First Virtual

First Virtual Holdings was a company formed in early 1994 to facilitate Internet commerce. The first product offering from First Virtual was an Internet payment system, which was developed quietly and publicly announced as a fully operational open Internet service on October 15, 1994.

First Virtual provided most of the features of both eBay and PayPal before those companies existed.

Founding

Key people behind First Virtual were Nathaniel Borenstein, Marshall Rose, Einar Stefferud, and Lee Stein. From The New York Times^[1]:

"The First Virtual approach is to create an automatic authorization system that requires no previous relationship between buyer and seller. In the era of electronic commerce, the new system may herald a shift comparable to the transition a generation ago, when the members-only department store credit card gave way to use-anywhere cards like Visa and Mastercard.

"The new company, based in San Diego, is the brainchild of Lee Stein, a San Diego lawyer and accountant who is its president, and three computer scientists long involved with the Internet global web of computer networks. First Virtual's big partners are Electronic Data Systems Inc., a division of General Motors, and First USA, a fast-growing credit card company in Dallas that will issue a Visa card for the new service."

Breakthrough usage of technology

First Virtual's system differed in many ways from all other proposed approaches to Internet commerce, most notably in the fact that it did not rely on encryption or any other form of cryptography to ensure the safety of its commercial transactions. Instead, safety was ensured by enforcing a dichotomy between non-sensitive information (which may travel over the Internet) and sensitive information (which never does), and by a buyer feedback mechanism.

First Virtual's protocols were built atop existing IETF protocols, and subject to public discussions. The backbone of the system was designed around Internet email and the MIME (Multipurpose Internet Mail Extensions) standard. First Virtual used regular email to communicate with a buyer to confirm charges against their account. Sellers could use either email, Telnet, or automated programs that made use of First Virtual's Simple MIME Exchange Protocol (SMXP) to verify accounts and initiate payment transactions.^[2][3]

Initial venture capital

Early rounds of investment came from leading institutions such as First Data, First USA, and GE Capital, leading to a successful IPO in 1996. First Virtual was sold and changed its name to MessageMedia (for $0.60 per share) on December 16, 1998.^[3]

Bought out by DoubleClick

MessageMedia used the FV Email tools with considerable success in its Customer Relations Management Services (CRM) until MessageMedia in turn was forced to sell out to DoubleClick in the dot com crash for US$0.16/share in late 2001.^[3]

References