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 Back
in 1997, the heyday of dot-corns, Joe Shapira was one
of those lonely Internet entrepreneurs whose ideas could
not lure the scads of available venture capital.
Some VCs thought his idea for an online dating service
too small, while others thought he planned on starting
an escort service. "They were looking for ideas
that were much bigger and more compelling," Shapira
said, then quickly adding, "A lot of those companies
are no longer with us."
Today, backed by $12 million in European venture capital
followed by a $20 million stock offering -- on the Frankfurt
Stock Exchange -- MatchNet Plc managed to turn a small
profit of $367,218 in its third quarter ended Sept.
30. As with any Internet startup, it's not been easy:
up until that point, the company had $18 million in
cumulative losses since getting started in 1999.
Starting with Jdate, MatchNet's lead service targeting
Jewish singles, the company has launched gayl1.com and
AmericanSingles.com in the United States, plus several
other Web sites in Europe. "It has been a successful
concept," Shapira said.
Stonewalled
He said it didn't take him long to quit looking for money
domestically. "I went to a few meetings and saw that
I was being stonewalled," Shapira said. "Various
investors from Europe approached me. I figured it would
be easier to raise money in Europe so I just went there."
Shapira, an Israeli native who has lived in Los Angeles
for more than two decades, said the idea for Jdate came
from his own dating woes (he's married now). At about
the same time he was looking for love, the entrepreneur,
now in his mid-40s, was starting to get interested in
the Internet. So he sold his videotape manufacturing
business and, with $150,000, started Jdate (with partner
Alon Carmel).
MatchNet's first round of financing, in January 1999,
came from Value Management Research. The Frankfurt-based
venture capital firm provided the company with an initial
$1.5 million, then organized an additional $10.5 million
in two subsequent rounds, in August 1999 and March 2000.
In June 2000, MatchNet raised $20 million through its
initial public offering.
Shapira, the chairman and chief executive, runs MatchNet
with Carmel, the president, from offices in Beverly
Hills, where most of the company's 50 employees are
located. The company has sales offices in Frankfurt
and London, with two and three employees, respectively.
Though it has taken time to catch on, Internet dating
has become increasingly popular in the United States.
As more couples look for love in cyberspace, the concept
has been added to the small list Internet ventures capable
of producing profits.
According to MatchNet's September 2001 quarterly report,
the company derives most of its revenue -- more than
85 percent -- from membership subscription fees. The
balance comes from advertising and parties, which MatchNet
currently hosts in 15 different markets, including Los
Angeles.
Gordon Hodge, an equity analyst with Thomas Weisel
Partners in San Francisco, said he sees "plenty
of room for growth left in this business." Hodge
follows Ticketmaster, which runs the online dating service
Match.com that, like MatchNet, recognizes most of its
revenues from subscriptions.
To become a member of a MatchNet service, subscribers
answer up to 200 questions on everything from occupation
to drinking habits. Jdate's choices for "body type
-- female" range from 'petite to "zaftig"
with intermediate choices such as "shapely toned'
"Rubenesque" and "cuddly."
Membership to Jdate costs $28.70 per month (Gayll is
also $28.70 whereas American Singles costs $19.95).
Members can post pictures and messages, as well as contact
other members. From there it's up to them to proceed.
Jdate does not post phone numbers or email addresses;
contact messages are sent through the Jdate service.
Acceptance grows
Shapira attributes MatchNet's success to the fading
stigma of Internet dating, in particular among specific
communities. "Certain niches in the population
have a lot of affinity, a lot of glue," he said.
While couples are logging on -- Jdate claims more than
250,000 members -- most couples, even those with success
stories, are reluctant to talk about it. Several couples
contacted couldn't say enough great things about the
service, although strictly off the record. One woman
expressed willingness, but said her fiancee didn't want
his co-workers knowing he'd met a girl on the Internet.
Not every VC is envious of the success to date.
Brad Jones, managing director at Redpoint Ventures
in Los Angeles, said many European VCs, starved for
deals, tend to be trigger-happy when investment opportunities
come along.
"There are occasions where European investors
will invest in things domestic investors won't,"
he said. "It's not a business I'd want to be in,"
he said. "There's no unique technology, no intellectual
property. In businesses where there is no barrier to
entry, how are you going to create good margins? Somebody
is always willing to come along and do it for a few
cents less.
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