- The Washington Times - Monday, October 9, 2000

A California company is one of a handful of Internet firms competing to win a contract to help Virginia schools purchase their supplies on line.

The Virginia Department of Service is expected to pick the winner soon, and San Francisco-based Epylon Corp. hopes to be the lucky one.

The contract is worth $6 billion, said Stephen J. George, the company's founder.

Epylon already has a contract with the state of Michigan to supply all of its government agencies and schools with supplies like pens, toilet paper, chairs and computers on line.

Here's how it works: Epylon gives schools its customized software for free, so purchase agents can access its on-line marketplace. From the Epylon Web site (www.epylon.com) schools can seek bidders for their purchases.

Using this service facilitates an otherwise "complicated and involved process," Mr. George said.

The company, which has offices in the District, deals with over 1,200 school districts and government agencies in Washington state, Colorado, Utah, Texas, Florida and New York, representing about $7 billion in annual spending.

Epylon makes its money through a 2 or 3 percent commission paid by suppliers who win bids with schools. It is not yet profitable.

The education system spends $84 billion at the K-12 level and $60 billion at the college and university level annually, according to the U.S. Census Bureau. The overall institutional market schools and government agencies is worth a staggering $859 billion a year.

"If you are going to be a vendor to schools, it's one of the toughest things out there," said Mr. George, who used to work for a venture fund.

Investors liked Epylon's model, and since it started in April of 1999, the company has raised $50 million in venture funding. Today 90 percent of its business comes from schools and 10 percent from other government agencies.

Epylon gets its name from the Greek work "pylon" meaning gateway and "e" for electronic. And that's what Mr. George wants it to be an electronic gateway for schools to purchase supplies. His targets are some 16,000 public schools in the country and another 4,000 that are private.

"It's not hard to convince them," he said of purchasing agents that Epylon sales people contact about signing up with its services. "No one has said outright they are not interested. Typically they do not want to take the risk [of trying something new], and a lot of that risk is around money."

But as schools sign up and begin making deals that save them money, companies like Epylon become popular. In New Jersey, for example, schools have saved between 40 and 60 percent on lab equipment by shopping through Epylon, Mr. George said.

Local school districts, so far at least, have been hesitant about dealing with Internet companies.

"We don't deal with any," said Richard Davis, director of purchasing for the Arlington County school system. "We are all direct purchasing … dealing with Internet companies is just too new."

Virginia, however, is likely to become the first local system to do all its purchasing on line. That's because Gov. James S. Gilmore III, a Republican, has pushed for the state's institutions to become more technology-oriented, and use the Internet more often.

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