Starwave Takes the Web ... (Seriously)

The first wave on the Web was spun out of romance. All of a sudden there was a new space, uncharted, open, free -- cyberspace -- with few requirements and fewer rules. It was open to exploration and self-expression, and an unspoken etiquette was all that was needed to maintain order among its members. It was Web-stock.

The second wave on the Web was spun out of greed. All of a sudden anything with "net" or "web" in its name could attract venture capital or go public; in the last 18 months, investors have thrown something like $3.5 billion at the Web. The Web was a place you went if you wanted to cash in and cash out -- fast. It was Web-rush.

Now we are into the third wave on the Web -- and it is spun out of a newfound seriousness of purpose. All of a sudden, the bubble has popped and there's talk of a shakeout -- the heady IPOs and sky-high stock market multiples look like a passing phase in the Web's evolution rather than a permanent destination. Now it's time for a long hard look at what it takes to build a serious company on the Web. It's Web-business.

On the outskirts of Seattle, the men and women of Starwave Corp. are betting that the third wave will be their wave -- and they are taking the Web very seriously. Backed by billionaire Paul Allen, boasting a collection of the best and brightest talent from the converging worlds of publishing, broadcasting, entertainment, and software, and offering a stable of some of the Web's most successful programming, Starwave is making a serious bid to be considered the Web's first real company.

This isn't a romantic fantasy, and it certainly isn't a get-rich-quick scheme. In fact, in the course of building a serious company, Starwave has lost serious money.

Starwave's model isn't the only one for doing business on the Web. Jeff Bezos, founder and CEO of Seattle-based Amazon.com, has thought long and hard about the business of Web business. He chose not to enter Starwave's market -- multimedia content -- and to conquer another front in the Net revolution, electronic commerce. In two years, Bezos has built the world's largest online bookstore -- and a business model that more and more companies want to emulate. (See "Who's Writing the Book on Web Business?")

Building a Web site is easy. Building a Web business is anything but. A close look at the challenges facing Starwave reveals the still-emerging shape of business on the Web. The company's challenges suggest the nature and scale of what lies ahead for any group of ambitious, committed pioneers who set out to create a defining company on the Web.

Challenge Number One

How far can egoless leadership and patient capital take you?

if you want to know CEO Mike Slade's idea of running Starwave, look at the two magazines on the coffee table in his office: Nation's Business and MAD magazine. That's the dichotomy -- call it casual intensity -- that runs through all of Starwave right to its CEO.

Starwave is headquartered in an anonymous office building next to a drab Seattle freeway. It isn't until you get off the elevator and enter the open and bright reception area that you get the feeling you've arrived someplace a little ... different.

On this day, a crew from Ziff-Davis TV is visiting the company, gathering up its gear beneath a bizarre mural spatter-painted directly onto the wall by noted illustrator Ralph Steadman. The slightly ominous painting shows, amidst Steadman's trademark swirls and drools, a weird buglike creature trapped in a pond. It bears the title, "Thus Spokane Methuselaa."

Slade, 39, wears khakis and a knit shirt, and his hair is thick and spiky -- the look of a man just back from two sets of tennis and a quick shower. But once he starts talking, the words come spilling out in a flood that barely leaves room for questions.

Ask to see Slade's business plan for Starwave and he laughs: "Which one?" Since he joined the company in February 1993, Slade has generated more business plans built on more financial models than most CEOs do in their entire lives. The reason for the proliferation is simple. There is no single plan or model for doing business on the Web because there is no business -- yet.

"Opening a site on the Web is kind of like opening a restaurant in SoHo or Greenwich Village," he says. "You can do whatever you want. You own the building. You can decorate it. You don't have to adhere to building codes. On the other hand, there might be a couple of homeless people sleeping outside the door when you wake up in the morning."

If that sounds like a skeptic rather than a cheerleader, listen to what Slade says about making money on the Web. "If you're a venture capitalist investing in Web site number 677," he warns, "the best strategy you can have is to sell it to an even bigger fool."