Startups Get On The List – Red Herring Article

By Owen Thomas
Red Herring
February 26, 1999

Sometimes it seems like all of Silicon Valley is on the same mailing list.

In the past six months, a bevy of startups have gotten funding for the same goal: building a critical mass of subscribers to email lists, and building direct marketing engines targeting those subscribers.

Startup veterans formed Topica, Onelist, and eGroups in 1998. Onelist launched early last year; eGroups followed in January 1999; and Topica launched its service this week.

Topica was the first to go out for a large venture round; August Capital and Highland Capital Partners invested $4 million in August 1998, and Onelist raised the same amount from CMGI’s @Ventures arm and Bertelsmann Ventures in December. After raising a $1 million seed round in June 1998, eGroups scored another $5.1 million from Atlas Venture and Sequoia Capital in January.

A TANGLED WEB

The tight-knit venture community has taken a keen — and competitive — interest in these companies.

“Onelist got funded from CMG and Bertelsmann, and it was basically me who connected CMG and Bertelsmann together,” says eGroups CEO Martin Röscheisen. “They really wanted to invest in us, but [Sequoia partner] Mike Moritz is of such caliber that we rejected [CMG and Bertelsmann]. They turned around and put the money in Onelist.”

Bertelsmann Ventures partner Jan Buettner wouldn’t comment specifically on whether his fund approached eGroups, but says he did due diligence on several companies in the space.

“We thought that Onelist had the better management team and growth rate,” says Mr. Buettner. “I negotiate with two or three companies at one time. If you have a problem with one company, you want to have another one in place.”

And Topica and eGroups share the same law firm and strategic consultancy, the recently formed BZ Partners. Jim Brock — the legal eagle behind Yahoo (YHOO) for many years at Venture Law Group — is advising Topica, while his partner Bob Zipp is advising eGroups.

“Bob and Jim seem to be managing a Chinese wall about those topics,” says Mr. Röscheisen. (To complicate matters, Mr. Brock serves on the board of FindLaw, Mr. Röscheisen’s previous startup.)

SIBLING RIVALRY

Despite these industry connections, all three companies seem to be launching a fierce war of words.

EGroups and Onelist eagerly point to their lead on Topica in numbers. For its part, eGroups counted 3 million users and 5 million emails distributed in a day. Onelist has slightly more than 2 million users, but they’re considerably more active, at 10 million emails a day.

Topica is taking a different approach, however. The company has built a directory of lists, partly by licensing collections of mailing lists created by long-established Net volunteer groups, and partly through the acquisition of the List Exchange, a site Topica bought from Webbers Communications last summer.

“We don’t care if the list that you’re on is on Topica when we manage it,” says board member Andrew Anker, a partner at August Capital. “The other guys are building a closed system. List owners don’t care whether their subscribers are on Topica or not; subscribers don’t care whether the list is on Topica or not. … You can manage Onelist on us; you can manage eGroups on us.”

In fact, eGroups also allows subscribers to manage subscriptions to lists hosted outside. But Topica CEO Ariel Poler says that his product is designed specifically to target list owners.

“The more owners we have on our side, listed on our directory and archiving with us, the more value we can offer to consumers,” says Mr. Poler. “One thing [eGroups and Onelist] have been doing is archiving lists without permission and getting in a lot of trouble with owners.”

For eGroups’ part, it sees potential on the corporate side as well as in consumers. “We expect the OEM part to possibly be even bigger down the road,” says Mr. Röscheisen, comparing his company to Critical Path — another company that has staked its IPO hopes on outsourcing email.

Onelist, meanwhile, is focusing on the growth of its numbers.

“We expect 20 million users by the end of the year,” says Onelist CEO Mark Fletcher. “And we’ll be sending out 3 billion email messages a month.”

Those are big numbers — and they might attract big players.

“All the major portals have been very interested in getting to know us,” says Joe Gillach, Onelist’s acting vice president of marketing.

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