[NYT] So, what *really* happened at WebTaggers?

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From: Adam Rifkin (adam@KnowNow.com)
Date: Sat Dec 16 2000 - 20:40:11 PST

The NYT printed a followup their June 7, 2000 piece on Webtaggerz:


Six months later, the company is dead:


Great picture of David Chevalier:


Sigh, Rohit, Rudy Rouhana got into the New York Times twice before you
were featured once...


After a Spring of Hope, a Dot-Com's Autumn of Reckoning

December 13, 2000

AUSTIN, Tex. -- LAST spring, Rudy Rouhana learned that raising money was

"Once you have a venture capitalist, everyone wants to date you," Mr.
Rouhana, 25, said in early May as he and his partners made a pitch for
$10 million to finance their new company, WebTaggers.

This fall, they learned that the opposite was also true.

As Mr. Rouhana and other soon-to-be-former employees of WebTaggers poked
through their soon-to-be-shuttered office one day in mid-November, there
was a lot of talk about timing. As in how it is everything. As in how an
idea that was good enough to generate revenue was not good enough to
survive this year's dot-com roller coaster.

And as in how the company T-shirts arrived one hour after the plug was

WebTaggers -- whose ambitious, optimistic, caffeine-laced 10-month
effort to secure start-up financing was chronicled in the E-Commerce
section on June 7 (10 Months, 10 Minutes, $10 Million) -- was one of at
least five Austin-based start-ups, most of them dot-coms, to close in
recent months. Others included OneCard.com, Bike.com and
Garden.com. "Sometimes you can do all the right things, and it still
doesn't work," said Travis Fuller, an accountant for Virtualcfo, a
company that offers financial guidance that had been working with

"The company did book revenue," Mr. Fuller said. "Someone was buying the

WebTaggers had expected to start making a profit early next year.

But tough times elsewhere in the sector changed that. Mr. Rouhana's
partner, Sean McCullough, 25, said, "You look at the people we were
trying to sell the product to and they were disappearing or already
starting to tighten their belts just in the last few weeks."

WebTaggers, founded by Mr. Rouhana, Mr. McCullough and his twin brother,
Craig, offered software developed by Mr. Rouhana and Sean McCullough
that allowed retailers to track customers' movements around their Web
sites and change the information offered to meet the interests being

And while it was started by people in their 20's with limited business
experience, WebTaggers had found an experienced chief executive, David
Chevalier, 46, who was well known in the technology community for his
work at Dell Computer.

But to one of the company's major backers, Bruce Ezell, WebTaggers was
unable to escape the chill that had fallen over business-to-consumer
companies. Mr. Ezell, another former Dell executive, operates Techxas
Ventures, a venture capital company that had committed more than half of
the $5 million that WebTaggers had raised.

Though WebTaggers was more of a business-to-business company, it
depended on online retailers, including Garden.com, for revenue.

"Their product had a consumer dot-com flair," Mr. Ezell said, while from
an investor standpoint, "It might have been better if the company had
been a pure B-to-B company."

In other words, companies that sell shovels do better than prospectors
but also have a hard time once the gold rush ends.

"Six months ago," Mr. Ezell said, "they absolutely would have been funded."

Rob Adams of AVLabs, the venture capital firm that provided WebTaggers
with more than $1 million in seed money last year, agreed, citing a
"hard, Darwinian market."

"The point is, it's all a venture," Mr. Adams said. "Everyone thinks
it's so easy."

The really difficult part came in late October, when the company faced a
deadline for meeting its goal of raising $6.5 million, said
Mr. Chevalier, the chief executive.

Because the combined $5 million investment from AVLabs and Techxas
depended on a commitment by WebTaggers to raise $1.5 million more by
Oct. 31, the company's existence became extremely vulnerable when a deal
with a publicly traded corporate investor fell through.

"I basically had six days to find another $1.5 million," Mr. Chevalier
said. "If you don't fund by the expiration date, then the lead investor
withdraws the term sheet."

The financing from the three investors fell through, and on Nov. 9,
soon after enough T-shirts arrived for an expected increase in staff
members set for early December, to 70 from 32, Mr. Chevalier delivered
the bad news.

Weeks before the announcement, dreams of public-offering status and
company trips to resorts were the talk of the office.

In the week after the announcement, sighing employees came in to clear
out their desks and pick up the pieces.

At this point anything remaining -- computers, equipment -- goes back to
the company's bank, Silicon Valley Bank, according to the bank's senior
relations representative, Stuart Edwards.

Sean McCullough said he, his brother and Mr. Rouhana were also trying to
sell the technology.

"If we sell the intellectual property," he said, "anything we sell goes
back to the bank."

But it is not all bad. If start-up employees know one thing, it is how
to be flexible.

"A couple of people have already called me," Sean McCullough said.

He added: "I briefly entertained the idea of being a fireman. You know,
there's more of a mission there; no one ever has a problem with a

"I guess at this point," he added, "you just pick up the mobiles and
move on to the next thing."

But for now, he said, he is waiting for the ski slopes to open in Red
River, N.M. As soon as they do, he will be there, snowboarding.


[John] Doerr wrapped it up with his belief in the "Evernet," a conglomeration of six different Webs, the first five of which are handheld computing, voice Web, video Web, broadband, and e-Web (something he called machine-to-machine). He refrained from revealing the sixth Web, saying it was "secret," leaving the audience to guess just what Mr. Doerr and his KP partners are up to. The Red Eye agrees with Mr. Doerr's optimistic prediction that the Web is only in its first stages of development and that many new faces of the medium will emerge. -- http://www.redherring.com/insider/2000/1114/tech-redeye111400.html

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