476 ENTREPRENEURSHIP CASE
distributing it to a limited audience to dis-
cover errors or bugs. Shortly thereafter, they
also found a way to make their postage print-
able in Microsoft Word, which made their
service more accessible.
In December 1998, with their software
virtually in place, the three cofounders decid-
ed to change the name of their company to
Stamps.com because they believed it was a
stronger and more recognizable brand name.
In spring 1999, Stamps.com received $30
million in private equity funding from three
VC firms. Galileo International, a leading
provider of electronic distribution services to
travel agencies, and the Intel Corporation
also made investments in the fledgling com-
pany. In June of 1999, the Stamps.com IPO
issued 5 million shares at the price of $11 per
share. Then, in August of 1999, Stamps.com
received approval from the USPS to com-
mercially distribute its software-based indi-
cia. By the end of October 1999, within ten
weeks of its launch, Stamps.com had over
90,000 subscribers paying a monthly fee to
download and use the company’s software.
Early Management
In August 1998 John Payne, a former presi-
dent and CEO of two software companies,
was recruited to bring his management and
technical experience to Stamps.com as the
company’s CEO. In February 1999, a for-
mer postmaster general, a former chief mar-
keting executive for the USPS, and the
founder and chairman of GeoCities, Inc. (a
sponsor of Web pages and blogs), were
added to the board of directors. The presi-
dent and CEO of Hewlett-Packard was
recruited to the board later that spring.
In December 1999, McDermott,
Engelberg, and Green, the company’s three
cofounders, left Stamps.com in what was
described as an amicable separation follow-
ing the company’s successful IPO and service
roll-out. In Spring 2000, the three of them
founded Archive.com, a data-storage soft-
ware company. That company was sold in- At least two of the three partners
remain active in entrepreneurial activities.
McDermott is a managing partner in U. S.
Renewables Group, a private investment
company that acquires, develops, and oper-
ates renewable power generation and clean
fuel assets, while Engelberg is a founding
partner of the Los Angeles Social Venture
Partners. Engelberg is also a history teacher
and part-time basketball coach at the Los
Angeles high school he once attended.
John Payne stepped down from his posi-
tions with the company in October 2000.
Ken McBride, the company’s CFO, was
named Payne’s successor, and served in that
capacity for a number of years.
Early Competition
On the same day that Stamps.com received
USPS approval for its software system, a
competitor named E-Stamp Corporation
was also authorized to distribute electronic
postage. E-Stamp used a different model; its
customers had to purchase a starter kit with a
CD-ROM and a hardware device known as a
postage vault or doggle in order to use its
service. While E-Stamp customers accessed
postage online, they printed their stamps and
labels offline. Many customers found their
system awkward and inefficient. E-Stamp
exited the online postage market in
November 2000, and Stamps.com acquired
that company’s name and patents in April
2001.
Two other IBIP participants also compet-
ed against Stamps.com from the beginning.
Pitney Bowes, the postage meter giant, intro-
duced an offline postage-printing program
with a postage “bank” that could be refilled
by phone or via the Internet. In 1999,
Pitney Bowes sued Stamps.com for patent
infringement, and in 2001, Stamps.com sued
Pitney Bowes for the same. All suits were
settled in 2003.
The other company was Neopost, the
leading supplier of mailroom equipment in
Europe. Neopost also introduced a compet-
ing postage program that customers printed
offline with special labels and a Neopost
“stamp dispenser.”
Both then and now, Stamps.com aims