@LARGE
Apocalypse Not

By Scott Kirsner
Globe Contributor, 01/22/2001

I get these covert e-mails sometimes. More and more of them, lately. Occasionally, there's a late night phone call, or note slipped furtively under the door. The senders are forgotten people, living underground. No one else will tell their stories.

The only information the official outlets would like you to have is that the revolution is over. Tech startups are dying, dead, or in denial. Every dot-com is looking to sell out, lay off, or close up shop. How, then, do you explain these dispatches from the underground, where my informants tell me they're not just surviving but growing, raising money, finding new customers and partners?

"My world is very interesting right now," writes Roy Hirshland, who leads the Technology Practice at Meredith & Grew, a commercial real estate firm. "Despite the doom and gloom, I just advised RSA Security on a 327,000-square-foot lease in Bedford and Veritas Software on a 75,000-square-foot lease in Back Bay." Hirshland adds that, where Cambridge Technology Partners and Engage Technologies have given up space in Cambridge, others have quickly snapped it up.

"Two things make me confident," Hirshland says, over a secured phone line. "First, every week, we're seeing three to five new companies and business plans that are built around really exciting technologies. And second, we've got clients who are coming to Boston from other parts of the U.S. and the world. They're not coming here for the weather. They're coming here because this is the No. 1 or No. 2 place to do business if you're a technology company."

Today, Ty Rauber will announce that his company, Digital Media On Demand (DMOD), has raised a second round of venture capital - $12.5 million - in a financial environment where the prospect of raising a second round induces many entrepreneurs to start gnawing their cuticles and take up cigarettes. And, Rauber says, "We were looking for less money. Somehow, we ended up with twice as much as we wanted," from investors like Greylock, Pilot House Ventures and Intel.

DMOD, based in Allston, develops technologies to deliver digital content securely, and in such a way that media companies can control its redistribution, and even charge for it. It's possible that the company could be part of the arrangement between Napster and BMG to develop a Napster-like service that would generate revenue for the record label and its artists.

What's more certain, according to Rauber, is that the company will open offices in New York and Los Angeles this year and grow from 42 employees now to at least 75. "We've already hired a VP of West Coast operations," Rauber says, "and we're beefing up our engineering staff, marketing and business development."

Tomorrow, TVisions, an Internet professional services firm, kicks off its 2001 recruiting drive with an open house in Waltham. Ralph Folz, the company's co-founder and CEO, says the company is looking to hire 150 people for its Watertown and New York offices this year. The company employs 200 people now.

TVisions, which develops Web sites for big players like Analog Devices and MFS Investment Management, also grew from 60,000 square feet to 90,000 square feet at the Arsenal complex in Watertown, in part by taking over some space from ThingWorld.com, which has cut its staff and is looking for a buyer.

Unlike such Internet services firms as Viant, Scient and Cambridge Technology Partners, TVisions has grown slowly and without acquiring other companies. It hasn't laid off a single employee, and by virtue of being privately-held, the company hasn't had to endure wicked lashings from the stock market. Plus, "a lot of [our competitors] had too many dot-com clients, and that led to a downward spiral," Folz says. "Dot-coms went away, revenue went down, the stock went down, people left, they couldn't support clients, and then clients left. It's very hard to get out of that spiral."

TVisions ended 2000 with $21 million in revenue and $3 million in profit. It's hardly spent any of the $20 million it raised from CMGI @ventures last spring, and Folz says the company is picking up clients, as well as employees, from foundering competitors. "A year ago, [TVisions employees] saw the stock of the Viants and Scients soaring, and I got a lot of questions," Folz says. "`Are we doing the right thing by being conservative?' Now, I get, `Thank God we were conservative and went with the solid Fortune 500 customers and didn't grow too fast."'

Next week, IBM will officially open something it calls a Center for IBM E-Business Innovation atop the Lotus Development Building in Cambridge, even as Lotus itself undergoes reorganization and possible layoffs. This will be IBM's fourth innovation center in the U.S., and right now, the center employs 80 people - nearly half of them new hires into IBM - who help IBM's clients develop new Web strategies and online offerings.

"About two-thirds of our clients are large, established companies," says Roger Letalien, who runs the center. "For them, the Web is about profits, relationships, and driving cost out of the equation. They want to use the Web to support real business initiatives." Next week's opening cocktail party will feature Penn Jillette of Penn & Teller as the master of ceremonies - an unabashedly old-school launch party. Later this year, IBM expects to open innovation centers in New York, Washington, and Dallas.

Finally, I spoke with an informant who only agreed to talk after multiple requests. Bob Tarr took over as CEO of HomeRuns.com last February, after the online grocer received an investment of $100 million from the Cypress Group. Since then, he hasn't once spoken to the media. He's been busy trying to prove that HomeRuns can make money delivering diapers and Froot Loops to urban households, amidst the bankruptcies of competitors like Streamline and ShopLink.

"I'm very enthusiastic about the business," Tarr says. "Our operating performance continues to get better and better every day, and we're doing twice the volume that we were doing last year when I started." The company isn't yet turning a profit in Boston, but Tarr, who was previously CEO of Harcourt General, hints that it is close. A second warehouse is already serving customers in Washington, D.C., and Tarr says that HomeRuns has signed leases for distribution plants in Baltimore and Bethpage, N.Y., on Long Island.

You can't be too loud or cocky these days about your tech startup, your Net-based plan for remaking a market. But you can still innovate, and you can still succeed.

The revolution lives. It's just underground, for now.

Scott Kirsner is a Boston freelance writer and a contributing editor at Wired and Fast Company magazines.