At first glance, Socialtext doesn't look like a company running on a shoestring budget. Founded less than two years ago, it now has more than 50 customers around the world, including Walt Disney (DIS) and Eastman Kodak (EK), which use its Web software to help people collaborate online. Yet a peek behind the slick Web site reveals a truly virtual company: no offices, only 10 full-time people -- all working at home, and a chief executive who answers the phone himself.
Socialtext co-founder and CEO Ross Mayfield makes no apologies for the threadbare setup. Increasingly inexpensive and ubiquitous information technologies such as the Internet, wireless connections, and cheap computer servers, he says, allow him to run the company with far less money and fewer people than he could have a decade ago -- without scrimping on features or quality. Says the 34-year-old serial entrepreneur: "This is the prototype of the new Internet startup."
BEATS A HUNDRED E-MAILS. That's not a boast. It's the stark new reality for many tech entrepreneurs. Socialtext is helping forge this new path -- not the least with its own software. Based in Palo Alto, Calif., Socialtext sells so-called wiki software. Offered as a service over the Web, the software makes it quick and easy to set up Web sites with a simple browser.
Anyone in a company or department can post material on these wikis, and anyone else, subject to approval by the creator, can edit or add to them. They've become a cheaper, more flexible collaboration alternative to both overtaxed e-mail and complex groupware such as IBM's (IBM) Lotus Notes.
Essentially, Socialtext's wiki software allows everybody in a group or even a whole company to literally stay on the same page -- that is, on their shared Web pages. That speeds up everything that involves coordination, helping to cut costs.
Stata Labs, a San Mateo (Calif.) startup that makes e-mail software, uses Socialtext's wiki service to track projects, post presentations, and allow employees and partners from Boston to India to work more closely together. Although Stata can't quantify the exact savings, it has reduced a raft of expenses. The wiki has made it easier to outsource programming and public relations and reduced the need for constant back-and-forth via e-mail and phone.
DOT-COM VET. Mayfield, a tall, gangly Palo Alto native, stumbled onto wikis via an unlikely route. After graduating from the University of California at Los Angeles (UCLA) with a degree in political science, he opted to work in nonprofits, in hopes of changing the world. He landed in Eastern Europe in 1995 as a $300-a-month special adviser to Lennart Meri, Estonia's first post-Soviet President. He wrote some of Meri's speeches and ultimately developed a Web site for the President's office, where he caught the Internet bug. "I realized I could have a greater impact being an Internet entrepreneur than as a bureaucrat," he says.
After starting a broadband service provider and a Web-design and software-development company in Estonia, he returned to San Francisco in 1998, where he got a fast education in boom-era entrepreneurial frenzy. He co-founded RateXchange, an online business-to-business marketplace for telecommunications capacity, but it went south in the telecom bust.
Then he dabbled in a few other ventures, getting interested in the social dynamics of e-mail and the Web. By the end of 2002, Mayfield and some friends became jazzed with the business potential for wikis, which were mostly a nerd phenomenon. Thus came Socialtext.
NO FANCY OFFICES. Befitting the leaner times, Socialtext has subsisted on less than $300,000 from friends and other social-software entrepreneurs such as LinkedIn CEO Reid Hoffman and Tribe Networks CEO Mark Pincus. Last month, it got another $300,000 from the Omidyar Network, the semi-philanthropic organization launched by eBay (EBAY) founder and Chairman Pierre Omidyar and several other individuals. That's in stark contrast to the boom, when multimillion-dollar initial rounds were all but mandatory.
How has Mayfield survived on the cheap? Partly by using his company's own wiki software to get things done. Mayfield does his work on Socialtext's internal wiki wherever his laptop is, from his home office to the nearby café that has free wireless Internet service. So do colleagues in places such as Silicon Valley, Chicago, Indianapolis, New York, Canada, and Taiwan.
They also use free Internet-based teleconferencing and long-distance calling services. "The infrastructure costs are a tenth of what they used to be," says Mayfield. "We can do more work with lower cost because of teleconferencing and the Internet."
"TRANSFORMATIONAL." They also use the Net to do all their marketing, essentially for free. For one, Mayfield and several other founders write well-read blogs on social software and related topics. Mayfield also pitches his wikis as discussion boards for high-profile events such as the PC Forum, giving hundreds or thousands of influential industry players a taste of how the software works.
When Stowe Boyd, managing director of Corante Research, a technology-information service, encountered a Socialtext wiki at a workshop, he says, "It was transformational. It became much more of a group experience."
Finally, Socialtext draws on the resources of the open-source software movement, in which programmers volunteer to improve the software. Socialtext, which charges $995 a year for five users plus $30 per additional user, also offers a free open-source wiki called Kwiki for do-it-yourselfers. Mayfield draws new feature ideas for Socialtext from seeing what smart techies do with it.
More than that, he imbues the for-pay product with the same philosophy, leaving it open for customers to modify. "People value the ability to extend the tools themselves, so we don't have to invest in very customized areas," he says.
MISSIONARY ZEAL. All that frugality won't ensure that wikis will become the next big software phenom. Analysts figure larger companies such as Microsoft (MSFT) and IBM could simply make them part of their suites of software. At the same time, Socialtext's niche is attracting attention from new rivals. JotSpot, a new company in Palo Alto recently launched by Joe Kraus and Graham Spencer -- two founders of the boom-era portal Excite (ASKJ), is backed with $5.2 million in venture capital. Kraus contends that JotSpot has a more ambitious goal beyond mere collaboration, allowing minimally technical people to write customized software (see BW Online, 10/6/04, "Do-It-Yourself Software for All?").
But those who know Mayfield say that in contrast to his easygoing demeanor, he won't get shoved aside easily. "He is tenacious and scrappy," says investor Pincus. More than that, he notes, Mayfield has a zeal about social software that transcends his own company. If wikis do catch on widely, Mayfield no doubt will be a big reason why. By Rob Hof in Silicon Valley