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Sunday, April 09, 2000 By Ken Zapinski, Associate Editor/Business
Rob Frasca's back in Pittsburgh for his third tour of duty with a tech start-up.
This is the city, after all, that gave birth to the 34-year-old former naval aviator's business career six years ago when he co-founded a financial Web site that was later purchased by Intuit Corp.
Later, he became a key executive at WiseWire Corp., which was sold to Lycos in 1998 for stock worth roughly $140 million at today's prices.
Now, he returns as chairman and chief executive officer of Internet Venture Works, a company that hopes to transform old-line bricks-and-mortar companies into dot.com powerhouses.
The company is based in Boston, where until late last year Frasca was vice president and general manager of Lycos.com. But it is opening its initial branch office in Pittsburgh. That operation will be run by Chief Operating Officer Matthew M. Miller, 41, another former military flyer previously with Deloitte & Touche.
"When we decided to start the company, I knew the importance of having offices around the country," Frasca said. "Especially Pittsburgh."
That's what he says now.
Not too long ago, Pittsburgh wasn't where he wanted to land at all.
After graduating as a mechanical engineer from the Rochester Institute of Technology in 1987, Frasca flew S-3B Viking tactical jets off an aircraft carrier. But after six years of that, he wanted to get into business, so he applied to become a Navy ROTC instructor.
His first choice was Harvard, where he'd be in the heart of the Boston tech community. His second choice was Silicon Valley's own Stanford University. Carnegie Mellon University was his third choice.
During 1994, he taught by day, studied for his MBA at night, had his first child, and co-founded GALT Technologies.
After its sale to Intuit, Frasca went to work for the new owner, commuting from his Point Breeze home to Mountain View, Calif., every other week.
He was on the verge of moving to Silicon Valley when he decided instead to join WiseWire, where he was already on the board. He handled product development for the search-engine technology company until the sale to Lycos.
While at Lycos, he said, he fielded a half-dozen calls a day from headhunters looking for a CEO for this or a venture capitalist for that. "There's just a huge shortage of experienced Internet talent," Frasca said. And that got him thinking.
While he was mulling some ideas with Andy Hannah, chief financial officer from Storm LLC, Hannah suggested he contact Miller, a former Air Force B-52 officer whom Hannah knew from his Deloitte days. The two hooked up late last summer.
Frasca brought his Internet expertise. Miller brought connections to J.W. Childs Associates LP, a leveraged buyout firm managing more than $1.5 billion. Thus was born Internet Venture Works, with J.W. Childs and Lycos as strategic partners.
IVW bills itself as an Internet "accelerator." The company will help incubate promising start-ups, and it also acts as the Internet arm of J.W. Childs. But its chief mission is to drag traditional bricks-and-mortar retailers onto the Web, or a "dot.BAM" strategy.
"We go in and make things happen," Frasca said. E-tailers may have Internet savvy. But they have no customer service history, no brand presence, no fulfillment and distribution systems. Traditional retailers have all those things but lack the technical expertise. "Which camp would you rather be in?" Frasca asked.
IVW doesn't intend to be a consulting firm. Rather, it will help client companies develop an Internet strategy and spin off the electronic arm to an independent company in exchange for an equity stake in the spinoff. IVW is hiring a stable of managing directors to serve as CEOs-in-waiting, ready to jump in and run these Web spinoffs as they are created.
Setting up independent companies is a complicated course for an established company trying to make headway on the Web, but it is best for several reasons, Frasca and Miller said. It relieves the earnings of the parent company from the costs of developing the e-business. It creates a separate company that can turn to the stock market for financing. Options and IPOs create currency to attract and retain top talent. And a smaller, streamlined operation can move more quickly.
They are currently putting the model to work at a $1 billion-plus specialty agricultural retailer.
The independence strategy can resolve conflicts that can occur when a traditional retailer looks to the Web, Miller said. For instance, if retail managers are compensated based on sales, what incentive do they have to create alternatives that may cannibalize their own sales?
And the missions of the two are different, Frasca said. "Stores are in the business of selling wares."
But on the Web, people have different expectations, looking for information and content they'd never look for in the corner store. E-tailers have to be ready to provide that rich experience to customers, he said, "so they keep coming back."
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