Trio of St. Louis survivors drives past the tech wreck

Kevin Nelson, a technical staffer at Cybercon.com, troubleshoots a balky server in the server room. (Kevin Manning/P-D)

GlobalStreams Inc. is a survivor. So are Asynchrony Solutions Inc. and Cybercon.com Inc.

They are among the technology startups in the St. Louis area that took off during the Internet boom and so far have withstood the sharp downturn in the tech sector.

Two years ago in March, the Nasdaq Stock Market plunged as investors, fed up with Internet hype and perpetual net losses, bailed out of tech stocks. The abrupt withdrawal of capital caused a chain reaction. Companies depending on investments for survival withered. Others postponed or canceled technology projects. Demand for tech products and services plummeted.

Since the tumult first hit, a dozen high-profile startups in the St. Louis area have cratered. Broadband Investment Group Corp., which called itself BIG and dreamed of building a massive Internet consortium with multiple products, collected an estimated $18 million from investors before going belly up in November 2000. StreamSearch.com, a search engine for streaming media on the Web, pulled in more than $30 million from investors before its abrupt death early last year.

CoreExpress Inc., which wanted to build a high-performance Internet network around the nation, attracted $573 million in investments in 2000, only to shut its doors a year later.

Savvis Communications Corp. - whose alumni had gone on to found BIG, StreamSearch and CoreExpress - is struggling to turn a profit selling its Internet and data network services. After going public in February 2000 at $24 a share, its stock has fallen below $1.

To escape such a fate, the survivors have deployed a host of tactics, from skimping and saving to layoffs, mergers, name changes, relocations, product changes and debt restructuring. The struggle for survival puts a premium on creativity and flexibility.



Tough decisions



GlobalStreams shows how tech companies can reinvent themselves. The Clayton-based company now has nearly 100 employees and recently unveiled its latest system for broadcasting over the Internet. It already has sold the system to Hewlett-Packard Co.

Those successes have a long history behind them. The original company, GlobalStreams.com Inc., came into being in 1999, when Mike Rechan launched a company aimed at publishing a guide to streaming media.

Broadband Investment Group, or BIG, invested in GlobalStreams, and GlobalStreams moved with BIG into the former WorldCom building off Highway 40/Interstate 64 in Town and Country. When BIG was liquidated, another technology startup, Play Streaming Media Group Inc., acquired GlobalStreams' assets early last year.

Rechan and a handful of other original employees moved over to Play Streaming Media, and that company soon renamed itself GlobalStreams Inc.

But Play Streaming Media's technology became GlobalStreams' chief product. That software and hardware helps companies broadcast video over the Internet. Play Inc. of Sacramento, Calif., had developed the technology and spun off Play Streaming Media to sell it.



"We quickly controlled our own destiny," said David Hellier, executive vice president of GlobalStreams. "We have not been afraid of making tough decisions."

Now, the company has about 45 employees in marketing, sales and technical support in Clayton, and about 45 employees in development and manufacturing in Sacramento.

It also dropped ".com" from the name, partly because its products can be used to prepare digital broadcasts that go over satellite systems or even on video cassettes, not just the Internet. The name change had a "secondary" advantage of removing the dot-com stigma, Hellier said.

The company also has attracted financing - even in the wake of the March 2000 meltdown. In March last year, it announced that it had received $22 million in venture capital funding. Hellier said he could not comment on the company's finances.

The latest product, OnQ, enables businesses to use a desktop computer to broadcast live video to employees or customers over the Internet. A basic, $5,000 package equips 10 desktop computers with the software needed to broadcast, Hellier said. The product is easy to use so that "the business masses" can broadcast easily and without extensive training, he said. "We think it's a tremendous way to save time and money and have effective communications."

Still, streaming faces issues such as slow network connections and incompatible technologies. For instance, a person can receive an online OnQ broadcast using Microsoft Corp.'s Internet Explorer browser software but not with Netscape browser software. Hellier said that's not a problem, because most large businesses use Internet Explorer.

Such concerns haven't stopped the company from moving ahead with OnQ, which was unveiled March 7. It recently sold a $20,000 package - including software, hosting and network services - to HP, Hellier said.



A steady path to profit



Asynchrony Solutions Inc. has taken more spartan path to survival - sort of a church mouse in contrast with GlobalStreams' city mouse.

Asynchrony, which develops custom software for companies, first occupied offices in Earth City that it leased from an investor. Last year it moved into offices in downtown St. Louis's Washington Avenue loft district to find lower rent and take advantage of tax breaks.

Its subsidiary, Asynchrony Software Inc., is operated by a few employees, even though it brings software developers from around the world together on collaborative projects.

Small is beautiful might even be the mantra for Asynchrony, which has 25 employees. David Elfanbaum, one of the company's founders and its vice president of marketing and business development, said that in retrospect, it may be best that Asynchrony has raised just $5 million in venture capital funding since it was launched in 1999.

Other technology companies got multi-million-dollar venture capital infusions from investors who then expected the companies to grow rapidly and survive by obtaining further investments, he said. "They built up overhead to the point where they couldn't sustain themselves."

Elfanbaum says venture capitalists often encouraged a company to grow fast beyond its means, in hopes that they could later draw in more investors or sell their stakes. "Nobody was looking for profitability in your business plan. They were looking for growth," he said. "Our intention from the beginning was to have an ongoing profitable business."

Of course, growing big can be a good thing, too. This year, the company expects its total revenue to quadruple to $4 million. It also expects its employee roster to expand to 40, he said.

Clients include Boeing Co., Magellan Behavioral Health and McKesson Information Solutions.

The company also has continued to build on its collaborative software development site, Asynchrony.com, now Asynchrony Software Inc. Developers from around the world can sign up to develop projects that are proposed on the site, receiving shares in return for their work. If the project is completed and sold, the developers are compensated according to the number of shares they have.

The first major product to come from the collaborative site was PDA Bomb, which blocks intruders from gaining information from a personal digital assistant, such as a Palm Pilot, without a password. The company recently renamed the software PDA Defense out of concern that the original name could raise concerns.

Since launching the product last year, Asynchrony has sold it to customers that include the Department of Defense, FBI, White House and NATO, Elfanbaum said.

Recently, the company received a $1 million investment, which will be used to hire new employees and develop its products, Elfanbaum said.



Benefits from downturn



Cybercon.com Inc., which acts as host for Internet computer equipment for clients, is surviving quite nicely.

Last year, it had revenue of $4.7 million, almost twice the $2.8 million from 2000, said Joshua Chen, president and chief technical officer. Now, the company is aiming to double its revenue again this year, he said.

He said the company, which has 16 employees, has earned a profit every year since 1997, though he declined to say how big that profit was.

The tech downturn actually had a beneficial effect for Cybercon, Chen said. Before March 2000, many companies tried to jump into Web hosting, but since then many found they could not make money, forcing them to drop out of the business. That meant more customers for Cybercon, he said.

Since Cybercon moved to 210 North Tucker Boulevard downtown, the total number of servers housed in its offices has risen to 1,100 from about 500, he said.

Cybercon recently leased space in a Web hosting facility in Newark, N.J., so it can be a host to computers for customers on the East Coast as well as in St. Louis. It also plans to lease space on the West Coast by the end of this year, he said.

The downturn also has helped, because many companies have turned to Cybercon for help in managing their information technology. "We see more and more people trying to save money by outsourcing their IT or e-business operations," he said.

Meanwhile, Cybercon has moved to offer its customers more services, including consulting on network and software security, and on how to balance Web site traffic to maximize performance of Web technology, Chen said.

The key to surviving in the downturn, he said, is a familiar refrain in the business world. "Provide superb customer service."

More survivors

In addition to GlobalStreams Inc., Asynchrony Solutions Inc. and Cybercon.com, other local startups still are operating despite the downturn in the technology sector:

• Access US, an Internet service provider, 1995.
• Brick Network, an Internet service provider, 1997.
• Celox Networks Inc., a maker of high-speed data switches, 1999.
• Erlang Technology Inc., a computer chip design company, 1999.
• Nuvox Communications Inc., a telecommunications company, 1998.
• Primary Network Inc., an Internet service provider, 1995.
• Savvis Communications Corp., a data network service provider, 1995.
• TradeHarbor Inc., a voice identification company for e-business, 1999.

Downturn's toll

These companies are among the more high-profile tech startups in the St. Louis area that have failed since the downturn hit in March 2000.

• Broadband Investment Group Corp.: BIG, which widely touted its plan to offer a vast array of Internet-related technologies and products, opened its doors in February 2000 and shut them nine months later.
• CoreExpress Inc.: Operator of a high-performance nationwide data network, it opened for business in 2001 and went out of business when it sold its assets later that year.
• Haystack Toys Inc.: The company, which ran a Web site to sell toys it produced, was launched in 1999 and shut down earlier this year.
• Influence LLC: An Internet consulting firm that designed the yourpharmacy.com Web site for Express Scripts Inc., Influence was founded in 1998. It sold its assets in 2001, with proceeds going to pay off creditors.
• Linuxgruven.com Inc.: A firm that trained students to use the Linux operating systems, Linuxgruven was launched in 2000, grew fast, then shut down in 2001.
• Max Broadcasting Network Inc.: A distributor of professional sports news over the Internet, the company was launched in 1999 and filed for bankruptcy in January 2001.
• Sportshuddle.com Inc.: A distributor of high school sports news over the Internet, Sportshuddle.com started operations in 1999 and was liquidated to pay creditors in early 2001.
• StreamSearch.com Inc.: Launched in 1999, StreamSearch.com built a search engine for music and video streamed over the Internet. It laid off most of its employees in late 2000 and later filed for bankruptcy.
• Worknet Communications Inc.: A provider of wireless Internet service, Worknet was offering its service as early as 1998. It laid off employees and transferred its customers to another company in 2001.