Another firm fell prey to the venture capital drought this week as virtual
office provider HotOffice Technologies said it would close its doors soon.
But rather than hang their heads and slink away without a whimper, the firm
has taken steps to make sure its customers are not left in the lurch. Though
HotOffice will close its doors indefinitely on Dec. 19, it has referred
its intranet licensees to chief rival Intranets.com, an idealab! offspring.
The transition process is being carried out on a page on Intranets.com’s
site here.
Beginning Thursday, Intranets.com said about 750 HotOffice clients had begun
the transition over to the host company, with thousands more expected to
sign on before HotOffice closes shop.
Raising the white flag of surrender, the firm posted this notice on its corporate Web site:
“To HotOffice.com Customers and Visitors: HotOffice.com will cease operations on December 19th. Like many
Internet companies, despite intensive efforts, our inability to raise capital in the current market conditions left us without options. We have enjoyed serving our customers and are doing everything we can to ensure a smooth transition.”
Benificiaries of a Dying Dot-com
Rick Faulk, vice president of marketing for Intranets.com, said he knew a
month ago that his firm’s rival was having problems when it laid off about
50 employees. Faulk, of course, praised HotOffice highly Friday.
“It’s unfortunate — it’s a great company with a great product that just ran
out of money,” Faulk told InternetNews.com. “Fortunately, they were in a
position where they were able to make a lot of referrals. And it’s unusual.
This is a great example of how two competitors are working together for the
best interests of their customers. It looks good for them because they are
helping their core clients transition and of course it’s good for us because we are
fortunate enougth to have all of their referrals.”
While HotOffice will save clients in the hard times, the same cannot be said
for its employees, with nearly another 40 percent or so of its staff trimmed
down to a skeleton crew of less than 10 until the Dec 19 judgment day. Will
Intranets.com consider hiring some of these workers before the holiday rush?
Not yet.
“We have no plans yet to hire HotOffice employees,” Faulk admitted. But he
was quick to add that Intranets.com was looking to fill some business
development positions, possibly to help with the added clientele. However,
Faulk noted that Intranets.com looks to fill bytes — not bodies — first.
How Time Expired for an Industry Leader
So, what led to the demise of HotOffice? Was it the business model of free
intranets that did the firm in, as rival Planet Intra’s Product Manager Tim
Dorey suggested to InternetNews.com Friday. Dorey, too, acknowledged the
clamp on cash.
“We knew somewhat that they had problems,” Dorey said. “We wanted to create
a business that was not just a free service and not rely on banner ads. We
figure any company going that way would have a tough time. The money is
harder to come by now. A year ago you could get funding for just a good
idea. Hopefully the new year will be better for everyone.”
HotOffice Senior Vice President of Marketing Mickey Freeman disagreed with
Dorey’s statement.
“Truthfully, most of our revenues were derived from subscriptions,” Freeman
said. “I agree that relying solely on banner ads is not a viable business
solution.”
Freeman said HotOffice knew it was in trouble in June, a year after its last
round of funding. It eked out its existence “in tactical retreat mode,” as Freeman described it, since then until it couldn’t hold on any longer. The firm slashed about 50 jobs in November before
quietly making its doomsday announcement this week.
Freeman was crestfallen when reached at his office
at HotOffice in Boca
Raton, Fla., but he said there was nothing HotOffice could have done about
it. He made it clear that it wasn’t a situation where a company has trouble
and issues a press release talking about how it went wrong. And Intranets.com’s Faulk backed
that up with praise for the firm.
No, Freeman said management was strong, but nothing could have saved them. Freeman said they were left stranded at the altar twice
in the past month on bids to be rescued through acquisition.
One of the firm’s that left them hanging had
actually funded them 100 percent before. Freeman declined to name names and noted that timing was the toughest part. HotOffice was funded by Intel Corp., Staples Inc. and TBG Information Investors, a
partnership of Blumenstein/Thorne Information Partners and GS Capital Partners II, an affiliate of Goldman Sachs Group.
“It just seems that those who make the cutoff point are safe,” Freeman said.
“One thing I do agree on is that we could have been better served as part of
a larger bundle of content, commerce and access all in one place.
But, Freeman said, HotOffice will never know.
“Dot-com green is dead,” Freeman said. “We’re proud, we went down fighting. We turned to our bank resources, our board resources, our personal networks. But it would take a white knight scenario to save us.”
“And I am not exaggerating when I say that our toughest competitors actually conceded that we had a better product. They were scared. They couldn’t understand how it happened to us with our brand being what it was.”
Ditto for Freeman.
