- The Washington Times - Monday, November 20, 2000

Creating an on-line community to help toy companies navigate problems with manufacturing from design to delivery seemed like a great idea to Internos Inc.

Unfortunately, its attempted entry to the information highway was sideswiped by equity investors fleeing off the nearest exit ramp.

I offer the tale of a Web entrepreneurial effort with the best of intentions but the worst of timing.

Founded in December 1997 by Donald Hyde in Dulles, Va., Internos Inc. created a business model with supporting software to build industry-specific communities.

During the proprietary software development phase this summer, the company worked on a number of sites and enhanced ToyNetwork.com, which became the model for all others to follow.

"Though ToyNetwork was the last site launched, it was to become the prototype for an application-based B2B (business-to-business) community that would be able to serve an international community working within 24 varied time zones," said Mr. Hyde from his Dulles office.

"The software was designed to securely answer 100 percent of a company's supply chain communications needs taking place off shore and in the U.S."

The on-line communities created by Internos were available through subscription, averaging $5,000 per year. For that fee, each subscribing service or materials provider from the Hong Kong manufacturer to the Texas retailer would have real-time access to a living production file.

The enhanced communications and the transfer of documentation limits errors and helps get products to retailers' shelves quickly, efficiently and inexpensively.

With the software, Internos partnered with "toyainment" experts Pangea Corp. of Dana Point, Calif., self-described "creative salon, marketing boutique, licensing rep and deal making firm."

Internos brought to the table what both groups saw as a superior Web-based software solution, and Pangea Corp. brought the URL ToyNetwork.com and more than 15 years' experience in the toy, animation, entertainment, multimedia and interactive markets.

Success seemed imminent as toy companies large and small responded positively to their on-line business-to-business community.

Yet with all of this behind it, Internos was unable to sustain its momentum through two IPO processes. Last fall, the management decided to postpone registration and restart the process in the spring of 2000.

But by that time, the manic investor frenzy that characterized past IPOs was gone.

Despite years of experience, a predictable sales model and support from some of the largest toy companies, it could not keep the momentum. It soon become just one more dot-com to fall off the Web.

"The community tools that Internos made available to us was a cool delivery system that would bring together the whole confluence of the various parts of the toy industry," said John Shulte, co-founder and principal of Pangea Corp.

"The goal of the effort was noble and valuable and there were tools and functionality throughout that are valuable to industry," he said.

So what happened to Internos, Pangea and ToyNetwork.com?

Pangea retains its expertise and knowledge and continues on with a large roster of clients, including such toy giants as Mattel Inc., Hasbro Inc., Universal Studios, Playmates Toys and Dreamworks.

It continues to develop a Web site at ToyNetwork.com, focusing on building a transaction-based revenue stream that will serve the B2B and business-to-consumer markets. Internos ceased operations in September and is now in the hands of its board of directors.

"The market let us down and we ran out of time to be profitable because in order to stay in business you must have free access to the private equity markets and institutional investors that will stay with you through a successful IPO bid," Mr. Hyde said. "But that is no longer the environment. Though last year B2B was all the rage; today investors are much more sanguine and are demanding short-term profitability.

"I don't think of this as a failure of Internos' plans or management, but of the market to be there for us and others like us."

• Have an interesting site? Write to Joseph Szadkowski at the Business Browser, The Washington Times, 3600 New York Ave. NE, Washington, D.C. 20002; call 202/636-3016; or send e-mail to [email protected]

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