Internet entrepreneur 'somehow . . . still in the game'

                                                        By Reid Kanaley
                                                   INQUIRER STAFF WRITER
                                              August 29, 1999.
                     http://www.phillynews.com/inquirer/99/Aug/29/business/MARV29.htm

                           Marvin Weinberger, the dogged entrepreneur who launched his Internet business, Electric
                            SchoolHouse, in March after a year-long struggle, is still pursuing his dream.
                            Still hoping for a miracle.

                 After raising $1.4 million from investors, pledging his house and all he owns, and spending $2.4 million
                 of his personal funds just to get the business started, Weinberger has continued a desperate fight to keep
                 it alive.

                 "Somehow, we're still in the game," Weinberger said last week. Having struggled through the spring and
                 summer, e-SchoolHouse has attracted a potential buyer, he said.

                 Meanwhile, Weinberger, a self-proclaimed "serial entrepreneur," is about to start a second business,
                 Innovation Factory, an incubator for start-up Internet companies, even as he nurses hopes for a third, a
                 Web site called MyCharity.com.

                 "Most people would have just sat on whatever money I have, and reduced expenses" to conserve
                 dwindling resources, Weinberger, 44, said in an interview at his Narberth headquarters.

                 As he has done every day for the last 18 months, Weinberger wore his faded green cap emblazoned with
                 the Electric SchoolHouse logo. "Instead," he continued, "I said, 'I know, I'll spend more money, in the
                 hopes that we'll pull up the nose of the airplane.' "

                 The possibility that he could crash and burn has plagued Weinberger for the year and a half since he left
                 the employ of Infonautics Inc., a company he cofounded in 1993, to pursue his dream of a safe Internet
                 service.

                 His is the story of one entrepreneur among thousands attempting to make it big in the explosively
                 rewarding - and monumentally risky - Internet industry. Venture capital groups say they expect at least
                 half of all start-up companies that receive outside funding to fail.

                 For 11 months last year and early this year, The Inquirer followed Weinberger as he hunted and pleaded
                 for venture capital in his quest to start Electric SchoolHouse.

                 But starting the business was no guarantee of success.

                 The five months since he officially launched Electric SchoolHouse with a grand party at its Narberth
                 offices - inside a former public elementary school - have been wrenching for Weinberger and the people
                 around him.

                 Simply put, the business has bombed in its mission as an education-oriented, child-friendly Internet
                 service provider.

                 Despite months of promotions on public television stations, first in Philadelphia and then in Chicago,
                 Los Angeles and Sacramento, Calif., only a few hundred families have become paying subscribers.

                 "People weren't interested in that," Tom Shoemaker, the Electric SchoolHouse president, whom
                 Weinberger had hired away from the AT&T Worldnet executive offices a year ago, conceded in an
                 interview. "I said to Marvin, 'I love you, pal, but if you want to continue with the model you have, it isn't
                 going to work.' "

                 Rather than give up, however, the Electric SchoolHouse management team, led by Shoemaker and Susan
                 Murphy, an educational-content guru who left Comcast Corp. to join Weinberger, spent the spring and
                 summer recasting the company as a Web site to connect schools and families.

                 As it now functions, the site http://www.eschoolhouse.com is a place for teachers to post and grade
                 assignments, for students to keep a "virtual backpack" of homework and activities, and for parents to
                 review a "virtual fridge" that keeps them abreast of their child's schoolwork and able to trade e-mail
                 with teachers.

                 The company tested features of the service during summer sessions in the Methacton, Wissahickon and
                 Springfield, Montgomery County, school districts, and in several schools in the state of Delaware.
                 About 100 teachers and 2,000 families are already signed up to use it, Shoemaker said.

                 And as the back-to-school season gets under way, Shoemaker and Weinberger believe they are on the
                 cusp. They are considering a buyout offer from a public company that Weinberger declined to name. The
                 right deal, he hopes, will rescue both Electric SchoolHouse and the fortunes of Weinberger and his
                 investors.

                 "We're at a crossroads," Shoemaker said. "It will play out in the next 30 to 60 days."

                 Weinberger said his foray with Innovation Factory was in part a diversion from the tensions of Electric
                 SchoolHouse. He has invested $150,000 to start the business incubator.

                 He had announced his intention to open a different business, MyCharity.com, during the Electric
                 SchoolHouse launch party in March. But Weinberger says now that the Web site, where consumers
                 would make purchases and donate part of the price to charity, was too expensive for him to pursue just
                 now.

                 In hindsight, Weinberger said, he realizes that he has made mistakes with Electric SchoolHouse. "A lot
                 of mistakes. But we're still here," he said.

                 For starters, he said, "We didn't deliver the goods in a timely fashion." In trying to build an Internet
                 access service to compete with America Online and thousands of other dial-up services, he had spent
                 months, and millions of dollars, on technical issues that ultimately did not matter.

                 As a result, the company was not ready for market when schools opened a year ago, and competition
                 among education-oriented Internet companies was already heating.

                 Looking back, Weinberger said, the Web site that now exists is the kind of business he could have
                 delivered at far less expense, and he may not have needed to leave Infonautics to do it.

                 Weinberger was chairman of Infonautics - whose flagship service is a research Web site called Electric
                 Library - when its board of directors told him in February 1998 that it would not back Electric
                 SchoolHouse.

                 There is a laundry list of events that now keep him awake at night, Weinberger said. Most notable is the
                 loss of a prominent early backer, Bill Gross, whose Pasadena, Calif.-based IdeaLab has cranked out a
                 stream of Internet companies with hundreds of millions of dollars in aggregate valuations. Gross had
                 grown impatient with the slow progress of Electric SchoolHouse.

                 Weinberger said he also regrets that he intervened "too frequently and loudly" in decisions he ought to
                 have left to Shoemaker, and that he sold huge chunks of his stock holdings at low prices to keep Electric
                 SchoolHouse going.

                 "Oh, lots of mistakes," he said.

                 And, he added, "I'm not sure I regret or not" bypassing many opportunities to bail out.

                 "I think not, though."

                 As to things he has done right, Weinberger said he picked a good team and recruited a supportive board
                 of directors, including LeVar Burton, the Reading Rainbow TV show host and coproducer, and Howard
                 Lee Morgan of Villanova University, an investor who also sits on the board of Gross' IdeaLab.

                 Weinberger said he was glad he also pursued and won endorsements from public-television stations,
                 and had the foresight "to believe that education would emerge and become one of the primary growth
                 sectors on the Internet."

                 And despite the delays and costs, he said, "We're just in time, with the right product, two years later than
                 I thought."

                 He also praised his wife, Fran, for putting up with him as he spent most of their life savings. "Boy, is it
                 clear that most wives would have - and perhaps should have - thrown me out on my ear," he said.