RueLala reaches out to well-heeled web shoppers

With a business model that is about upscale, off-price and online, a Boston-based retailing company that started by selling off-price merchandise has expanded to high-end, invitation-only boutique sales, an approach to e-commerce that first caught on in Europe.
Retail Convergence Inc., backed with a $25 million funding round that closed in April, launched RueLaLa.com, a website that operates two- or three-day private sales for boutique stores. The high-end e-commerce business is the second website that Retail Convergence has launched as part of a plan that eventually calls for several such sites, CEO Ben Fischman said.
The RueLaLa business model is similar to one employed by France-based Vente-Privee.com, a 7-year-old company in which Boston-based Summit Partners has a 20 percent ownership stake. But it’s also a business model that is attracting many web-based imitators, mostly in Europe where off-brand stores such as Marshalls or Filene’s Basement are uncommon.

Worcester State outsources e-mail to Google

Inspired by the business world, Worcester State College is outsourcing its e-mail system to Google Inc. to cut costs and reduce a drain on support services.

The shift from having e-mail hosted on-site to having it managed by Google marks the first time a four-year college in New England has switched its e-mail system to Google’s Apps for Edu service.

The switch is the latest example of IT departments — which began in small and midsize businesses but have now moved to large enterprises and other traditional late-adopters, such as the college campus — becoming more comfortable with allowing third parties to manage systems formerly held strictly in-house.

Worcester State’s decision is expected to save the college up to $120,000, or 5 percent of its IT budget, the first year, and about $70,000 in subsequent years.

Replacing the college’s 6-year-old Microsoft Exchange system with Google has increased e-mail storage from 15MB to 6GB per user, and increased data storage from 250MB to 6GB, college CIO Donald Vescio said.

The switch was made last month, just after the spring semester ended.

New England’s IPO drought is longest in five years

New England venture-backed companies have yet to complete an initial public offering this year — the first time since 2003 that no such IPO has closed by midyear.

At least five VC-backed companies had registered to complete IPOs this year, but with 75 percent of the companies that went public last year seeing their shares trading below the issue price, companies in registration have been holding off.

Last year, nine local VC-backed companies had completed IPOs by midyear, and 20 went public in all of 2007. Nationally, the second quarter was the first three-month period in 30 years of tracking by the National Venture Capital Association that no VC-backed company went public.

Last year, 25 IPOs had been completed in the second quarter.

While the local gaming space rises, Cecropia falls

After spending more than five years of work, Lexington-based game creator Omar Khudari plans to officially shut down game software developer Cecropia Inc. in September.

Khudari said he is shuttering Cecropia, a self-funded company that launched an animated game called The Act in 2006. The company, which tested a coin-operated version of the game last year, planned to subsequently create a home version depending on negotiations with publishers.

But interest in the game, which was created with the help of 40 former animators from the Walt Disney Animation Studios in Orlando, Fla., didn’t materialize after Khudari pitched the game to at least 18 publishers. So nine months ago, he decided to begin shutting down operations.

The closing coincides with an unusually active period for the game industry — especially locally — which added to the heartache, said Khudari, a former co-founder of Papyrus Design Group Inc.

“It is extremely hard and very disappointing,” Khudari said. “I was encouraged by the industry getting broader and mainstream.”

Other New England game companies have been active over the past couple of years.

Companies pay millions, whether IPO deal closes or not

Yes, time is money. But waiting to complete initial public offerings is costing local tech companies plenty of both — time and money.

Portsmouth, N.H.-based NitroSecurity Inc. two weeks ago withdrew its application to raise $55 million in an IPO, and the CEO says 10 months in the IPO pipeline cost the security software and hardware company about $1.3 million.

NitroSecurity has had plenty of company. A search of securities filings revealed that local technology firms — both those that registered for an IPO that went unfulfilled and those that have gone public in the past 18 months — incurred costs that ran as high as $4.2 million. The bulk of those expenses represented legal and accounting fees.

For companies that don’t ultimately go public, it’s a hefty price to pay for little return — and that doesn’t include the drain on a management team’s time and resources, say observers.

Going solo: More VCs deciding to invest alone

Like most firms in the collegial venture capital industry, Kodiak Venture Partners regularly seeks out other VC firms to join an investment round. But in January, when it invested $7 million in an Atlanta startup, it chose to go solo.

And Commonwealth Capital Ventures was the only institutional investor when it backed Woburn-based ByAllAccounts in a $5 million February financing round.

Both VC firms are part of a national trend in which venture investors — faced with deploying capital from larger and larger funds — are forgoing syndicate deals and instead are investing alone. The go-it-alone approach is an attempt to boost portfolio returns, but it may come at a price of diminishing the collaborative VC culture that brings a mix of minds to solve business problems.

Last year, 34 percent of the national venture-backed deals were completed as solo investments compared with 22 percent in 2000, according to Dow Jones VentureSource.

Travel search takes off as airlines go into tailspin

As air traffic is dragged down by high fuel costs and airline executives reach for sickness bags, travel-search traffic is picking up online — and that has meant business taking off for New England companies whose Internet search technologies support travel-related websites.

With cash-strapped consumers busy looking for deals, the boost in online travel-search has meant stronger revenue and acquisition activity by local companies. For example, earlier this week, Boston-based Smarter Travel Media LLC, which operates Smartertravel.com and BookingBuddy.com, acquired for an undisclosed amount New York-based Airfarewatchdog.com LLC.

How high are the travel sites soaring? Online travel search engine Kayak Inc., with operations in Concord and Norwalk, Conn., expects to generate revenue of $140 million this year compared with $47 million in 2007, co-founder and CTO Paul English said.

In 2005, the year in which Kayak launched its meta search website that aggregates the results of other sites, the company posted $3 million in revenue, he said.

Web revenue: That was easy!

Among all of New England’s Internet expertise, a local retailer has quietly created a $5 billion web-based business selling decidedly nontechnology products: office supplies.

Staples Inc. in Framingham has built an e-commerce business second only to Amazon.com Inc. among U.S. retail websites — a business that now represents about one-third of Staples’ total revenue. And it has done so by focusing less on the latest web innovations and more on how to make buying online as simple as possible for busy office managers.

Its strategy is working. The company, scheduled to release its 2007 financial numbers next month, generated $5.2 billion in third-quarter revenue — $1.7 billion of which came from its web-based and catalog-based sales. Its website processes 40,000 orders a day, with a typical transaction price of just under $200.

‘Caregiver’ sites launch as boomers seek help with elders

Websites focused on caregivers — from nannies to those taking care of elderly parents — burst on the scene in the late 1990s, then fizzled out quickly among the many dot-coms with faulty business plans.

But in the past six months, three Boston-area companies have launched websites focused on that same online audience, and this time they’re faced with a new challenge: attracting users who don’t identify themselves as “caregivers.”

About 34 million adults in the U.S., or 16 percent of the population, provide care to people 50 or older. The average caregiver age is 47. And about 8.9 million caregivers look after someone at least 50 years old with dementia, according to the San Francisco-based Family Caregivers Alliance.

Two firms to sell rental tech to pay the bills

Local entrepreneurs are designing web-based tools aimed at making property leasing easier and safer than ever.

Cambridge-based FlipKey Inc., for instance, is set to launch in late January or February its online system that collects data about rental vacation properties and enables users to rate them. And Newton-based Investment Instruments Corp. is launching in January a new online tool for tenants to pay rents and report problems to landlords while the system tracks tenants’ records for future references.

The two local software companies are entering a crowded market, but the payoff for more efficient online leasing networks is a big one.