It’s no secret that forming a brand-new company to sell products like kitty litter, carburetors and stuffed animals isn’t lighting up the bottom line of many Internet firms.
For them, the lesson learned from dot-com failures, as preached by analysts and investors alike, is that the types of businesses most likely to succeed on the Net are those that started in the brick-and-mortar world.
Novica.com, a pure e-tail play focusing on handcrafted art, seems to be proving that lesson wrong. The L.A.-based company is hitting its stride on the Net, holidays or not.
Novica specializes in handcrafted fine art from artists in developing countries. It’s where you would go if you want, say, a Balinese Baron Babi pule wood mask ($93.08). The company caught the attention of the National Geographic Society, and the two inked a deal last week.
As part of the partnership, 112-year-old National Geographic will provide 2-year-old Novica with content from its vast editorial resources, cross-marketing support and access to its own commerce-related properties.
Novica has around 9,000 arts and crafts from 1,700 artists on its site, as well as stories about the cultures and artists that originated the works.
Novica’s admirable mission to foster economic development in Third World countries, promote artists in those poverty-stricken regions and provide bargains on arts and crafts to site visitors would seem terribly unprofitable.
But Roberto Milk, Novica’s president, said the company sticks to a cardinal and seemingly anti-capitalist rule: The artist must earn more than the local going rate, and the consumer must pay below-market prices.
And thanks to the Net, Novica totally eliminated the many middlemen that can inflate prices up to 20 times their actual value.
“Novica is a business that can only exist with the Internet, and it’s a beautiful use of the medium,” Milk said.
Novica, founded in 1998 by a group of Stanford University alumni, has completed three rounds of financing from Scripps Ventures, Rust Capital LLC, Chris Blackwell (founder of Island Records), and Michael Burns, a Hollywood veteran and former vice chairman of Lion’s Gate Entertainment. The company employs about 200 staffers at its L.A. office and at branch offices in 12 countries.
Under the terms of the partnership formed last week, National Geographic became a 19 percent shareholder in Novica, with an option to increase its interest to 30 percent.
“National Geographic has enabled hundreds of millions of people to travel to the far corners of the globe, at least in arm chairs,” said Rick Allen, president and CEO of National Geographic Ventures, who will serve on Novica’s board.
There’s more good news for Novica from the World Bank Department of Commerce, which recently estimated that the market for traditional handmade arts and crafts is about $22 billion in the United States and $280 billion worldwide.
“Our buyers are consistent, not seasonal,” said Milk. “But because the works sold at Novica focus on meaning, we see very heavy traffic throughout the gift-giving season.”
Fresh Money
Just when it seemed the curtain had fallen on digital Hollywood, a flurry of financing poured into new technology companies hoping, like their dead predecessors, to revolutionize Hollywood.
The companies taking in the cash in the past two weeks LivePlanet Inc., CinemaNow Inc. and CreativePlanet Inc. are hardly like their dead predecessors, however, and their diverse business models reveal how parceled digital Hollywood is becoming.
LivePlanet, whose co-founders include actors Ben Affleck and Matt Damon, blends old media and new media and has two projects in development. “Runner,” a joint venture with ABC, is a reality-based television program that follows a person across the country who tries to elude capture by Net and television audiences. A million bucks goes to the successful hunter or to the runner if he or she escapes. The second project is Green Light, an online screenwriting contest in which the winner gets a million bucks to make a film, to be released by Miramax.
LivePlanet announced Dec. 10 that it received $12 million from Redpoint Ventures and Accel Partners.
CinemaNow, owned by Lion’s Gate Entertainment, distributes independent feature films on-demand over the Net, which depends on still-nascent broadband distribution technology. Launched a year ago, CinemaNow has inked distribution deals with heavy-hitters like Microsoft Corp. and iBeam and has access to the Lion’s Gate film library.
CinemaNow took in an undisclosed amount of funding in its second round on Dec. 4. Microsoft led the round, joining first-round investor Blockbuster Inc.
Creative Planet is ramping up its effort in Hollywood’s B2B marketplace, thanks to a $30 million investment from British media giant United News and Media announced Dec. 5.
CreativePlanet helps studios and television networks manage their businesses with the help of Web platforms and wireless technologies. For an annual subscription that costs around $10,000, studios can have processes like location scouting, job searching and budgeting streamlined on the platforms and high-tech devices.
Despite the funding, CreativePlanet laid off 70 staffers, or 20 percent of its staff, last week.
“The layoffs are distinct from a company going under and are about tightening our belts and doing whatever we need to do to get to profitability,” said Creative Planet spokesman Sean Conway.
The $30 million in financing, Conway reminded, is a validation of the Creative Planet business model.
A previous round of financing in August raised $38 million and included Rustic Canyon Ventures (formerly Times Mirror Chandler Trust Ventures), Waterview Advisors and Chase Capital Partners.
At least some members of the L.A. venture community are unimpressed.
“Show me one (e-company) that’s going to make money,” said one skeptical venture capitalist, who spoke on condition of anonymity. “Our firm won’t invest in Hollywood entertainment companies at all.”
Staff reporter Hans Ibold can be reached at [email protected].
