Global business: The IPO dash

The journey so far has not been without unwelcome surprises. For one thing, the rate of Internet adoption in the Latin American countries is still between only 3 percent and 5 percent of the population, depending on the country. Fear of online fraud has been a significant factor since consumers are not typically shielded from liability for fraud, unlike in the United States where most credit card users are liable for only up to $50 in fraudulent charges. It's not surprising, then, that Latin Americans are not big credit card users, although Galperin says this is slowly changing. Concerned by the slow acceptance of e-commerce in its target markets, MercadoLibre began a pilot study early last year, targeting the 30 million U.S.-based Hispanics. "The studies at the time were saying that there were 6 million to 9 million Hispanics online in this country," says Vidaguren. That makes for a very attractive segment -- a higher number of online consumers than all the Latin American countries combined. Surprisingly, the U.S. pilot did not reveal much interest by U.S. Hispanics. "Many were indifferent to whether the site was in English or Spanish. We found that the people who do prefer Spanish to English in the United States are generally not as comfortable yet doing transactions on the Web. So we'll have to wait a little bit for that group to blossom," says Vidaguren.

Despite this setback, Yankee Group's Smith thinks MercadoLibre has legitimate value for Latin American consumers. "MercadoLibre's model takes advantage of what the Internet does best. The fact that they aren't trying to sell bricks or pet food -- along with their relatively early, well-funded start -- means that they've got a chance," he says. However, he cautions that MercadoLibre will have to start showing some solid success (in terms of increasing revenues and eventual profitability) this year because a significant percentage of the highest income Latin American residents are already online, Smith says.

Bringing in the grownups

One of the luxuries of doing business as a B2B rather than a B2C Web startup -- whether in the United States or abroad -- is that your customers are likely to be much readier to accept your offering. For the founders of Stockholm-based Jobline International, there has been precious little in the way of waiting around. Jobline was founded in Stockholm, Sweden, Toon Bouten, chief executive officer, and Lars-Henrik Friis-Molin, founder, Jobline International, Stockholm, Sweden in 1997 by Lars-Henrik Friis-Molin. Friis-Molin had been conducting online research on university students' attitudes for another company, Universum, when he realized that the personal data the students had entered would make an excellent job-hunter database. So, with the students' permission, Friis-Molin created a database (now up to 644,000 CVs) for recruiters and job boards for students. Clients pay Jobline about 10 percent of a successfully placed candidate's salary -- a major savings over the traditional 25 percent employers pay offline headhunters.

In 1998, Friis-Molin forged a profitable partnership with Bonnier Group, the largest Scandinavian publisher, which positioned Jobline to expand from Sweden into Norway, Denmark and Finland. U.S. venture capital firms invested in the growing company in late 1998. At the time, European VC firms were just getting up and running, and it was easiest to start with U.S. investors.

By 1999, Friis-Molin's leadership had carried the company successfully through its first growth spurt. But he was smart enough to realize his venture -- like many others before it -- was in danger of imploding from too much growth too fast. So he called in a team of seasoned managers, including Toon Bouten as CEO and Tom Nyman as COO, to help take the company to the next level. Bouten, 42, spent six years as vice president of the European consumer division for Compaq; prior to that, he had been with Philips Electronics for 10 years. Bouten feels that the young entrepreneurs who start these ventures often don't know how to pace their company's growth, and they expand too fast. "At a certain point, things can go out of control," says Bouten, mindful of the highly publicized fate of his Swedish countrymen who founded the B2C fashion venture Boo.com.

During late 1999 and 2000, Jobline has added eight countries of operation (Austria, France, Germany, Italy, the Netherlands, Spain, Switzerland and the United Kingdom) to the original roster of four, for a total of 12. The trick to ramping up so quickly, says Bouten, was to find the right property at the right price and then follow detailed processes for increasing operations. Of course, it's not always possible to find good space at a decent price. Bouten had to settle for a tiny office on the outskirts of London; he calls rents there of $500 per square meter "outrageously expensive." The trade journal Realty Times puts London at the top of the global rent heap at $126.85 per square foot, with Tokyo a distant second at $95.63.

Jobline contends with the cultural challenges of operating in so many different countries by trying to instill a sense of corporate -- rather than country -- culture. For instance, the company has an international sales conference once a year, and managers in all countries "meet" in weekly phone conferences. Still, misunderstandings sometimes crop up. "Swedish people are more introverted," says Bouten. "In group discussions it can sometimes appear they are not interested in a subject. But that's not true. You have to approach them actively to get their opinion, whereas Italians, for example, are always answering."

Last September, Jobline went public, raising 83.3 million euros (roughly US$73.1 million) in its IPO on the OM Stockholm Exchange. Jobline has 477 employees and so far this year has hit revenues of 15.6 million euros (about US$13.3 million). But the company is not yet profitable, aalthough Bouten expects to achieve that crucial milestone in the near future.

For better or worse, Europe never experienced the all-out Internet craze that swept the United States. So while it was harder for European Web startups to obtain money in the beginning, fewer of them are now in the position of being overvalued, according to Therese Torris, Amsterdam-based research director of European Internet commerce for Forrester Research. "There were a handful of overfunded enterprises but very, very few -- unlike the United States," says Torris. True startups like Jobline also faced a tougher road because European venture capital firms tend to invest in Web spinoffs of brick-and-mortar companies as opposed to pure plays. Now that Jobline has successfully gone public, it will have only a short time -- eight to 12 months -- to prove itself by achieving profitability, Torris says.

A Remote Dream

Going public will likely remain a remote dream for Moliski and his colleagues at OptoMail. Japan's cultural differences and its more conservative business community may prove too difficult an obstacle to surmount for this particular startup. As Moliski has learned to his chagrin, even a little thing like a creased business card can damage business-customer relations. When he offhandedly handed a potential client the last business card in his wallet, the businessman chastised him severely for the card's rumpled condition. Moliski has since mastered the Japanese ritual of presenting business cards. (Executives proffer their cards with two hands and slight bow. Next, each makes a polite remark about the other's card. Only then can business begin.)

But it may be too late. Though OptoMail has a handful of clients, profitability is remote. The funding won't last forever, and prospects for another round are faint. "We'd always hoped to be profitable. It hasn't happened yet. Some type of exit event would be nice," says Moliski wistfully, no doubt thinking of the successful sale of his first venture. It would be nice to get his life back, though he admits he may still be infected by the startup bug.

"This job is so all-encompassing that I don't spend a lot of time thinking of what I'd like to do next,'' Moliski says. "I don't know if I'd have the energy to do another startup. But there are plenty of entrepreneurs who said the same thing who are now on their third and fourth companies." e

This story, "Global business: The IPO dash" was originally published by CIO.

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