From the January 2000 issue of Startups

Think we're PC prisoners now with our Web surfing addictions and video games with 999 levels? Just wait, hermits in training--online film is giving us even fewer reasons to leave the house or office.

With 20 percent of home users set to have broadband access by 2002 and video technologies improving daily, home theater will prove true to its name. Though downloading feature-length films via the Internet probably won't be practical for a few years, the demand for short films and animation is already soaring.

"The emergence of a whole new species of online film broker demonstrates there's certainly a market for [short films and animation], both on the consumer and the business-to-business ends," confirms Aram Sinnreich, an analyst of consumer content strategies at Internet research firm Jupiter Communications.

"People like to see leading-edge, independent [entertainment], and shorts are the most leading edge," says Mika Salmi, 34, founder of AtomFilms, an online and offline distributor of short films and animation in Seattle.

After living in Europe, where film shorts are common, Salmi (at right) wrote up a business plan for short-film distribution and sat on it until 1998, when both he and the technology were ready to start film distribution on the Net. AtomFilms licensed more than 250 films in its first six months. The company distributes them to other sites and offline companies, like HBO and major airlines, adding to its sales from e-commerce, advertising and sponsorship.

AtomFilms had its first big online hit with the animated short Gerbil in a Microwave (5 million-plus e-mailed and downloaded), and Salmi sees his company finding many more. "Long term, our plan is to become experts in Web programming," Salmi says. "There are going to be a lot of Internet-based hits like the Dancing Baby, [and] we're all about finding the next South Park or other hot property."

2. Niche Label Clothing

A wise man named Adam Silverman once said, "[Young people] are not interested in looking like each other or their parents." Damn straight. That's why Levi's and Nike are having a heck of a time revamping their images to court Gen Y. Unfortunately, cool kids see right through multimillion-dollar marketing strategies.

"That's our soapbox, if we have one," says Silverman (top right), co-owner of The X-Large Corp., the Los Angeles manufacturer, wholesaler and retailer of clothing brands X-Large, Mini and X-Girl (sold only in Japan). "[People] need to support niche labels so everyone doesn't wind up wearing Gap, drinking Starbucks and buying furniture from Ikea."

Silverman, 36, and partner Eli Bonerz (top left), 33, commenced their mission back in 1991. When their architecture degrees from the Rhode Island School of Design in Providence landed them $11-an-hour jobs, the roommates decided to dream up something better: a business that would give them both autonomy and cash. Using $48,000 they raised from friends and family, they launched X-Large. Reaping upwards of $10 million last year, the partners expect sales of more than $15 million this year.

Word-of-mouth and tons of editorial coverage have supplied free advertising, and remaining subculturally unbiased has made X-Large popular among everybody from snowboarders to hip-hop enthusiasts. "[We wanted] a company that would reflect us, our age, our friends and our environment," says Silverman. Somehow, they've done it without becoming played-out.

The keys are to make the most of your time, build a rapport with magazines and stay focused. Says Silverman, "You've got to think: Am I going to spend my eight hours designing ads, or building an interesting company worth talking about? The latter's the better way to go."

3. Tot Tech

OK, even we're jealous of high school and college students with outrageously successful tech companies, but given the proliferation of baby and tot software and the burgeoning online audience of pre-readers, the next e-prodigies will be in grade school, not their teens.

"Five years ago, there was almost no software for kids under age 4," says Ann Stephens, president of market research firm PC Data. But after companies like Jumpstart introduced baby and toddler software, sales soared, rising 18 percent in '98 and reaching $20 million by mid-1999.

In 1998, former Netscape senior manager Tony Fernandes' then-infant son enjoyed playing with Tony's PC. To create something that rewarded their child's curiosity, Tony, 35, and his wife, Kathy, 35 (pictured below), began BowWow House Inc., which develops software for young children. BabyWOW!, their flagship program, reacts to slight stimuli like mouse movement or a pressed key with photos and sounds.

Though BowWow House competes with behemoths like Mattel, Tony says small size allows them to innovate without millions of dollars in overhead. "We're constantly learning [from parents and researchers]," says Tony, who expected a 400 percent increase in units shipped for 1999.

Pre-readers are also the newest audience online. Yaron Ben-Shaul, 28, watched his nephew unsuccessfully search the Web for info on dinosaurs because he misspelled the word. That led Ben-Shaul and partners Victor Vidal, 34, and Joel Vidal, 27, to create Alfy Inc., a Web portal for kids ages 3 to 7. "We have a 100 percent graphical interface, so [children] can explore thousands of sites and unique content by clicking on images and hearing sounds," says Ben-Shaul.

Currently, Alfy's sales come from banner ad merchandise sales and sponsorship, but the tot tech company plans to incorporate a subscription section with original content and games, and to begin merchandising Alfy, the site's skateboarding canine host.

4. Online File Storage

Marc Wallace, 29 (below right), CEO of SwapDrive.com LLC always wanted to be an astronaut, but instead, he launched his way into cyberspace. Along with five partners, Clyde Kunst, 35, Steve Birnhak, 31, Rob Duckwall, 34, Roland Schumann, 37 (l. to r.), and Scott Heifetz, 31 (not pictured), Wallace set aside his aerospace aspirations to go online with a free Internet hard-drive site. Users sign up for 25MB of space for storing and sharing files without having to download software or take up room on their computers' hard drives.

It took a basement full of servers and more than $150,000 in funding from the partners to launch SwapDrive.com in mid-1999. Wallace explains the idea behind the Arlington, Virginia, company: "More and more people use the Web on an almost full-time basis. They'll want to use a site like ours to store their files. This technology will become as commonplace as e-mail."

SwapDrive.com is part of the rising tide of Net service businesses, a market International Data Corp. predicts will generate more than $78 billion in revenues in 2003. Its services are free, so revenues are generated through advertising and premium services, such as extra MBs of space.

Launching an Internet storage site requires a hefty hardware investment and the technical expertise to fashion a Web file transfer interface. SwapDrive.com's client base, consisting of users as diverse as genealogists, fantasy football leagues and small businesses, is fairly representative of the target market for Web storage.

More than a dozen companies already exist, with such large presences as Yahoo! Briefcase and Imation Web Backup heating the competition to the boiling point. However, as SwapDrive.com's success shows, there's still room for a small company to muscle in. For this company, the sky isn't the limit, it's just the start.

5. Match Making Service

Big news, people: Video dating is out (was it really ever in?), and hooking up with a little help from dot.com central is easy, not that scary, and fun. Irma Zandl of New York City marketing consulting firm The Zandl Group sees a rosy future for modern-day matchmaking. "If a service has really good word-of-mouth about the quality of its match-ups, I think [consumers]--especially guys--will pay a great deal of money," she says. "Think of all the money they waste on useless dates! This would be very economical." Welcome to 2000.

Rutgers University's National Marriage Project last July found marriage rates are at an all-time low. The U.S. Census Bureau estimates the number of women living solo doubled between 1970 and 1996, while the number of loner men tripled. It's pretty obvious society needs some love.

E-introduction services like Winkat.com start where chat-room flirtations leave off. Launched last May with $12,000 by Justin Willow, 28, Chris Lindland, 27, and Nicholas Nicholas, 27 (l. to r.), this San Francisco venture offers a "second chance" with that hot thing you saw at Denny's. If he/she also knows about the service, or if you have their e-mail address, you can have Winkat notify them regarding your crush. The company expects profitability soon but currently pays dues with page view revenues and an exclusive partnership with online storage company i-drive.com.

"As more people become accustomed to finding information online, they'll [come to expect] things like this," says Nicholas, who found love within a week of thinking up the idea (purely coincidental). "Being uncomfortable approaching another person is nothing new. What is new is that there are solutions to the awkwardness."

6.Corporate Concierge

by now, the fact that working Americans don't have enough hours in the day to get everything done is more widely known than who our president is. And that's where concierge services come in. Concierge services-specifically, corporate concierge services--are currently the hottest segment of the personal services industry. "In the past five years, the corporate concierge market has increased 65 percent," says Sara-ann Kasner of the National Concierge Association.

With more corporations contracting services for their employees--anything from picking up dry-cleaning to making all the arrangements for an employee's transfer to France--the corporate concierge is fast becoming a staple of the office environment. Concierges contract with individual corporations or property managers of entire buildings, typically receiving a monthly retainer and on-site office space, which keeps start-up costs down. "Basically, they're a personal assistant doing everything from A to Z," explains Kasner. "It's definitely a people business where you really have to be a jack-of-all-trades."

Kelley Dunn (above), founder of Consider It Dunn, a corporate concierge business in Minneapolis, experienced the need for personal assistance firsthand. "I'd get home from work at 6:00, and my daughter went to bed at 8:00," recalls the single mom and former receptionist, "but in those two precious hours I'd want to spend with her, I'd have to go to Target or the grocery store."

After attending a one-day seminar on concierge businesses, Dunn quit her job in 1996, compiled a database of reliable vendors and developed marketing materials. Living off $10,000 in savings, Dunn walked all over town checking commercial buildings' directory boards for the largest tenants to pitch her services. Her first contract was with former employer Pillsbury, whom she charges $45,600 a year to station a full-time concierge on site. She's also contracted with blue-chip firms Ernst & Young and Grant Thorton, tenants in the same building as Pillsbury, and raked in 1999 sales of $150,000.

7.High Tech Public Relations

When you hear their story, PepperCom Inc.'s secret to success in the public relations arena sounds simple: The 5-year-old company offers something unique and does it very well. "We're experts at working with small technology and Internet companies and helping them figure out a one- or two-sentence description that sets them apart," explains Ed Moed (l.), 34, who co-founded the New York City agency with partner Steve Cody in 1995.

What also helped the young firm mushroom from a one-bedroom start-up into a Park Avenue powerhouse with $5 million in annual sales is its participation in one of the industry's hottest sectors--technology.

"Internet companies, particularly, realize the value of public relations in launching a product," says Richard George, former director of public relations for the Public Relations Society of America.

There's a big need for small firms that can translate high-tech chatter into English. This is particularly true as more Silicon Valleys sprout up around the nation. Among the areas expected to be hottest for tech-oriented PR start-ups are Atlanta; the Austin/San Antonio corridor in Texas; Colorado Springs, Colorado; Boston; Dallas; Denver; Fairfax, Virginia (due to its proximity to Washington, DC); Los Angeles; and New York City.

What's the bottom line? High-tech PR is a $498.8 million (and growing) slice of the public relations world, according to PRWeek Magazine, whose 1998 survey found that the top 200 firms in this industry subsector alone accounted for 25 percent of total revenues.

8.Juice Bars

They were the hangover concoctions of choice for Linda and Ted Reese, both 30, who in college developed an affinity for the vitamin-replenishing fruit smoothies they consumed after every weekend bacchanal. Even post-graduation, the two still craved the blended fruit beverages.

Forced into a smoothie-void hell when visiting family in North Carolina, the couple (below) were determined to enlighten the deprived. So they sold their Houston home, rented an apartment in Charlotte, North Carolina, and started experimenting with recipes. With Ted handling finances and Linda in charge of marketing and training, they launched Carolina Smoothies in 1996, using $120,000 in savings. Five stores later, the Reeses have projected sales of $1.6 million this year and plan continued expansion.

With industry revenues of $866 million in 1999 and a growth rate of 30 percent, according to Juice Gallery, the smoothie remains the coolest libation to ever blend into the entrepreneurial cup, far surpassing the trend stage. And while big guns like Jamba Juice dominate, start-ups can still stir up success by carving out untapped markets; co-branding with related concepts, like a vitamin store/juice bar; or targeting broader markets, not just gym-going hardbodies.

9. Online Education

While studying for their MBAs in Washington, DC, Scott Mitic, 29, and Peter Mellen (far r.), 32, decided to burn their resumes and go into business. Inspired by satellite-powered distance learning, they hatched Headlight.com in mid-1999. "Headlight is the leading source for online training for small and midsized businesses," explains Mitic. "We provide a library of more than 500 courses in everything from how to use Microsoft Word to how to prevent sexual harassment. We don't create the content; we just merchandise and sell it."

With $10,000 of their own money, the co-founders moved to San Francisco after an initial home office stint in Washington, DC, and hired a Web site designer. Their backgrounds helped--Mitic, a former high school teacher, had set up corporate training centers; Mellen had worked in IT and Web production-but the two also "spent a lot of time getting our business model straight," says Mellen. "We talked with CEOs and founders of two dozen Internet and training companies." And although it's too soon to predict sales, the partners' idea was impressive enough to win a round of angel funding.

Mitic and Mellen chose a fast-growing area of the Internet, one with few major players. Market research firm IDC predicts the Internet-based training market will explode to $7.1 billion by 2002. Mellen agrees: "There's a trend toward technology enabled learning--specifically, learning over the Web. This will be one of the key forces moving the Internet forward over the next 10 years."

While the field is still wide open for all types of online learning, business training should be one of the biggest markets. College and university courses will be hot, too, as more schools seek to offer online education.

10. Massage

You've got the footrest, the ergonomic trackball and the wrist pad--and your spine is situated in the recommended "S" shape against your posture-correcting chair. But no matter how often you take those joint-popping stretch breaks, the muscle spasms persist. So millions of us hobble on over to legit massage parlors for some alternative healing.

According to the American Massage Therapy Association, consumers spent between $4 billion and $6 billion on visits to massage therapists in 1998. And with research indicating that a basic 15-minute chair massage twice a week results in decreased job stress and increased productivity, this pop alternative treatment has opportunity written all over it--an opportunity Brian Flynn, 32, took to the retail level in the form of a walk-in massage store.

With his $800 massage certification and a location at the trendy Orange, California, open-air mall The Block, Flynn and partner John Gessford (far l.), 34, used $125,000 in personal savings to open Past Tense Inc. Offering 10-minute "Stress Buster" massages for $9.95 and 20-minute "Rest Stops" for $19.95, the pair have recouped double their start-up investment since opening in 1998 and plan to launch a second store in Los Angeles next year.

Besides attracting scads of shoppers with the store's no-disrobing, no-oil, no-hassle environment, Past Tense has also landed corporate accounts, providing mobile massages at local businesses. For those without the capital to open a retail location, focusing on mobile massage alone can be an inexpensive way to get started. "The [quick-massage aspect] of the industry is really in its initial stages," says Flynn, "and it's only going to get bigger."

11.Online Auctions

Hulking sites like eBay, Amazon.com and the new Microsoft-backed FairMarketPlace conglomerate might seem to block the online auction sun from shining on smaller start-up sites. But there are still ways to grab some of those rays. College friends Troy Smith (l.) and Jeff Dull, both 24, took a different approach when they launched AuctionWatchers, a site that compiles computer-related auctions from other sites in up-to-date searchable listings.

"Our focus was 'Don't try to do the entire market; do a section of it very well,' " Smith says. "We try to break down our items into intelligent groupings, so if you want to look for something, you can easily filter out irrelevant items." AuctionWatchers launched in 1998 from Smith's Chicago home, with internal start-up funds of just under $5,000. While AuctionWatchers took a build-it-yourself approach to the Web site, many companies offer auction-building services and software to help you if you're not so savvy.

Forrester Research calculates the online auction market will grow to more than $19 billion by 2003. Another research firm, Jupiter Communications, predicts the number of business-to-consumer auction users alone will grow from 1998's 1.2 million to more than 6.5 million by 2002. How to profit from those users? AuctionWatchers generates revenues through advertising and by charging listing fees to participating auction sites.

Smith still sees room for entrepreneurs in the online auction world, if they don't attempt to be all things to all people. "There will definitely be more consolidation as smaller auctions with a loyal following look attractive to larger sites [as potential acquisitions]," he acknowledges, adding, "I see specialty auctions, like an auction only in Depression glass, being a viable business." With up to half-a-million hits each month, AuctionWatchers has certainly found its niche.

12. Action Sports Camps

Yes, people still like to bond in teepees, stroll on nature walks and frolic in Lake Who Cares. But expanding beyond sedate outdoor activities is today's ticket to entrepreneurial popularity. Whether it's surfing or snowboarding, there are ordinary folk who'd love to enjoy action sports (they're no longer considered "extreme") but think they can't.

Hottest candidates for action sports camps? Women--who rank windsurfing, ice hockey and snowboarding among their favorite sports--and young girls. "Boys learn from [other] boys, but girls don't because they're taught not to do crazy, radical things--they might hurt themselves," says skateboarder/snowboarder/surfer/professional photographer Patty Segovia (r.), 29.

Segovia's All Girl Skate Jams--all-ages, Vans-sponsored skateboarding contests--are now in their fourth year, and she launched her Encinitas, California, all-female skateboard camp of the same name last September. Media hype surrounding skateboarding fluctuates, but it's definitely this year's "it" sport. Recent stats from the National Sporting Goods Association show 5.7 million participants, 22.6 percent of them female. Vans plans to have six skate parks open by this spring and projects first-year sales of $3.5 million for its first park in Orange, California.

Melodie Woods, senior vice president of programming and development for entertainment company Girl Games Inc. in Austin, Texas, says accessibility fuels the trend: "Skateboarding's everywhere because anybody can do it, and it's cheap." Opening an action sports camp isn't so cheap: It cost Segovia about $5 million. But since Mattel's Skateboard Shannen doll hit the shelves last fall, girls will be (kick)flipping to enroll.

Alternative Networks

Every once in awhile, the media get ahold of something fresh coming out of a local cable access or radio show. You hear about it in Nebraska, but when the heck will you ever get to experience the joy yourself? Sometimes these things do get syndicated--Loveline started on Los Angeles radio station KROQ, and The Tom Greene Show began on Canadian cable--but if MTV doesn't share the wealth, who will?

You, that's who. Internet entrepreneurs are busy showing us new original short films (see "Online Film Distribution" on page 42) and creating their own radio shows, but it's time someone dusted off the old-school oddities to broadcast to Web freaks in the night. College radio, cable access shows, UHF hits (Wally George, anyone?), old USA Night Flight episodes--we're calling you.

Instant Spas

It's so annoying when you have to go here to get your hair coifed, there to get your toenails varnished, and over there to feel a little Pilates goodness. No wonder day spas became instantly popular when they sprang up several years ago. Making all feel-good/grooming appointments available in one storefront, they offered the luxury of a week at a spa, condensed into one day.

But today, few of us can afford even a day off work. More like an hour. In other words, pamper us silly, but make it snappy. Day spas in urban meccas like New York City are hot. "Instead of three-martini lunches, people are visiting the spa and ordering in lunch," says Eva M. Jensch, principal of Spa Concepts International, a Sonoma, California, consulting and management firm serving the spa and health resort industry.

Using the Web can streamline the process. Your site could list the services offered, like hair styling and manicures; clients could make appointments online.

Jensch estimates urban clients would spend $60 for a lunchtime treatment. That sum won't instantly drain their bank accounts--but it will eventually swell yours.

Teen Beauty Stores

We don't want to widen the generation gap between teens and everyone else, but let's face it: Teens seeking their favorite MAC eyeliner in Nordstrom don't like to be sneered at by Louis-Vuitton-bagged women just for wearing corduroys and trainers. They need a safe haven where they can spend money (teens spent $141 billion last year, according to Teenage Research Unlimited) without feeling loathed for spending a little time.

We're talking about a beauty store for teens-- like Skin Market in Los Angeles--with room to lounge, TV screens to watch, Net stations to use and books to peruse. Keeping prices teen-friendly (less than $15) when offering so much fun requires high volume. That's why hosting makeup demonstrations and maintaining a strong Net presence are imperative.

Harvey Entertainment, the licensing force behind junior brand Hot Stuff, picked the brains of top teen magazine editors last summer and found that dabbling in, and shopping for, cosmetics is still one of girls' favorite after-school activities. Since this is unlikely to change--no matter what feminist trends emerge--we suggest you check the vacancies at your local mall.