The summer of 1995 was a “big bang” moment for the Internet. Amazon.com switched on its servers two decades ago this month, and the founders of AuctionWeb — later renamed eBay — were busily preparing to launch their site on Labor Day weekend. Browser-maker Netscape went public in August. And a company you likely haven’t heard of, Viaweb, was founded in a triple-decker in Cambridge.
Viaweb never became as well known as the others, but it played a pivotal role in the evolution of e-commerce, and the entrepreneurial ecosystem.
The founders were a trio of Harvard University computer science alumni and graduate students who saw that selling things on the Web was going to be huge, at a moment when most people were still apprehensive about typing a credit card number into a Web browser. They also realized that rather than businesses buying their own servers, connecting them to the Internet, and taking orders that way, “etailers” might want to pay someone else to operate their online catalogs, shopping carts, and cash registers.
In the company’s original business plan, cofounder Paul Graham wrote, “Our software will ‘run’ on everyone’s machine, updates will be free and instant, and the interface will be one the users already know (Netscape).” That made Viaweb among the very first “software as a service” companies, offering to provide a digital storefront that retailers could pay for by the month, just like an electric bill.
The company’s first $10,000 in funding came from Julian Weber, an attorney and the former president of the humor magazine National Lampoon. The culture was frugal and hard-working, recalls former business development executive David Parker.
“Who cared that we had to walk up three flights?” he says. “The rent was cheap, and that set the tone that we don’t really care about anything other than the business.”
Programmers stayed late, sometimes all night. Any feature a customer asked for would get done in two days, says Parker. There were no meetings.
The company spent much of its time trying to educate catalog retailers in the merits of offering their products for online purchase. “People were scared to change,” says Ann-Marie Bland, Viaweb’s former marketing director. Even the major credit-card companies took a while to get on board with what Viaweb was doing, she says.
Among Viaweb’s first customers was Quantum Books, a technical bookstore in Cambridge. Vermont Teddy Bear Co., food purveyor Dean & Deluca, and lingerie retailer Frederick’s of Hollywood followed.
Over its lifetime, Viaweb only raised about $2.5 million in funding, says Hutch Fishman, the company’s former chief financial officer. In 1998, Yahoo said it would acquire the company for $50 million in stock. Why did Graham feel it was time to sell? “Fifty million dollars seemed like a huge amount of money,” he writes via e-mail.
Today, Yahoo still offers Web-based software, called Yahoo Stores, for building an online shop. And Viaweb can be considered a progenitor of other local e-commerce companies, like Burlington-based Demandware, the publicly held company that powers the websites of Brooks Brothers and Converse.
But the Viaweb crew had an even bigger impact in the years after the sale. Graham introduced a Viaweb colleague, Langley Steinert, to Stephen Kaufer. Together, in February 2000, Steinert and Kaufer started a company called TripAdvisor. The Needham company now operates the Web’s most-visited collection of travel sites and employs more than 3,000 people. Steinert later left TripAdvisor and started the Cambridge firm CarGurus, a car-shopping site that will generate close to $150 million in revenue this year, he says.
Fishman serves as a part-time CFO for several local companies, including BiddingForGood, a Cambridge firm that helps nonprofits run online auctions. David Parker runs E for All, a nonprofit that provides mentorship and support to entrepreneurs in Lowell and New Bedford. Mark Nitzberg, an early Viaweb employee, developed software to enable visually impaired people to use smartphones and tablets to get text and signage read aloud to them.
In 2005, the Viaweb founders launched a summer entrepreneurship program in Cambridge, using many of the lessons from their Viaweb experience. Just as Julian Weber, Viaweb’s original investor, had given them $10,000 to get off the ground, they would offer a small amount of money to young entrepreneurs and try to impart some of the wisdom of experience, in return for a stake in the startups that participated.
Since then, their program, Y Combinator, has helped launch companies like Airbnb, the lodging marketplace, and Dropbox, which makes it easy to store and share files. Last year, Amazon paid almost $1 billion for Twitch, a service that allows video game players to broadcast their play to others, and whose founders had been through Y Combinator twice.
YC has essentially become the Harvard of entrepreneurship, the program that almost every young entrepreneur with an idea applies to. After several years of running the program in Cambridge during the summer and Silicon Valley in the winter, Graham decided to operate it in Silicon Valley year-round.
Why? “He was having trouble getting companies funded here,” says Fishman. “The West Coast was much more receptive to his type of companies.” Y Combinator has so far put money into 842 companies, and YC announced plans this month to increase the number of startups it funds.
“If you look at Y Combinator’s companies, so many are just ahead of their time,” says Parker, Viaweb’s business development executive, “The ideas seem crazy. But Paul gets those kind of ideas, and he encourages them.”
Twenty years ago, says Parker, Viaweb was one of them.
Scott Kirsner writes the Innovation Economy column every Sunday in the Boston Globe, in which he tracks entrepreneurship, investment, and big company activities around New England.
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