Like other Internet hopefuls, PrintNation.com has sought to take an old, established industry online in hopes of hitting e-commerce pay dirt.
The Irvine-based company runs a Web site offering supplies and equipment for printers,everything from ink to imagesetters. PrintNation’s focus on trade with existing businesses,rather than fickle consumers,has been good for $31 million in venture funding since October 1999.
But now the 2-year-old company is racing against the clock, trying to get profitable before its two rounds of funding run out, said Tony Seba, PrintNation’s president and chief executive. The company has about $15 million in cash left, which Seba estimates will last PrintNation another 16 months.
Earlier this month, PrintNation laid off 12 of its 86 employees. Positions were cut across the board, with emphasis on marketing and some programs in engineering.
“We need to make sure we become profitable with the money we have,” Seba said. “In the current financing environment, you cannot count on another round of financing.”
Belt-Tightening on Horizon
PrintNation expects to break even in early 2002, Seba said. Until then, the company plans to look for other ways to save money, including re-evaluating its 30,000-square-foot office in the Irvine Spectrum.
“It is a big space for what we have today,” he said. “The question is, do we move to a smaller space? Do we sublet? We’re looking at all the options to make sure we stay here for the long term.”
PrintNation.com’s belt tightening is tough but necessary, according to Bruce Temkin, an analyst with Cambridge, Mass.-based market researcher Forrester Research Inc. The OC company is among many in the business-to-business e-commerce sector preparing to make do with the financing they have.
“Stretching things out more right now makes a lot of sense,” Temkin said. “A year ago, the business-to-business sector was in a time of reckless abandon. Now it’s back to business, and business needs to be profitable sooner or later.”
Like the consumer e-commerce segment before it, the business e-commerce sector has shifted, Temkin said. Companies are becoming more responsible to their investors.
“That will help the industry as a whole,” he said.
Back in April, PrintNation received $25.5 million in second-round funding from Lehman Brothers Venture Partners and others. That was on top of $5.75 million in initial funding a year ago from Menlo Park-based U.S. Venture Partners and Venrock Associates, the New York-based venture capital arm of the Rockefeller family.
For now, PrintNation is rolling on with plans to strengthen its business, Seba said. The company plans to continue looking for strategic partners. The company already has established several alliances, including with Sir Speedy Inc., the Mission Viejo-based printing, copying and digital network franchise, Agoura Hills-based PIP Printing Inc., a printing franchise network with nearly 450 locations, and Georgia-Pacific Corp.’s paper distributor, Unisource.
PrintNation is looking to get more repeat business out of its existing customers. About 10% of the 40,000 small and medium-size commercial printers in its target market have purchased equipment via PrintNation, Seba said.
To better serve customers, PrintNation, plans to open warehouses across the country to provide 24-hour shipping, Seba said.
So far, the company has four facilities, each at less than 10,000 square feet. One is in Commerce while the others are in Chicago, Connecticut and Atlanta.
PrintNation has received its share of fanfare. In June, Upside magazine named the company one of its “Hot 100” private companies for 2000. In August, Forbes included PrintNation.com in its “Best of the Web B2B” list.
But conditioning old-economy customers to use PrintNation has been one of the company’s biggest challenges, Seba said.
The adoption curve for business e-commerce sites hasn’t been as fast as PrintNation.com and other companies anticipated, Seba said. One reason: Businesses have specific needs,such as same-day shipping, credit lines and volume discounts,that PrintNation.com hadn’t planned for, he said. The site has since incorporated such offerings into its business model.
Steep Learning Curve
“A lot of people thought, ‘If you build it they will come,’ ” Seba said. “But you have to build value. You have to give customers a reason to buy from you rather than their traditional suppliers.”
Forrester’s Temkin said many other business e-commerce companies are realizing it’s not as easy as they first thought to create a successful site. It takes time to study the behavior of buyers and sellers and a substantial amount of software development, he said.
If PrintNation can cut costs and bide its time, the company may be able to stick it out, Temkin said. But, for now, there are too many players in what he calls the business-to-business “garden.”
“Companies left in the marketplace 12 to 18 months from now will have a much better opportunity to shine because a lot of the weeds will be gone,” he said. n
