EDSR INFORMATION 07-10-2000 TECHNOLOGY
A marriage made -411.1t,
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in cyberspace
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How three guys from Duluth met a Brit businessman,
and a company was born
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,_ ������� ;tiµ s.• - -- — BY FRANK JOSSI Vertical Publishing Inc.and moved the
_ operation to Elk River as a tenant in a
• ' #" business incubator operated by Harlan
• *. About a year ago,three colleagues at a Jacobs,president of Columbia Heights-
,
,., Publishin company in Duluth came up based Genesis Business Centers Ltd.
with an idea for software that would put Newman signed on as a consultant and
print publications on the Web.They saw a has traveled to Minnesota to meet the
huge market,but they had a couple of founders,ink deals and get to know every-
4441, pressing problems:They didn't know any- one.The founders have now quit their old
rr• ° , one who could write the code,and they jobs at the Duluth offices of Advanstar
didn't have the money to pay a software Communications Inc.,a Cleveland trade
firm to do it for them. magazine publisher with 103 titles and
Most entrepreneurs like to think that branches around the country.
their ideas are unique,but this trio figured It's not the first time that Newman has
-., that great minds must think alike.Some met potential business partners over the
inventor somewhere must have come up Internet,but his other two experiences
MKAO with a product like the one they imagined turned out to be disasters.A San Diego
—but who,and where? company contacted him about a joint rela-
*N While David Held,one of the partners, tionship,but when Newman showed up in
4 INwas searching the Internet for clues,he California,he found the business`in seri-
` " "'�� found Online Publishing News,a Web site ous-to-terminal condition."A software
COMPDOCTOR
sponsored by the British firm MMP,which development company in India sent a rep-
has a product called Littoralis For resentative all the way to England to dis-
11-! ! 7iPublishers that does precisely what Held cuss a business aimed at a market both
LJ � g " . : and his partners wanted.Held traded e- parties ended up agreeing was"fairly well-
' ' mails with managing partner Charles developed"with"little commercial oppor
5zt Newman and began forming a business tunity left."
LAINrelationship. Newman,a former technology and
4 ; "We saw a need in the market and once business journalist,says those experiences
is .,r' we saw the software the`need'quickly taught him two lessons:"One is the old(by
• 4,3•141.;i1 became a business idea we could all work Internet standards)saying that'On the
together to bring off,"Held says."We didn't Internet,no one knows you're a dog.The
A R K ET N G 56 start out thinking we were going to look other is to look for commitment,specifi-
for software and that it was out there but cally financial,before taking anyone seri-
once we found it we knew Charles would ously."
E e w ," ' , save us a great deal of time." He was burned twice—so what appealed
The trio—Darryl Arquitte,Frank W. to Newman about Vertical's pitch?
Christopherson III and Held—formed First,Vertical Publishing's management
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Ventures July 2000
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. ` team had lengthy experience with write,"Three out of four publishers with
Advanstar,a company known in the Web sites are currently losing money in
United Kingdom.Second,Newman liked their interactive ventures;yet most plan a
the credentials of their financial backers, significant increase in their online invest-
among them Jacobs and Wendell King,co- ment over the next year.Slowly but surely,
founder of Angeion Corp.and Gateway print publishers are coming to realize that
Alliance I,LLC,an early-stage incubator. the Internet is the perfect complement to
Newman saw in the bios of the founders use Vertical Publishing's system,which will print,and,ultimately,the gateway to rev-
and investors a combination of business target small to mid-sized publishers who enues never before attainable."
acumen and management experience vital don't have the resources to employ some- The size of the market,Vertical's manage-
to bringing Littoralis to market in the one to build and maintain a Web site.The ment team and the software attracted the
United States. total U.S.market for the product could be interest of Jacobs,who seems to be on the
$1.2 billion—a figure Arquitte gets by boards of more small companies than anyone
The software taking the annual cost of leasing the pro- else in the Twin Cities.He sees the success of
Littoralis For Publishers allows content gram($42,000)and multiplying it by the Littoralis in Europe as a strong advantage in
to be updated and managed in a"user-
friendly manner;unlike database-driven
systems, tes are
developed that canan be easily rays. efreshed i i These guys were diligent and resourceful
with new content on a regular basis.The enough to find the [one] person in the whole
archive system provides a search tool,
unlike many magazine sites,which orga- wide world who had what they needed.7
nize past issues simply by date.Clients
don't need to change their interfaces for —Harlan Jacobs, Genesis Business Centers
Littoralis to work,and it doesn't matter
what kind of design software was used to
produce the site. number of magazines in the market.Even pitching Vertical Publishing to investors."It's
Around a dozen publishers in the United 5 percent or 10 percent of the market not an average startup because it's been
Kingdom and Europe are using the system. could make Vertical's founders(and proven in the marketplace;'he says.
Arquitte,Vertical's CEO,says the ones he's Newman)rich.But Arquitte concedes that Like Newman,he thinks the experience
spoken to say the software has paid for itself they don't own the market.E-Publish,a that the founders bring to Vertical will sell
by generating new revenue. venture of the huge Chicago-based print- more than a few investors who still like
The publications using Littoralis include ing conglomerate R.R.Donnelley&Sons B2B ideas despite the recent stock market
China Economic Review,World Cargo Co.,offers a similar service,but their focus backlash.Also,the fact that the trio found
News and Soccer Analyst,a British is more on consumer publications. , Newman and convinced him to sign on
newsletter for brokers and analysts follow- "They have a large base of print cus- made a favorable impression on Jacobs.
ing the market in publicly traded soccer tomers and they're a threat;Arquitte says. "These guys were diligent and resourceful
clubs—a growing trend in the United "But they're just getting into it,like us,and enough to find the[one]person in the
Kingdom and Europe.Six back issues of their market is more consumer-oriented whole wide world who had what they
Soccer Analyst took less than a week to than B2B.They're going after consumer needed,he says."It was a match made in
assemble and index on the Web site using magazines while we're going after trade heaven:'
Littoralis,and the buzz about the maga- magazines,so we see ourselves in a differ-
zine's online presence led to a leap in sub- ent niche."
scriptions. Part of their pitch is that sites could pay Darryl Arquitte and David Held, Vertical
"MMP's solutions came well within our for themselves by selling advertising and Publishing: 651-225-4262;
budget—which was a fraction of what subscriptions with subscriber-only con- darquitte@verticalpublishing.com;
some publishers seem willing to spend on tent,says Arquitte."There's many ways to d h eld@vertica I pu bl ish ing.com;www.ver-
less effective Web project,says Jeremy make it a storefront"he says."You can ticalpublishing.com
Cowan,managing director for Prestige , have product listings,job listings,classi- Harlan Jacobs, Genesis Business
, Media,another MMP client. fieds and Internet advertising on the Web Centers: 612-782-8576;
site.You can have e-mail newsletters, tedgenesis@aol.com
0 , U.S. market alerts,sponsors for[parts of]the site and Charles Newman, MMP:
Arquitte says at least 35,000 business subscriptions:' 44-273-380040; info@mmp.co.uk;
print magazines in North America could In their business plan,the cofounders www.mmp.co.uk
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Ventures July 2000