Onvia: Good People, Fuzzy Focus Aim at Small Business B2B

If Seattle-area small-business portal Onvia really does have a better idea for entrepreneurs, they’re keeping it a well-hidden secret, at least for now.

Onvia describes itself as “a business-to-business online operations center devoted to meeting the needs of entrepreneurs through targeted business products, services, tools and expert advice from a single point of purchase.”

In reality, the Onvia site presents its visitors with an unfocused Web page that looks like spam-come-to-life: offers for long distance, Visa cards, software and hardware and nothing compelling enough to make time-hassled sole proprietors part with a few minutes of their time.

“I admit it’s a little confusing right now, but that is going to change,” said CFO Mark Calvert, an investment banker who was also Onvia’s first outside investor. Onvia, said Calvert, will be offering more and more services that are vitally needed by companies with fewer than 100 employees — their target market.

Calvert said those services will include payroll and tax preparation, human resources advice on issues such as how to hire and fire without being sued, as well as marketing and other services that small business owners find difficult, frustrating and time-consuming to locate.

Calvert and the company’s other backers think that finding all these services at one portal along with the products a small business needs will allow Onvia to take a healthy share of a market they think will hit $62 billion by 2002.

Calvert said that while the potential market is huge, the main reason he seed financed Onvia was, “people, people people. They were committed, hard working people none of whom was taking more than $2,000 per month in salary … people who could make $80,000 or $100,000 somewhere else. Their hearts were in it.”

“It’s a very attractive market space,” said Nancy Schoendorf, partner with Mohr-Davidow, the lead VC in a $12 million round of financing that closed last month, the first since Onvia’s seed financing. Also in the round were the Internet Capital Group, Stanford University and private investors.

The market promises to get crowded very soon with AllBusiness.Com, Office.Com and BigStep.Com all aiming for launches in the next six months.

Schoendorf said that Onvia looked like the best bet to them partly because of founder and CEO Glenn Ballman’s previous success as founder of MegaDepot.Com which sells the same sort of office supplies, computers and long-distance service that dominate the Onvia site.

But margins for hardware and office supplies — never a big cash cow to begin with — will be squeezed ever more tightly as online competition heats up, which is why Calvert says they will be focusing on services and making their revenues from a percentage of the service fee.

IDC Analyst Mary Porter agreed with Calvert that the company has very, very good people, but she added that “their profit model seems a bit vague now.” She added that the computer products seemed to be a loss leader to attract customers.

Clearly the battle for the hearts and wallets of small business will be joined very soon by other well-financed players which means that to succeed, these very good people must clarify the profit model and clean up the Web site confusion to make it irresistible to its potential customers.

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