter. (New York City itself announced a venture capital fund of $25 million in September, earmarked predominantly for start-ups.)

The prestige venture capital firms—like the one Steve Case's brother Daniel Case runs, Hambrecht & Quist—fund only a few of every hundred business plans they see. These venture capitalists are the benchmarks of good companies. But only a fraction of those companies go public. That means that you will never hear of most of the Internet start-ups out there. The vast majority will linger on the fringes of a new media made mostly of fringes, living off wealthy, small investors, hoping to stay afloat until they can be acquired—the so-called "exit strategy." RedFilter's ambition is to eventually sell for $50 million.

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