Will that be enough to win SmarterKids.com a place in the market, especially considering that it has drawn not a single breath of profitability since 1994? And will that be enough to make the cofounders' strategy -- of reinventing their company to take advantage of new technologies and trends -- finally pay off?
The transformation from traditional retail to E-commerce is a perilous one for the company. Virtually all the other online toy sellers feature much broader product offerings than SmarterKids.com does. For instance, eToys boasts more than 100,000 products to SmarterKids.com's 4,000. And the big toy sellers last Christmas generated two to three times more traffic to their sites than SmarterKids did. (See "Toy Traffic," below.)
Last November, when SmarterKids.com offered its shares to the public, ultimately raising $63 million, it told prospective investors it might burn through the money in a year. That's about how long Blohm, Pucci, and Viard have to show that their innovative idea has life.
"No games -- nothing -- that blows anybody up," declares Susan Graham definitively.
The founders of SmarterKids.com arrived at this juncture by the most circuitous of routes, re-creating their entire company, from strategic direction to corporate moniker, not once but twice. Jeff Pucci and Richard Viard both attended Boston's Berklee College of Music in the early 1980s. Viard, who had grown up 40 miles outside Paris, came to the United States for a semester and never left.
Although they went on to become entrepreneurs, neither founder quite left Berklee behind. Viard maintains a music studio in his basement, where he plays guitar, drums, and keyboard. Pucci, too, plays guitar -- his original songs. And he has an entrepreneurial drive that seems to need one more outlet beyond his busy dot-com; he cofounded and still keeps a hand in managing a small CD label, Curve of the Earth, that publishes the work of Boston musicians.
The two men didn't meet, however, until both landed in 1988 at Dr. T's Music Software, a Boston-area company that published software for musicians. It was a season of momentous change for the computer industry, for just coming to market was an exciting new generation of multimedia machines. Pucci and Viard talked about developing software that would bring music history alive, and multimedia provided their obvious avenue. Moonlighting, the two musicians created a CD-ROM that enabled people to listen to four centuries of great music while reading about the composers and the social and political developments that influenced them. In 1991 Dr. T's published their CD-ROM, called Composer Quest, and it became a kind of poster child for the capabilities of multimedia.
There was no home run for Jeff Pucci and Richard Viard as publishers. "No way to create real wealth," says Pucci.
Leaving Dr. T's and going out on their own later that year under the name of Virtual Entertainment, Pucci and Viard worked from a room in Viard's house and produced two more CD-ROMs, both children's educational products, that were published under a royalty arrangement by Opcode Systems Inc. The nature of the partners' collaboration was becoming clear. Viard loved the technology itself and took charge of all the important technical decisions and details. Pucci assumed the role of the technical neophyte; if a CD-ROM was easy enough for him to use, then it would be so for any customer. Meanwhile, Pucci focused on the creative end -- writing the text, obtaining the illustrations, and figuring out how everything fit together.
For three years their partnership was profitable, says Pucci, because they kept costs low by doing almost all the creative work themselves. And the publisher incurred the costs of sales and marketing. But Pucci quickly grasped that two developers working on their own could not leverage their skills into a bigger business. "There was no home run in it," says Pucci. "No way to create real wealth."
In 1994, Pucci and Viard, intent on creating and publishing CD-ROMs themselves, moved to an office in Needham and hired a handful of employees. For Pucci, shouldering the management responsibilities was no fun at all. "That was the highest level of stress in my life," he says. "I wasn't any good at it, and I didn't enjoy it. It was depressing."
In September 1995 they brought on David Blohm to run the company. Blohm had cofounded and run software company MathSoft Inc., which he had taken public in 1993. A year after the IPO, he had cut himself loose from MathSoft and was trying to raise money to start his own educational-software business. Besides sharing an interest in education with Pucci and Viard, Blohm brought to the founders the down-to-earth management skills they were missing.
With Blohm hired, the top management structure of the company was in place. Blohm would manage the daily operations and would use his extensive contacts for raising money. Free from day-to-day managing responsibilities, Pucci, the visionary, would serve as chief strategist, looking for new products to develop and ways to position the company in the marketplace. Viard would focus on the technology and on how to make the CD-ROMs easy for customers to use.
