From the 8/5/99 WSJ:
SciQuest Hopes Test Tubes Can Become an Online Hit
By CHRIS MARK
Staff Reporter of THE WALL STREET JOURNAL
While serving as an Army helicopter pilot in Desert Storm, Scott Andrews decided there were better ways to make a living.
These days, the West Point graduate is the chief executive officer of SciQuest.com Inc. (www.sciquest.com1), a Research Triangle, N.C., company he co-founded whose best-selling product is a petrie dish.
Believe it or not, it is a hot market. The scientific-products industry, which covers everything from microscopes and beakers to antibodies and solvents, has grown to $9.4 billion a year. Chemdex Corp., SciQuest's primary competitor, went public last week and ended its first day of trading valued at $810 million.
Both SciQuest and Chemdex aim to solve the problem of scientists and lab technicians wasting precious time poring over phone-book-like catalogs from hundreds of suppliers. Chemdex, based in Palo Alto, Calif., and backed by Warburg Pincus Ventures LP and Kleiner Perkins Caufield & Byers, was founded in 1997 and has had a quick launch. For SciQuest, founded in 1995, it has been a longer road, but it is seeing success as well.
Mr. Andrews, 33 years old, left the Army soon after the Gulf War and began working as a sales representative for Baxter International Inc.'s Baxter Healthcare in North Carolina. There, he quickly sensed the opportunities, and the perils, in the market. One customer didn't receive a key piece of equipment on time and lost three months of research; he never bought from Baxter again, Mr. Andrews says.
"The target market here is a little more critical than, say, the office-supplies market," says Tim Minahan, senior analyst in the e-commerce practice at the Aberdeen Group, a Boston consulting firm. "And institutions are wasting a lot of money by having highly paid researchers go to walls of catalogs to search for equipment."
After earning a graduate business degree from the University of North Carolina, Mr. Andrews launched SciQuest with three childhood friends. "We all knew it was a blockbuster concept," he says. The average order totals about $500.
Still, the new company quickly ran short of cash. The founders had raised $500,000 from local "angel" investors, but they were $200,000 under their budget. One Friday afternoon, the founders decided it was time to head back to their hometown, Farmville, Va., to seek help.
Nancy Anderson, the mother of co-founder Peyton Anderson, and now the company's vice president of business development, called the local paper and radio station with a brief announcement: Some Farmville boys were trying to launch a business and would tell their story at a luncheon at the Cedarbrook Restaurant.
"Thirty-five people showed up," Mr. Andrews says, "we closed down half the restaurant, and we walked out with secured commitments for $125,000." One person wrote a $25,000 check. "These were coaches, doctors, bankers -- the people we grew up with," Mr. Andrews adds. "What they really did was believe in the local boys." Today, the value of those investments has risen tenfold, Mr. Andrews estimates, and if the company someday goes public they could be worth much more.
This year, a funding round led by ABS Capital Partners, GE Capital and a unit of investment bank Hambrecht & Quist Group, among others, injected $37.5 million, in what became the largest venture-capital investment ever in the Research Triangle area. Meanwhile, senior executives from retailer Wal-Mart Stores Inc. and FDX Corp., owner of Federal Express, have come on board, and the company has made acquisitions and launched an auction service to bolster its lineup.
"My problem was, how do I fully communicate both the breadth of products and the pricing?" says Barbara A. Daily, the business director of John Hopkins University's Core store, which supplies material for more than 600 biomedical researchers and has annual sales of about $6.8 million.
SciQuest and International Business Machines Corp. worked with Ms. Daily to set up a dedicated Web site for her researchers, allowing them to comb through more than 100,000 products from 25 suppliers, compare specifications and make purchases at prenegotiated prices. "It's doing really well," Ms. Daily says of the site, which was launched in June after almost a year of development and now is seeing about 20 to 40 orders a day.
SciQuest isn't yet profitable, but the company says it is in talks to set up custom sites at other institutions, such as drug companies and other big researchers. And this week, it is announcing alliances with BioMedNet Inc. and ChemWeb Inc., online communities for biomedical and chemical researchers with about 400,000 and 100,000 members, respectively.
"I really believe in this," Ms. Daily says. "But the bottom line is that it pleases the customer, and they can spend more time researching." |
