Resuscitating Drkoop.com

SAN FRANCISCO (09/07/2000) - Drkoop.com is dead. Long live Drkoop.com.

That's the message from the troubled health site's new management. In an 11th-hour rescue Aug. 22, a group of investors, led by former ExciteAtHome executive Richard Rosenblatt, took control of Drkoop.com Inc. and agreed to inject $27.5 million into the all-but-bankrupt Austin, Texas-based company. Rosenblatt, Drkoop's new CEO, drew a management team from Prime Ventures, a Santa Monica, Calif., venture capital firm he founded in March.

"We're not going to do business the way they had done it in the past," says Edward Cespedes, DrKoop's new president and Prime Venture vice chairman. "They made a lot of very bad decisions."Adds Rosenblatt: "Once the cloud over Drkoop is gone, people will see that it is being run like a real company."

Think of Prime Ventures as a paramedic for distressed dot-coms. Like the turnaround artists called in to restructure corporations during the leveraged-buyout craze of the 1980s, Prime Ventures thinks there's money to be made in imposing financial discipline on wayward Net companies.

Rosenblatt says Prime Ventures was considering rescuing several failing Net companies in early August when a 911 call came in from Drkoop. The company had burned through the last of its cash and faced imminent shutdown as it confronted several securities-fraud suits from disgruntled shareholders. (The suits will likely be consolidated into a single action.) "We chose to focus on Drkoop. Once you removed the lawsuits and the spending, there was a strong company there. Drkoop has a very strong brand," says Rosenblatt, who founded iMall and sold it in 1998 to Excite, now ExciteAtHome, for $565 million.

Bailing out foundering Net companies is becoming a growing business. Another of Drkoop's five new investors, Austin-based Eco Associates, launched a $200 million venture fund in August to rehabilitate down-and-out dot-coms. "We had been big believers in the Internet and new economy but not in [its] business methods. We believe these companies have certain assets that were undervalued," says Eco CEO Scott Hyten, who joins the Drkoop board of directors. He says his fund has been deluged with inquiries from troubled Internet companies.

Unlike manufacturing companies that attracted turnaround artists in the '80s, troubled Internet ventures like Drkoop have few assets, save for their URLs and advertising contracts. Some industry observers question whether anyone can turn around the company cofounded by former Surgeon General C. Everett Koop.

"They don't realize just how much trouble their competitors are having making the [content] model work," says Jupiter Communications health care analyst Claudine Singer of Drkoop's latest management team. "These guys don't know much about health, but they do know about investment and running companies in an efficient manner. They may be able to turn it around enough so that they will get offers from legitimate suitors."

Drkoop's new management team didn't waste time letting Wall Street know they mean business: Within days of taking over Drkoop, the executives fired a third of the company's staff last week. (Koop remains chairman, and founding CEO Donald Hackett retains his seat on the board.) The new team plans to wean Drkoop from its dependence on advertising by offering services to hospitals and physicians through a partnership with Malvern, Pa.-based medical-technology company Shared Medical Systems.

Shared Medical executive Bill Carlson says the turmoil had scared off potential clients of the SMS-Drkoop service. "But we expect a resurgence in interest," he says. "The management change is almost the perfect prescription. "Rosenblatt and Cespedes say they've signed three-year contracts and will move to Austin. Says Rosenblatt: "We're going to focus on the company until it is sold or successful."

• Bookmark this page
• Share this article
  •  
  • facebook
  • slashdot
  • digg
  • Reddit
  • stumbleupon
  • linkedin
  • twitter
• Got more on this story? Email Computerworld
• Follow Computerworld on twitter

• Share
  Share this article

  •  google+
  • facebookfacebook
  • slashdotslashdot
  • diggdigg
  • RedditReddit
  • stumbleuponstumbleupon
  • linkedinlinkedin
  • twittertwitter
• print
• email
• Bookmark