Media Coverage

PLUGGED IN
New Dot-Com Deal Signals Changing Times
By Mark Veverka

Just when you thought the dot-coms were dead and most venture capitalists were under water, along comes an intriguing new Internet startup that helps ship stuff over land and through the air.

Early this week, Technology Crossover Ventures of Palo Alto is expected to announce a first-round investment of $15 million in Integres of Ranch Cordova, Calif., near Sacramento. Ordinarily, we don't get too riled up over the funding of an early-stage company. And before the bubble, a $15 million infusion warranted a yawn. But the folks at TCV and Integres might be on to something.

Integres is a virtual freight-forwarder that is designed to become a one-stop Internet shop for commercial shipping. Born in the belly of UAL's headquarters outside Chicago, Integres was an experiment by United Airlines to offer small and mid-sized businesses a way to air-ship on United without using a middleman. Launched with a few million dollars in seed money from UAL and the blessings of its executives in 2000, it didn't take long for former United Airlines cargo chief Jim Hartigan to realize that he may have stumbled on to something bigger than a portal for air cargo. "This is a once-in-a-lifetime opportunity," he says.

What Hartigan has is a bricks-and-clicks Web-based business that is poised to grab a piece of the $50 billion heavy-freight market. Realizing that the startup was in no financial position to raise venture capital, UAL executives cut Hartigan loose to pursue his business, which if successful should serve UAL well as an investment as well as a way to increase its air cargo business.

Integres has signed up some of the nation's transportation giants as strategic partners and investors, including Roadway, American Airlines and US Airways. Integres is banking on innovative logistics software woven into a Web-based system to optimize shipments for the transportation companies while giving the customers seamless and transparent ways of tracking their goods.

How does it work? Typically, a small-business customer will go to a freight-forwarding house, which in turn books shipment with a trucking, ocean-shipping or air-cargo outfit, or a combination of all three. Because Integres is directly linked to the carriers and the truckers, its technology is expected to provide better management, faster delivery and lower costs. More important, it will steer the traffic to each of the partners.

The startup is a particularly big step for Roadway, which launched Roadway Air through Integres. Whereas the trucking outfit could not offer its customers much in the way of air freight alternatives, it now can book directly on any one of Integres' airline partners, which together boast about 3,000 aircraft and 12,000 daily flights to some 400 destinations.

Akron, Ohio-based Roadway launched its air cargo service at the beginning of this year, which essentially put Integres in full throttle after a soft launch late last year. Integres' call center in Northern California is already fielding more than 100 quote requests a day, Hartigan says.

Hartigan and his board, which is chock-full of veteran transportation and technology executives, opted to locate Integres in suburban Sacramento, close enough to tap Silicon Valley for computer talent but more affordable than the Bay Area. For all intents and purposes, however, it didn't matter where the company was located because the business model is virtually asset-free; all of the trucks, planes and other heavy equipment are owned by the strategic partners. With the TCV investment, Integres, which has 49 employees, will have more than enough cash to see itself through the end of the year, Hartigan says. If all goes according to plan, the startup should be profitable by the end of this year or early in 2003, he says.

TCV partner and Integres board member Henry Feinberg indicated that the idea is to get cash-flow-positive as soon as possible. "I come from the old school. I only believe in earnings and free cash flow. They tell the tale," Feinberg says.

And once the books are in the black, a public offering could be on the runway. "We would like to be in a profitable situation before we go public," Hartigan says.

Boy, how times have changed.