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Handshake.com Seeks Foothold i

It might not be obvious looking at the hockey puck dents in the walls, war toys scattered around the office or the bamboo beads that serve as an office door, but for the 25-person crew at Handshake.com, e-commerce is serious business.

Despite the evidence of after-hours bedlam, most employees at the 6-month-old Fullerton company work diligently by day at their computers, striving to combine the simplicity of Amazon.com and the competitive bidding of eBay in what they hope will inaugurate a new wave of e-commerce: services sold online.

It’s too early to tell how popular the concept will prove with consumers and service providers, but it’s already piquing the interest of investors. The company has secured $4 million from big-name venture-capital firm Idealab! and is in negotiations for $30 million from unnamed investors for early 2000.

If successful, the service will allow everyone from car repair shops to wedding deejays to pitch their services online, even if they don’t have an Internet connection.

As co-founder and chief executive Ajay Shah explains it, Handshake.com is an intermediary between a slew of service providers and consumers, taking requests from people who need something done and encouraging companies to bid for that business. For 85% of service-oriented businesses, that means sending leads via fax.

“We really want to bring e-commerce to the masses, and that means starting with the technology they have,” said Micah Rosenbloom, the company’s 22-year-old president and co-founder, who used to earn his living representing television writers in Los Angeles.

The idea originated from a suggestion from Shah’s brother , a Toyota employee , for an Internet-based communications hub serving car reposessors, who typically work odd hours and are hard to reach. After getting tepid responses from venture capitalists who didn’t think the market was big enough, Shah and Rosenbloom gave up on the idea.

Still, the pair thought they might be onto something; despite a glut of online retailers, few were selling services online to consumers.

Market research appears to bear out their hunch, with Forrester Research estimating that online sales of business-to-consumer services will reach $22.1 billion by 2003. By being one of the first to broker services online, the Handshake.com founders hope to get a big slice of that total.

It won’t be easy. In many ways, setting up an online services hub will involve much more than creating an Internet-based retail operation.

For the concept to work, Handshake,com will need the participation of numerous service providers, and many mom-and-pop service providers have yet to venture online.

That’s where Handshake.com steps in, faxing service requests to businesses that aren’t yet online. But even with automated faxing, participants still need to phone or fax a proposal to Handshake, a process that requires human intervention.

And it takes person-to-person contact to sign up service providers, which Shah admits is taking longer than he’d like.

“The rest of the world doesn’t move at our pace,” he said. “For many of these offline businesses, moving quickly means having a partnership done in three, six, nine months. We’re usually looking for something in 15 days. The Internet introduces a completely different time scale.”

Shah plans to set up a way to ensure everyone gets a response to requests, even if the person lives in a small town with no merchants signed up. The company purchased a database of about 6,000 service providers across the country and will make a phone call if necessary.

So far, Shah and his crew are pleased with the responses from users and service providers; Handshake.com takes requests for 21 types of services in five categories and has processed 1,000 service requests since launching in October.

Shah said the typical request generates three to four bids, and about 42% of businesses signed up to use the service usually make a bid for a request in their category. Some merchants have changed their bid based on how other merchants have responded, evidence that Handshake.com is stimulating competition for consumers.

That could change, however when the service ends its free beta test and begins collecting revenue by charging merchants for leads, a change expected sometime next year. It will always be free for consumers, Shah said.

The company is looking to the $30 million in second-round financing it is seeking to fund a broader launch.

“What we’re doing is pretty unique,” Rosenbloom said. “People have focused e-commerce on selling flowers and other tangible things. Selling services is brand new, and even the analysts are struggling with what to call it or how to quantify it.”

While a web search turns up few large-scale attempts to sell non-technology services online , and none that offer Handshake.com’s reverse-bid process , some web services have faced similar challenges selling other companies’ non-shippable products online. Food.com, an online hub for restaurant delivery and take-out orders, has found the process of signing up participating merchants to be an arduous one. And like Handshake,com, it has resorted to sending many orders by fax.

But if e-commerce adoption projections are accurate, Handshake.com and others soon will be able to automate the entire process, taking full advantage of the technology that has fueled product-oriented sales so far.

“And we’ll be ready for them when they get e-mail,” Rosenbloom said.

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