Stop the Music already sent out the
invitations, blew up balloons, and wrapped the gifts. Only problem was,
nobody showed. You’ve probably never heard about eParties until now, but
this dot-com failure is a biggie. It just so happens that this smallish
implosion falls on the doorstep of eCompanies. EParties was the first company
hatched from the incubator’s nest late last year.

ECompanies stands out from a crowd of me-too incubators by its sheer
swagger and penchant for getting its name in the paper. Although this
latest twist is showing some curious signs that the publicity hound is
turning camera shy.

The incubator emerged on the scene during summer of last year armed with
all the bells and whistles. ECompanies is the brainchild of crackerjack
team Jake Winebaum and Sky Dayton. Winebaum was chairman of Buena Vista
Internet Group, while Dayton boasted an even more impressive background as
founder and chairman of pioneering ISP Earthlink .

The eCompanies venture fund was ready-made with an ambitious plan of attack
and a newly minted $130 million cash infusion from blue chip backers like
Disney, Goldman Sachs, and Accel. The only thing left was to start filling
an empty portfolio with wildly successful start-up companies. And eParties
was the first hatchling.

ECompanies unveiled its “highly-anticipated” first incubated company as a
one-stop party portal. The proud parent announced that eParties was to be
the first of its kind, aggregating all the resources and tools needed to
throw a shindig for any occasion. To top things off, former Mattel
exec David Haddad was named master of ceremonies.

ECompanies’ co-chief Dayton threw in some cheerleading for good measure,
“Far from child’s play, the party industry is a lucrative, multi-billion
dollar business desperately in need of the Internet.”

Famous last words.

Well last week, eParties surprised its thirty employees with pink slips,
and yesterday a spokeswoman for the start-up revealed that eParties had
been auctioned off at a going-out-of-business sale to an undisclosed buyer,
for an undisclosed sum. So what the heck went wrong?

To borrow from Dayton, “It takes three things to make a successful Internet
company: a great idea, capital, and gutsy execution.” Apparently not in
that order. Without question, eCompanies has talent on board to turn out
successful Net companies, but it’s a crapshoot when you’re looking to swing
for the fences. It’s one part skill, three parts luck.

EParties had modest capital, decent execution, and started with a so-so
idea. But with Yahoo! adding party planning
services a la carte, eCompanies walked away from competing with an
800-pound gorilla. Capital dried up, a fair idea turned bad, and execution
was a moot point.

Since eCompanies’ first baby steps, its portfolio companies have looked
awfully plain vanilla B2C. Once market volatility tossed cash-strapped
upstarts overboard, eParties got dragged out to sea by an anti-B2C
undertow. Rather than throw good money after bad, this latest liquidation
shows smart business acumen. But what eCompanies really needs is to get
back to basics and focus on hatching companies founded on a great idea.

Any questions or comments, love letters or hate mail? As always, feel free
to forward them to [email protected].

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