Raging Bull Web Site GetsVenture Capital From CMG
By JASON ANDERS
THE WALL STREET JOURNAL INTERACTIVE EDITION
The three college students who run the Raging Bull online message forum have indefinitely postponed their return to school.
CMG Information Services Inc. has taken a 40% stake in the fledgling stock-discussion Web site the three run, adding it to the stable of Internet firms it holds an interest in, including GeoCities and Lycos. CMG owns part or all of more than 25 companies, and has made millions of dollars by selling companies or taking them public.
Raging Bull is a relative newcomer to the world of financial message boards, and is still well behind market leaders Yahoo! Finance, Silicon Investor and Motley Fool. The service went online in September 1997, run out of a basement in Freehold, N.J., by three students: co-founders William Martin, 20 years old, and Greg Wright, 21; and Rusty Szurek, 20, who came on board in February.
The Sites
Raging Bull
Yahoo! Finance
Silicon Investor
Motley Fool
Mr. Martin says Raging Bull received inquiries over the summer from several companies, including Infoseek, that were interested in buying the service outright. None would have let the three retain control of the business. A spokeswoman for Sunnyvale, Calif., Infoseek declined to comment.
The call from CMG came in late August, just a week and a half before the three were to return to college -- Messrs. Martin and Szurek to University of Virginia, and Mr. Wright to Rutgers University.
"They wanted a business plan. So we pulled an all nighter and wrote one. We worked about 30 hours straight," says Mr. Martin.
A day after delivering the business plan, he was invited to fly to CMG headquarters in Andover, Mass., to meet with Chief Executive David S. Wetherell.
"The meeting was incredible. He told me what CMG was about, and I told him what our view of the future was. I told him we were at a point where we didn't want to sell out. It was just too early for anything like that," he says.
"We really hit it off," says Mr. Wetherell. "We talked about what we have done to build companies into Web powerhouses, and I asked if Raging Bull was interested in that."
Upstart Web Site Wants a Piece of Net Message-Board Business (July 1)
Later that night, over beer and pizza at Mr. Wetherell's Andover home, the deal was done: The three would retain majority control of Raging Bull, and CMG would bring in a new chief executive officer to run the company. Raging Bull would also move into CMG's headquarters in Andover.
CMG declines to say exactly how much money it invested in Raging Bull. Mr. Martin puts the number between $1 million and $3 million, but declines to be more specific.
For CMG, the investment is part of a larger plan to develop community sites on the Web. Mr. Wetherell says he became interested in message boards in August while on vacation on Martha's Vineyard. He spent a lot of time exploring online message boards ("My wife is still complaining about it," he says) and writing to message-board participants. He admits he knew little about what was available, and hadn't heard of Raging Bull until he read about it, ironically, on a Yahoo message board.
Mr. Wetherell says he has "dramatic" plans to incorporate technology from other CMG interests into Raging Bull, and says the site will be able to profit in ways that its competition cannot. He declines to elaborate.
Mr. Martin says he isn't wasting any time in spending the money. Raging Bull has made a "substantial" investment in new servers -- Mr. Martin acknowledges the existing servers had been choked by the influx of new users. A redesign of the site will be launched soon, along with a flurry of new features aimed at challenging the competition, including free electronic mail accounts, real-time stock quotes and original content updated daily.
Raging Bull wrote the software that powers its message boards. Its unique "ignore" feature, which allows users to filter out posts from other users that they find irrelevant or annoying, has been a popular selling point.
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Still, Raging Bull has a long way to go. It has been quietly siphoning users from other online forums, growing to 15,000 users from 5,000 users in the past three months. But it is still dwarfed by much larger, more established competitors. The subscription-based Silicon Investor boasts more than 80,000 registered users, and says it gets about 1.75 million unique visitors each month (users can read messages without registering). Motley Fool has more than 200,000 registered users.
"There is no doubt in my mind that we can topple the competition," says Mr. Wetherell. "We will have revenue opportunities that other sites don't. We can generate traffic to Raging Bull from our other sites. We're developing things using our proprietary technology to use with Raging Bull." He declined to elaborate.
CMG has drawn praise from analysts for its string of successful investments. It bought 80% of Lycos for $2 million in 1995. A year later, Lycos went public in an initial offering, and today the company has a total stock-market value of $1.3 billion. CMG has sold much of its stake of Lycos, but still owns 23%.
CMG recently reported earnings for its fourth quarter ended July 31 of $31.4 million, or $1.27 a diluted share, compared with a loss of $5 million, or 26 cents a share, a year ago. The earnings included a $54 million pretax gain from the sale of some of its Lycos stock, and a $24.3 million pretax gain on issuance of stock by Lycos.
Mr. Wetherell says he "absolutely" plans to take Raging Bull public in a few years. Still, he is cautious about drawing any similarities between Raging Bull and its latest IPO, GeoCities, which raised $81.6 million in its initial public offering in August. CMG owns 29% of GeoCities. Meanwhile, as the recent drought in the IPO market shows, rough market conditions can make it tough to predict when an IPO will come off.
As for the ages of Raging Bull's staff, Mr. Wetherell says he didn't give it a second thought. "Of all of our investments, this is the single most enthusiastic group I've run across. I think one of the reasons they went with us is that we didn't treat them like kids," he says. "I'm not sure age is so relevant in this market. To some extent, it might be a liability."
Mr. Martin says the deal is still sinking in. "Just a month ago we were working out of my dad's basement and getting ready to go back to school. Now we're in the headquarters of a major Internet firm," he says. "It's pretty unbelievable."
reprinted from the Wall Street Journal Interactive Edition |
