By Nick Patience
I’m going to build a billion dollar company, says Monte Zweben, the founder of Red Pepper Software and former PeopleSoft executive who is now at the helm of his new start-up, Blue Martini Software. He declined to put a timeframe on Blue Martini’s growth from zero to $1bn in revenues, but indicated that it would not take the ten years it took PeopleSoft. He also indicated that he would not be going anywhere until he had achieved that goal. San Mateo, California-based Blue Martini is the first company, Zweben believes, to offer a complete web merchandising software system, not only including storefront building, but also customer management, merchandise management and marketing tools. Partly because Zweben managed to sell Red Pepper for $252m in 1996, and partly because of a desire to resist the clutches of venture capitalist for a while at least, Zweben has appointed a board that includes no VC money. Instead he has recruited Thomas Siebel, founder and CEO of Siebel Systems, Michael Spence, Dean of the graduate business school at Stanford University, William Zuendt, the recently-retired president and COO of Wells Fargo & Co and James Gaither, senior partner at Cooley Godward LLP and a board member at Levi Strauss &Co and Amylin Pharmaceuticals, among others. The funding for the company, which only started in June this year, has come from Zweben and the other board members, although he says it may do a venture round next year. It was while he was entrepreneur-in-residence at two venture capital firms – Matrix Partners and Institutional Venture Partners – that he spotted the niche for a system like Blue Martini’s. There are plenty of web storefront builders out there and a few web marketing tools but nothing, says Zweben, that deals with the merchandising problems that face retailers moving to the web and for those that are already online who wish to regularly enhance their systems. Zweben believes e-commerce software will follow the trajectory of ERP, which he knows well. That started with home-grown efforts, developed into technical components – which is where we are now – and will lead to enterprise-wide systems, which he says Blue Martini is in the process of assembling. With a target launch date set for early in the second quarter of 1999, Blue Martini would not have time to build all the components itself, and is looking for partners for most of the modules, though it will build the fundamentals itself. Most of its revenues will come from software, as it intends to go to third parties for services and Arthur Andersen looks like becoming an early partner on that front, thought nothing is confirmed yet. Blue Martini has five modules, all written in Java. The merchandising module enables retailers to define their products in a hierarchical structure. This is fundamental to Blue Martini’s offering because it mirrors the way merchandisers think, says the company’s VP marketing Bill Evans, formerly of Objectivity, Red Brick and ParcPlace. By entering product descriptions, including price, color and size into a hierarchy that is arbitrarily defined by the retailer – rather than a rows in a database – retailers can execute special promotions across sectors of products, rather than having to define promotions for each instance of that product. For example, a retailer may have an offer on Levi’s 501 jeans. However, it would be just as simple in a hierarchy to apply the promotion to all Levi’s jeans at a higher level or all jeans still further up the hierarchical tree. And any number of attributes can be assigned to any product or product group. The customer management module similarly enables any set of attributes to be assigned to customers. The marketing module can do data mining on customer information to target them with promotions. However, Zweben says the company will not rely on its own data mining tool and will license data mining technology as well as link to existing tools. The web store module is what people thought e-commerce was, says Evans; in other words, a tool to build web storefronts and link into payment system such as CyberCash and VeriFone. The four modules are pinned together by the company’s workflow system , which like so much else, is yet to be licensed. There is also a set of Blue Martini tools that Zweben likens to Oracle Developer or PeopleSoft’s tools in those areas. Eventually Blue Martini hopes to componentize its Java objects and include them in the palates of Java development tools. It has also written COM wrappers so Windows clients can use them. The company is in contract negotiations with what Zweben describes as a major apparel manufacturer, which is likely to become an early adopter of the software early next quarter. The announcement for that should appear about mid-way through the first quarter. Some of the company’s other nearly-partners will do QA on the software as well, says Zweben. A lot of what Blue Martini has at the moment is goodwill, some would be unkind and call it vaporware as none of the software modules are even complete yet, by the company’s own admission. But the company only claims to be in the prototype stage, having just assembled its board. Zweben has done it before and believes the company can break even next year, which is a good foundation if he’s going to build a billion dollar company in less than ten years. And the name? Like Red Pepper, Zweben believes it is a sharp, graphic image that stays in people’s minds.
