In 1999, CNN news anchor Lou Dobbs joined the ranks of hungry tech entrepreneurs by launching Space.com--an advertising-supported, newsy Web outfit aimed at space fanatics with a taste for Pathfinder spacecrafts and photos of Mars.
Just two years later, the chummy Moneyline host had already retreated back to television, while bruised venture-capital firms, along with PaineWebber and NBC--owned by
Yet instead of hitting the eject button, the same investors poured in more capital. Since then Space.com has dropped its worn-out suffix and boosted its prospects. Last year Imaginova--as the Manhattan-based company is now called--pulled in some $30 million in annual revenue, up from $7 million in 2001, and posted something of an operating profit, in the sense of income before interest, taxes, depreciation and amortization.
Imaginova's wild ride speaks to one of the toughest conundrums for entrepreneurs and their investors: when to forge ahead and when to walk away.
"More often than not, in a troubled situation, investors will try to find some kind of exit strategy," admits John Higginbotham, chairman of VC firm SpaceVest, another original Space.com investor. That urge to flee was especially fierce in the hot-potato days of the tech bust. “It was a contrarian play” to reinvest, says Imaginova board member Mark Wright. “But not really when you looked at the details of the company.”
In the beginning, Space.com’s loose collection of assets included, among other things, Space News, a print trade magazine for the aerospace industry (estimated circulation: 15,000); Starry Night astronomy software; and a nifty Web site that attracted tech-savvy males between ages 25 and 44 with a few bucks in their pockets--an attractive demographic for advertisers like
“They were going to build the end-all space portal,” says Rothrock, even as America Online--now owned by
All that enthusiasm would soon fade. Advertisers fled in the wake of the tech bust, and in early 2002, the chief executive who had replaced Dobbs the previous year quit. By then the press was having a field day: “Lost in Space.com: Another CEO Quits Dobbs’ Internet Firm," spat one headline. (Dobbs, still on Imaginova's board, couldn't be reached for comment.)
The VCs responded by hiring Mark Wright, who had just sold his marketing software firm to online ad giant
"Online viewing was accounting for 20% of media consumption, but only 3% of media spending," he recalls. "That's quite an opportunity for arbitrage."
While Wright pleaded his case to investors, Rothrock, the lead VC, hunted for a longer-term chief. Five months passed. “If a good candidate had not emerged, we probably would have sold," he says. Wright finally settled on 40-year-old Dan Stone, former head of a division at Scient that built Web businesses for media and entertainment companies.
For Stone, the sky wasn't the limit. To reach a wider audience, he refocused the company more broadly on science, with Space.com being just one element. Investors bought the vision, ponying up another $6 million for new editors and product development. "Ultimately, there needed to be an educated leap of faith," says Stone. "I needed the money before I had it all buttoned up."
In November 2004, Stone launched a new multimedia site, called livescience.com, and changed the company's name to the more generic Imaginova. Two months later, he raised some $10 million more, in part to buy a maker of telescopes and binoculars, beefing up Imaginova's commercial side. The company now has three e-commerce sites: telescope.com, livesciencestore.com (weather instruments and robotics) and starrynight.com (software and DVDs). It even sells software that powers video projection systems at planetariums. Livescience now attracts some 1.6 million unique users per month.
Next step: raising even more capital for further deals. Investors seem amenable. “There were a lot of companies left on the [technology] scrap heap that could have been salvaged,” says Wright. "Good venture capitalists are patient.”
Patient investing: Imagine that.
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