Starmedia

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StarMedia
Type Latin Internet
Founded 1996
Headquarters Issy-les-Moulineaux, France
Key people Fernando Espuelas, Founder
Jack Chen, co-Founder
Industry Internet
Website www.StarMedia.com

StarMedia is a well known Latin Internet brand, founded in August 1996 by Fernando Espuelas and Jack Chen as the first pan-regional Internet portal for Spanish and Portuguese speaking audiences. During the dot.com boom of the 1990's, StarMedia became an iconic company when it raised the first dollar of venture capital for a Latin Internet company, and then did the first IPO in the sector.

In total, StarMedia raised over $500 million in a series of private and public offerings, reaching a market capitalization of over $3.8 billion dollars at its peak. According to the Harvard Business School Case StarMedia: Launching a Latin American Revolution, by 1999 StarMedia was the Latin American market leader. StarMedia is owned by France Telecom subsidiary Orange, serving "more than 24 million" Hispanic Internet users per month, according to company statements in 2008.

StarMedia.com is a free-to-web global service connecting Spanish-speakers through the Internet as well as providing consumers relevant and extensive information and services. StarMedia has local operations in Colombia, Mexico, Peru, Spain and throughout the United States (Los Angeles, Miami and New York)

Contents

[edit] Founding, Capitalization and Growth

Fernando Espuelas and his childhood friend, Jack Chen, founded StarMedia in 1996 with $100,000 in personal savings, credit cards and loans from friends and family.

A year later, after being turned down by over 50 venture capitalists across the U.S., the pair were successful in raising $3.5 million from Susan Segal, general partner of Chase Capital Partners and its technology affiliate Flatiron Partners. Soon after, StarMedia raised additional venture capital from Warburg, Pincus Equity Partners and the New York City Investment Fund. In 1998, StarMedia made history when it raised an additional $80 million dollars in the largest private placement for an Internet company up to that time. David Rockefeller, leading Latin American families, Intel Capital, the Hearst Corporation and GE Capital were the principal investors in that round.

StarMedia went on to raise over $500 million dollars in a combination of public and private offerings. Well before the twin stock market and Latin American collapses of 2000-2001, which severely impacted StarMedia's business and share price, major StarMedia investors had realized significant profits on their StarMedia investments. Investors such as Warburg, Pincus Equity Partners, Intel Capital, GE Capital, Hearst and many other institutions and individuals sold their StarMedia shares at or near the peak of the market. Espuelas writes in his book Life in Action: “Because I believed in our company and our mission, I had never sold a single StarMedia share or stock option. I personally lost close to $500 million.”

According to the Harvard Business School case StarMedia: Launching a Latin American Revolution , written by professors Thomas Eisenmann and John K. Rust, "by the fall of 1999, StarMedia had sprinted to a sizable lead in the race to acquire Latin American Internet users. Its pan-regional, horizontal portal was the first to target Spanish- and Portuguese-language speakers on the Internet, registering 1.2 billion page views in the third quarter of 1999. Thirty-three-year-old StarMedia co-founder Fernando Espuelas was the toast of "Silicon Alley" and a recognized hero throughout Latin America. A picture of him on the cover of Internet World magazine--ripping his shirt open to show the StarMedia logo, like Superman, summed up the spirit of the company."

StarMedia implemented Espuelas' "relentless innovation" strategy. StarMedia launched web-based email and chat in Spanish and Portuguese before its U.S.-focused competitors such as Yahoo, Excite, Lycos or AOL did in English. In 1996, Espuelas launched the first ever television campaign across Latin America promoting the Internet and the StarMedia brand. Along with CBS News, it launched the Web's first video streaming news channel in 1997. Other innovations included the first instant messaging system in Latin America; in partnership with HP the first out-of-the-box e-commerce platform for small businesses; and with IBM, the first free ISP in the region. As part of Espuelas' push, StarMedia acquired 12 other media and technology companies in the U.S., Latin America and Spain. At its peak, StarMedia had over 1,200 employees in 18 offices across 12 countries.

[edit] First Public Offering of a Latin Internet Company

StarMedia went public on Nasdaq under stock symbol STRM, on May 25, 1999 in an IPO of 7 million shares priced at $15 per share. It was the first Latin Internet company to go public, eventually reaching a market capitalization of $3.8 billion dollars. According to the New York Times in an article from May 31, 1999, Espuelas, who had immigrated with his mother from Uruguay with $100 dollars, was worth over $170 million at the end of the first day of trading; at its peak, Espuelas' holdings in StarMedia were valued at over $500 million dollars. He never sold any shares or stock options.

StarMedia became one of the best known Latin Internet Stocks on Nasdaq during the late 1990s dot-com boom, in addition to Quepasa, Terra, and AOL Latin America.

[edit] Technology market blow-up, Latin American regional bust and sale

During the .com bust of the early 2000s, which coincided with the worst Latin American economic collapse in a generation, StarMedia lost almost all of its market value, and was the subject of extensive shareholder litigation. After an independent investigation initiated by the Board found no wrongdoing, the class-action suit was settled by the Board and its insurance company, a full release was given by the shareholders to the former management and the lawsuits dismissed by the Federal judge. (Class Action notice of settlement in re Starmedia Network, Inc. securities litigation, July 29 2002)

In August of 2001, Espuelas resigned as CEO after conflicts over strategy with the Board of Directors. Susan Segal was named head of the company. Segal decided to abandon StarMedia's core business to focus on the mobile solutions subsidiary, StarMedia Mobile. The StarMedia network of websites, related intellectual property and over 25 million unique users per month audience were sold to the Spanish ISP eresMas Interactive for US$8 million in cash on July 3 2002. The following week eresMas, now claiming to be the leader of the Spanish-language Internet industry because of its acquisition of StarMedia, was acquired by France Telecom subsidiary Wanadoo SA (now called Orange after a rebranding in 2006) for $250 million dollars. According to Orange, StarMedia is the leading Spanish-language portal in the world.

In 2002, StarMedia Mobile was renamed CycleLogic and shareholders approved a one-for-1,000 reverse stock split. Shortly thereafter, CycleLogic deregistered its shares with the Securities and Exchange Commission. Segal ran the company until it filed for bankruptcy in 2003.

On March of 2004 the assets of CycleLogic were acquired out of bankruptcy by an international group of investors, becoming a part of the IMS group of companies, Intelligent Mobile Solutions Inc.

On March 29, 2006, the U.S. Securities and Exchange Commission (SEC) sued Espuelas and several members of the StarMedia executive team alleging in a civil lawsuit that the accounting treatment of a certain transaction relating to StarMedia's Mexican subsidiaries did not meet GAAP. The civil lawsuit relates to accounting decisions made by StarMedia in 1999 and 2000.

At the time of the filling, Espuelas, who cooperated with the SEC investigation over 5 years, told Adweek's Marketing & Medios magazine: "I know that I did nothing wrong.…It [the lawsuit] is related to accounting issues at the company. I personally was not involved in accounting at the company. I'm very confident that the company did things right. We had a rather elaborate control function, both internal and external, and to my knowledge that was undertaken correctly."


[edit] External References

  • www.starmedia.com
  • Harvard Business School Cases StarMedia: Launching a Latin American Revolution
  • Hispanic MPRM StarMedia launches new entertainment portal for Spanish speakers, May 2008
  • The Earth Times starMedia Launches New Entertainment News Channel, May 2008
  • Semana Los portales vuelven a la carga: Terra y Starmedia, sobrevivientes de la burbuja punto com, tienen fe en la nueva Internet, March 2008
  • espuelas.com Fernando Espuelas' Official Site
  • WNews Subversivos da Internet latino-americana, August, 2006
  • iMasters Entrevista exclusiva: Bob Wolheim, March, 2005
  • The Industry Standard Fernando Espuelas July, 2001
  • Exame Reinventando a Starmedia, July 2001
  • Associated Press Latin American Deals with Internet, Obstacles, April, 2001
  • PC-News.com Fernando Espuelas habla sobre la brecha tecnológica en el mundo, March 2001
  • MarketWatch StarMedia sees itself as Latin leader, December 2000
  • La Prensa Starmedia pregona su segundo lugar en Brasil, October, 2000
  • El Colombiano Fernando Espuelas, creador de un imperio para la comunidad virtual February 2000
  • BBC News Annan wants 'information for all', November 2000
  • CNN Twenty Latin American Leaders of the Internet Named by CNN, November 2000
  • Computerworld Free Net Access Rocking LatAm ISP Market, November 2000
  • Baquia Starmedia, el territorio hispano-luso le pertenece, September, 2000
  • The New York Times INTERNATIONAL BUSINESS: When Funds Abroad Fill a Void at Home; Financing Latin America's Start-Ups, August 2000
  • CityJournal The Triumph of Silicon Alley, August 2000
  • Fast Company What We Have Here Is No Failure to Communicate, June 2000
  • Bumeran Trabajar en Internet es como correr en Fórmula 1, May 2000
  • The New York Times StarMedia Faces New Challenges in Latin America, May 2000
  • IDG Los dos gigantes latinos cruzan el charco, May, 2000
  • The Industry Standard Santana Will Jam With StarMedia, May 2000
  • The San Francisco Chronicle Santana reaching out on Net via Hispanic StarMedia, Webcasts of upcoming concerts, online chats planned, May 2000
  • La Nacion Presente y futuro en la ruta de StarMedia, May 2000
  • Computerworld StarMedia Tops Analyst Expectations in Q1, May, 2000
  • Forbes Ramp Champs, May 2000
  • Computerworld Magazine StarMedia to Wire Public Schools in LatAm to Net, May 2000
  • Info Magazine A internet não é mais a mesma, May 1999
  • Hispanic Business Magazine Hispanic E-commerce Market Expands, May 2000
  • Revista HSM Com o encanto do virtual: Todos pensavam que a StarMedia remava contra a corrente, mas ela descobriu um tesouro escondido na América Latina, April 2000
  • Computerworld Magazine Espuelas: StarMedia Leads LatAm Portal Market April, 2000
  • Fortune Magazine Going Global With StarMedia Chief Fernando Espuelas, April 2000
  • MarketWatch StarMedia reports 531% jump in revenue, April 2000
  • New York Magazine Profile: 35 Under 35, April 2000
  • Internetnews StarMedia, L'Oreal Launch Portal for Spanish-Speaking Women, March, 2000
  • atnewyork.com 'Questions for ... Fernando Espuelas', March 15 2000
  • Istoe Mudança de hábito: O empresário Fernando Espuelas radicaliza e deixa de cobrar acesso de todos os clientes da StarMedia, February, 2000
  • Fortune Magazine Chase's Venture Capital Elite They're not rock stars; they're more like a hot studio band. Chase Capital Partners keeps the hits coming, January 2000
  • The New York Times VISIONS: CITIES - Manifestoes To Give City A New Edge; Cooper Union for Technology, January 2000
  • Newsweek Latin America's Internet Star: Fernando Espuelas, January 2000
  • Latin Trade Magazine Rocket Man - Internet Entrepreneur Fernando Espuelas, StarMedia, December 1999
  • Veja No olho do furacão, December 1999
  • The New York Times C.E.O ROUND TABLE; Online Pioneers: The Buzz Never Stops, November 1999
  • Newsweek A Regional Race Into Cyberspace - So What If Many Latins Still Await Their First Phone? Big Money Is Mobilizing To Bring The Continent Online In A Hurry, November, 1999
  • BusinessWeek Battle for the Net: The rush is on to cash in on Latin America's fast-growing market, October 1999
  • Noticias Los grandes sitios latinos seguirán los pasos de Terra y Starmedia, November, 1999
  • InfoWorld StarMedia: Latin American provider to offer wireless services to Spanish-speaking users, October 1999
  • New York Magazine The 1999 New York Awards: Fernando Espuelas, 1999
  • SmartMoney Starmedia Launches Brazilian Internet-Access Service, September 1999
  • The New York Times On-Line Network Expands, August 1999
  • The New York Times Treasury Chief Urges Inner-City Investment, July 1999
  • TVmas Magazine Premios internacionales de CNN y Time, July 1999
  • The New York Times Stocks Drive a Rush to Riches In Manhattan's Silicon Alley, May, 1999
  • Veja A batalha pelos portais, January 1999
  • El Espectador “StarMedia abre en Montevideo su sede para América Latina”, January, 1999.
  • Jornal do Commercio Bate-papo em português na página da Starmedia, January, 1999.
  • La Nacion Portales, la movida que se abre paso en la Web latina, January, 1999
  • Computerworld Latin America booming with IT skills, infrastructure problems, December 1998
  • PCWorld StarMedia: sabor latino en la Internet, December 1998
  • Wired Magazine StarMedia Wants US Hispanics, November, 1998
  • San Francisco Chronicle Viva Internet StarMedia Inc. lands $80 million to fund Latin American Web community, October 1998
  • Wired Magazine Yo Quiero StarMedia September 1998
  • The Brookings Institution The New York City Investment Fund: An Emerging Model For Corporate Engagement in Urban Development
  • El Espectador “StarMedia abre en Montevideo su sede para América Latina”, January 1999.
  • The New York Times Media Company Arrives, November 1997
  • Wired Magazine New York Dream Job: Director of Community, September 1997
  • SEC v. Fernando J. Espuelas et al. Civil Action No. 06 CV 2435 (S.D.N.Y. filed March 29, 2006)